Microsoft is preparing for a significant restructuring of its Xbox gaming division, with sources telling The Verge that the company plans to initiate a wave of layoffs starting July 6. The reorganization reportedly includes the potential closure of at least five game studios, the possible cancellation of the upcoming title Marvel’s Blade, and efforts to spin off multiple developers, including Undead Labs, Compulsion Games, Double Fine, and Ninja Theory.
Why is Microsoft Reshaping its Gaming Division?
The upcoming workforce reductions are part of a broader “reset” for the Xbox division under CEO Asha Sharma. According to sources familiar with the company’s internal strategy, Sharma has characterized the current state of the Xbox business as unhealthy, signaling that difficult decisions are required to align the division with her mandate. While Sharma has stated her goal is for Microsoft to become the number one gaming and entertainment company, the immediate path involves significant cost-cutting measures and a potential reduction in the total number of internal studios.
The planned layoffs are expected to impact most sectors of the Xbox organization, with rumors suggesting at least 1,000 jobs could be lost across the division, excluding the additional 500 potential staff reductions tied specifically to the five targeted studio closures.
What is the Status of ‘Marvel’s Blade’ and Arkane Studios?
Microsoft is currently weighing the cancellation of Marvel’s Blade, a project being developed by the France-based Arkane Studios. Sources indicate the project has faced significant internal challenges, with the ship date slipping to late 2027 and the budget exceeding initial projections. Beyond the potential cancellation of the game, Microsoft is actively exploring the sale of Arkane Studios to external buyers. If a buyer is secured, it could prevent the closure of the studio, though sources note that such negotiations can be complex and time-consuming.
Which Studios are Facing Potential Spinoffs or Closures?
The scope of the restructuring extends across several prominent developers within the Xbox portfolio. According to reports from Bloomberg and GamesBeat, Microsoft is seeking to divest from or close several subsidiaries:
- Compulsion Games: The developers of South of Midnight have reportedly been told that closure is imminent, with staff advised to seek employment elsewhere.
- Ninja Theory: Employees were informed earlier this month that Microsoft is considering either closing or spinning off the UK-based studio.
- Undead Labs: The developer behind State of Decay is currently the subject of an active search for a buyer.
- Double Fine: The studio remains part of the group of developers Microsoft is attempting to spin off.
The outcome for these studios remains fluid. If Microsoft finds viable buyers, these developers may continue operations under new ownership, avoiding the total closure currently being evaluated by leadership.
Frequently Asked Questions
When do the Xbox layoffs begin?
According to sources familiar with the company’s plans, the layoffs are scheduled to start on July 6.
Is Marvel’s Blade officially canceled?
As of now, Microsoft is weighing the cancellation of the game as part of broader cost-cutting measures, but no official final decision has been publicly confirmed.
Why is Microsoft looking to sell studios like Undead Labs?
The company is undergoing a “reset” of its gaming division. Selling these studios is one strategy being used to reduce costs and reshape the division’s internal structure.
Will all these studios definitely close?
Not necessarily. Microsoft is exploring options to sell these studios to third parties. If a buyer is found, the studio may continue to operate, though sources note these discussions can take months to finalize.
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