Xbox announces massive layoffs and sells off multiple studios

Sharma speaks of a necessary "Reset"

Sharma justified the restructuring by saying Xbox needs to focus more heavily on major projects and bring its many individual studios closer together. Over the past several years, the Xbox division has acquired, among others, Activision Blizzard (with brands such as Call of Duty and Diablo), Bethesda Softworks (Fallout), Mojang (Minecraft), Playground Games (Forza), Obsidian Entertainment, and King (Candy Crush). According to the report, Xbox owns more than 30 large and small studios in total.

The first concrete consequences are already known: The studios Compulsion Games (South of Midnight) and Double Fine Productions (Psychonauts 2, Keeper) are to be made independent again. Additionally, Xbox is planning to sell Ninja Theory (Hellblade) and Undead Labs, the latter currently working on State of Decay 3. Four Xbox-owned studios are thus affected by the initial cuts. It remains unclear whether the French studio Arkane (Deathloop, Redfall) will also be divested.

These studios are affected first

Bungie has been hit the hardest so far: Following the expected conclusion of Destiny 2, at least 300 employees there were laid off. Ninja Theory's Hellblade sequel has been anticipated for six years and was repeatedly delayed. Undead Labs has not released a single game since its acquisition by Xbox.

Xbox is also making noticeable changes to its Game Pass subscription model. Call of Duty will no longer be added to Game Pass on its release day in the future, appearing there at the earliest one year later. At the same time, PC Game Pass has been lowered from 14.99 euros to 12.99 euros, though it still remains one euro above its original price.

Changes to Game Pass

Xbox Game Pass Essential will increase in price from 6.99 euros to 8.99 euros per month. The Premium subscription remains at 12.99 euros. Xbox Game Pass Ultimate, which originally cost 17.99 euros and rose to 26.99 euros in November 2025, will now fall to 20.99 euros, but remains three euros more expensive than at launch. According to the report, Xbox's quarterly revenue fell 5 percent year over year, with profit margin in the current fiscal year down 3 percent.

According to the Wall Street Journal, Xbox Game Pass currently has 30 million subscribers. The company thus remains significantly short of its self-imposed goal of reaching around 77 million subscribers by June 2026. The gaming industry's overall sales are under pressure: as early as June, rival PlayStation cut 900 positions at studios such as Insomniac (Spider-Man), Naughty Dog (The Last of Us), and Guerrilla (Horizon Forbidden West).

Xbox announced that it intends to implement the layoffs and restructurings over the course of the coming year. How many of the affected employees will remain at the individual studios and how many will ultimately have to leave was initially unclear. Xbox also declined to comment on potential buyers for Ninja Theory and Undead Labs.