Xbox Game Studios used to include 14 individual teams working on distinct franchises. Following the latest twist in Microsoft’s big reset of Xbox, it will contain just three, at least for now. And even those seem like they could be shuffled elsewhere or cut beyond recognition in the months ahead. A massive first-party portfolio erected during the Phil Spencer era is now on the cusp of being completely divided up, divested, or shuttered.
In 2021, Xbox Game Studios consisted of the following:
- 343 Industries
- The Coalition
- Compulsion Games
- Double Fine Productions
- The Initiative
- inXile Entertainment
- Mojang Studios
- Ninja Theory
- Obsidian Entertainment
- Playground Games
- Turn 10 Studios
- Rare
- Undead Labs
- World’s Edge
- Xbox Game Studios Publishing
Since then, Microsoft’s gaming footprint ballooned with the acquisition of Bethesda and Activision Blizzard, but the part of its gaming division that consisted of a confederation of individual first-party teams reporting up through Xbox leadership has been shrinking. It began with The Initiative, pitched as a new AAA team to make GOTY contenders with a teaser for a new Perfect Dark game at the 2020 Game Awards. After years of struggling development at the studio, Microsoft announced in 2025 that it was closing the project down.
Then in June of this year, the unspooling ratcheted into high gear. Double Fine and Compulsion Games were sold back to studio management and Mojang was removed from the Xbox Game Studios umbrella to report up to Xbox CEO Asha Sharma directly. And today, chief content officer Matt Booty announced that 343 Industries, more recently renamed Halo Studios, would be severely downsized, its remaining staff existing as a support team for Activision.
Rare and Age of Empires developer World’s Edge have also been moved under Activision, while Obsidian Entertainment has been put under Bethesda. What’s left of Turn 10 has been similarly subsumed by Playground Games, while Undead Labs has joined Double Fine and Compulsion in being sold back to management. Ninja Theory, on the other hand, still can’t find a buyer. It’s at risk of closing in the months ahead if that doesn’t change.
The publishing group, which handles games like 2025’s Ninja Gaiden 4 and Kojima Productions’ upcoming OD and Physint, is also still around. Microsoft Casual Games, which makes things like Microsoft Solitaire Collection, has been handed off to Candy Crush maker King. Here’s what Xbox Game Studios looks like today:
- The Coalition
- inXile Entertainment
- Playground Games
- Xbox Game Studios Publishing
The only game makers still left are Playground Games, InXile Entertainment, and The Coalition. Coincidently, all three have games coming out in the next year, beginning with Gears of War: E-Day in October. Microsoft clearly waited until Halo: Campaign Evolved released in July to announce changes to Halo Studios. It’s not hard to imagine it’s waiting until other games are out before making additional changes.
“The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring,” Booty wrote in today’s post. Coincidentally, 75 is also roughly the percentage of teams that are no longer apart of Xbox Game Studios since the reset was announced:
If InXile’s Clockwork Revolution releases in the first half of 2027, Microsoft would be in a position to disassemble the rest of Xbox Game Studios without causing upheaval to projects in the last leg of development. Coincidentally, Clockwork Revolution is about a crime boss who uses time travel to enrich herself and keep the the working class trapped in the slums.
Microsoft has never quite figured out a way to unlock first-party game development the way its competitors have. It relied on outside talent for Xbox’s first hit exclusive, Halo, and has struggled to recreate similar successes in-house ever since. It’s mostly had to buy its way to owning genre-defining IP. With the rapid decline of Xbox Game Studios, Microsoft seems content to offload the unpredictable chaos of shipping world-class games to the more successful publishers it now owns.
“As a gaming organization, we have never been in a better position to deliver a diverse line-up of exclusive games for Xbox fans now, and in the future,” Booty wrote back in 2019 when Microsoft Studios was first rebranded to Xbox Game Studios. He echoed that same sentiment today as if nothing had changed. He wrote, “At our October 6 town hall, we will come together as an ALL-XBOX team to reflect on our progress and look ahead to one of the strongest game lineups in our history.”