Microsoft has confirmed what had been anticipated for weeks: a reduction of 3,200 jobs within its Xbox division, paired with the closure of four development studios. Described internally as the most significant restructuring in the brand's history, the move removes Double Fine, Compulsion Games, Ninja Theory, and Undead Labs from its roster — studios behind titles such as Psychonauts, We Happy Few, Hellblade, and State of Decay.
The impact doesn't stop there. Arkane Lyon, the French studio behind the Dishonored series, is among the studios Microsoft is evaluating for elimination as part of this shake-up, though its departure has not been finalized. Internal discussions are reportedly underway that could determine its fate in the coming days.
Adding to that list is Obsidian Entertainment, known for its work on narrative-driven RPGs, which is said to be negotiating directly with Microsoft to avoid the same outcome as its peers. The company has not publicly detailed the terms of those talks, but the effort appears aimed at preserving the studio within Xbox Game Studios despite the broader wave of cuts.
The process is part of a wider business review at Xbox, aimed at cutting operational costs and concentrating resources on a smaller number of projects and internal teams. Microsoft has not provided a public breakdown of how many employees at each studio are directly affected by the layoffs, nor an exact timeline for the final shutdown of the four already-confirmed studios.
The news lands hard on a developer community that had already weathered multiple rounds of cuts following the Activision Blizzard acquisition. Losing studios with such distinct creative identities as Double Fine or Ninja Theory reopens questions about the direction Microsoft is taking with its internal studio ecosystem, while the futures of names like Arkane and Obsidian remain unresolved.