Microsoft cut 268 jobs at Xbox on September 22, 2026, as part of a broader restructuring that also moves its Casual Games division under mobile publisher King and puts UK studio Ninja Theory into consultation over a possible closure.
The cuts affect Halo Studios and other first-party development teams, along with management and central functions inside Xbox Game Studios, Xbox chief content officer Matt Booty confirmed. Activision will now develop the next Halo title with a newly formed team, while Rare and World's Edge move under Activision as well.
Some Studios Merging While Others Face Uncertain Future
Playground Games and Turn 10 Studios are being merged into a single studio focused on the Forza and Fable franchises, and Obsidian Entertainment is joining Bethesda's group to continue work on Grounded and a new Fallout project.
Ninja Theory, the Hellblade developer, has not found a buyer after two proposed deals fell through, and Microsoft has begun consultation with employees on a proposed closure rather than confirming one outright.
"The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise," Booty said.
Cuts Add to a Year of Heavy Industry Layoffs
The move builds on cuts Microsoft announced in July as part of a plan to reduce Xbox headcount by roughly 3,200 positions through its 2027 fiscal year, and it lands in a year that trade trackers expect to come close to the industry's worst on record. Layoffs tracked across the video game industry are forecast to reach roughly 14,600 for 2026, just short of the 15,631 recorded during the sector's 2024 peak.
That pressure has landed hardest on console, PC and mobile publishers carrying large studio payrolls and long development cycles.
Browser Gaming Follows a Different Trend Line
Browser-based gaming has followed a different trend line over the same stretch. The web games market is projected to grow from about $19.28 billion in revenue this year to $28.44 billion by 2032, according to Statista research drawing on Inkwood Partners data.
Much of that growth comes from titles built for a few minutes rather than a few hours, games a player can open, finish a round, and close again without an install step or a system update in between. That friction-free access is a large part of why short-session browser games keep finding new players even as bigger studio titles consolidate.
Puzzle formats built around matching or combining colored blocks have become one of the more common styles in that space. Poki, a well-known browser game platform, hosts a block blast game that follows this exact format.
Restructuring Reaches Beyond Gaming
Corporate consolidation of this kind is not unique to gaming this year. Starbucks announced its own restructuring days earlier, closing hundreds of North American locations while working to complete 1,500 store retrofits by the end of the month.
Why Are Successful Franchises Also Facing Financial Risks?
They can still struggle to attract players even if they have established a good reputation in the market. Xbox has several well-known series, including Halo and Forza. This good reputation isn't a guarantee that fans will enjoy every new title.
It's quite easy for people to lose interest if a sequel feels too similar to an earlier game. Removing features players love sometimes makes them hesitant to spend money. All successful franchises need to keep up with:
- Changing player tastes
- Competition from other publishers
- New gameplay ideas
- Changes in gaming technology
- Player feedback and reviews
- Interest in older titles in the same series
If a new release fails to meet the buyer's expectations, it can weaken interest in future titles. Publishers need to adapt to survive when the market is changing.
Casual Games Development Costs Are Becoming Harder to Predict
While casual games often look simple, they still take time and other resources to develop. Teams must do things like:
- Design different levels
- Test the features
- Fix bugs
- Find ways to keep players interested
Developing casual games doesn't always go as planned. The team might finish a feature, but upon launching it, it might fail to work as they expected. Players also ask for new levels or updates if the ones in the game aren't engaging enough.
Each of these factors is actually making it harder for publishers to estimate costs accurately. They have to base their work on industry estimates or past data. The information from such sources is usually a good starting point, but it isn't always reliable.
Xbox Publishers Now Have to Make Tough Funding Decisions
Publishers have to make difficult funding decisions when developing video games. They must decide which projects deserve more money and which ones need a change in direction.
Even if a game looks promising, publishers might have to hold back for a while. Ignoring rising costs and publishing games players haven't shown much interest in only makes it harder to earn back the money spent on development. Here are some tough decisions we're seeing publishers make:
- Reducing some game features to avoid selling it at a very high price
- Delaying releases to observe the market
- Moving talented workers to different projects
These decisions aren't easy because each choice comes with risks. Cutting features may disappoint players. If publishers choose to delay the release, costs may increase even more. Competing titles will then have more time to attract buyers.
Subscription Services Are Changing the Game to an Extent
Gaming subscriptions have changed how companies make money from video games. Instead of buying each game separately, players pay a monthly fee. They then access a library of titles.
When you get the Xbox Game Pass, for example, you will be able to try different games without paying the full price for each one.
Having a popular game helps publishers attract new subscribers. It also encourages the current ones to keep paying. Xbox needs to ensure its library stays appealing so it can earn enough money to support developers.
What Comes Next for Xbox
For Xbox, the studio realignments are described internally as a way to reduce the number of separate business units rather than a one-time cut, with a company town hall planned to walk staff through the changes in more detail.
For more news on the latest tech developments, explore the rest of our site.
This article was prepared by an independent contributor and helps us continue to deliver quality news and information.
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