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Microsoft has announced a major restructuring of its XBOX gaming division, confirming widespread layoffs alongside significant changes to its first-party studio lineup. The move will see four XBOX Game Studios developers leave Microsoft’s internal portfolio, although none have been confirmed as closing.
According to an internal email from XBOX CEO Asha Sharma, Compulsion Games, the studio behind South of Midnight, and Double Fine Productions, known for the Psychonauts series, will transition into independent studios.
Meanwhile, Ninja Theory and Undead Labs have entered agreements to move under new ownership while receiving funding to continue development of their respective projects, Senua and State of Decay 3. Microsoft indicated that both studios will continue operating, with the ownership changes intended to support their long-term growth.
The future of Arkane Lyon, the developer behind Deathloop and the upcoming Marvel’s Blade, remains less certain. The studio has entered a consultation period to evaluate “potential strategic options,” and Microsoft has not yet provided an update regarding the status of Marvel’s Blade.
The restructuring extends well beyond XBOX Game Studios. Layoffs have also been confirmed across Bethesda, ZeniMax, Activision Blizzard and Mojang, making this one of the most significant organizational changes since Microsoft’s gaming acquisitions over the past several years.
While Microsoft has not disclosed the total number of employees affected, reports indicate that thousands of jobs are being eliminated across the gaming division as part of the broader reorganization.
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