Microsoft Xbox Restructures Game Studios, Faces Potential Ninja Theory Closure

Microsoft Xbox has launched a significant new restructuring initiative across its game studios, leading to the elimination of 268 positions. These changes, following layoffs in July 2026, have sparked concerns among developers regarding workflow autonomy and the future of ongoing projects.

As part of the reorganization, some studios, including Obsidian Entertainment, have been reassigned under ZeniMax, which is also owned by Microsoft. While Microsoft has stated its intention for Obsidian to maintain its independent operations, employees have voiced apprehension about a potential loss of autonomy and shifts in project decision-making.

Industry observers suggest these moves reflect a broader strategy integrating resources from Activision and ZeniMax into the Xbox Game Studios portfolio. Publications in the gaming sector have likened the process to a "reverse acquisition," where Xbox's owned intellectual property and publishing functions are increasingly absorbed by Activision and ZeniMax.

Meanwhile, the situation appears dire for the studio Ninja Theory. A previously attempted sale has fallen through, and Microsoft is now considering closing the studio. The current project, "Senua," which is reportedly showing improvements over its predecessor, may not be completed if the studio ceases operations.

Other studios like Undead Labs and Rare have also seen changes. Undead Labs ultimately secured a path to continued independent operation, while Rare has been integrated under Activision, meaning future project decisions will be made by Activision.