Xbox lays off 268 employees as Halo, Rare, and World’s Edge move to Activision, Obsidian Entertainment moves to Betheseda Softworks, and Playground Games and Turn 10 Studios merge

Xbox will lay off 268 employees across Halo Studios, other first-party studios, and the Xbox Game Studios management and central functions layer, as well as reorganize and merge several studios, the company announced.

The major reorganizations are as follows:

• World’s Edge and Rare will be moved to Activision, and a “new, purpose-built team” at Activision will develop the next Halo while a small team at Halo Studios will continue to support the Halo community and existing Halo games. (Update 12:20 p.m.: According to a World’s Edge employee on ResetEra, just under half the studio was laid off as well.)
• Obsidian Entertainment will be moved to Bethesda Softworks.
• Microsoft Casual Games will be moved to King.
• Forza Horizon developer Playground Games will merge with Forza Motorsport developer Turn 10 Studios, acting as one studio focused on the Forza and Fable franchises.

Microsoft also provided an update on its July-announced divestitures:

• In August, Compulsion Games and Double Fine Productions returned to independent management with their intellectual property, back catalogs, and runway funding.
• Undead Labs has successfully transitioned on similar terms, and will release State of Decay 3 on day one on Game Pass under a new publisher. (Update 11:15 a.m.: Undead Labs is now independently owned.)
• Two separate agreements with Ninja Theory fell through, and consultations on a proposed closure will now begin while continuing to explore other paths forward.
• Consultation with Arkane Lyon remains underway and is expected to continue through the end of 2026.