Microsoft Proposes Closure of Ninja Theory as Activision Takes Over Halo Development

On the morning of September 22, an internal memo titled "Continuing Our Reset" landed in the inboxes of Microsoft's gaming division globally, confirming the potential end of a 26-year-old studio and a seismic shift for the company's flagship franchise. Sent by Xbox Chief Content Officer Matt Booty, the message outlined the elimination of 268 roles across Halo Studios, first-party teams, and central management.[2]

Buried within the broader corporate restructuring was a pair of announcements that fundamentally alter the balance of power within the $69 billion Xbox ecosystem. The most immediate casualty of the reset is Ninja Theory, the Cambridge-based developer behind the critically acclaimed Hellblade series. According to Booty's memo, the studio is now facing proposed closure after two separate acquisition deals collapsed.[1][3][5]

"Unfortunately, two separate agreements for Ninja Theory fell through," Booty wrote to the staff. "We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward." Under UK labor law, this triggers a mandatory 30-day consultation period, meaning the studio is not shuttered today, but its survival now hinges on a last-minute buyer stepping in to absorb the team.[1][2][3]

The proposed closure marks a sharp turn for a studio that just three months ago showcased a new project, simply titled Senua, at the Xbox Games Showcase in June 2026. According to industry reports, that high-profile trailer placement was part of an active effort by Microsoft to attract potential buyers as the publisher looked to divest the team.[1][3]

While developers like Double Fine and Undead Labs successfully spun out into independent operations with their intellectual property intact, Ninja Theory and Dishonored developer Arkane—which remains in its own ongoing consultation through the end of 2026—are caught in the final, most difficult phase of the restructuring.[2]

While the Ninja Theory consultation represents the human cost of the reset, the memo's other major revelation reshapes the future of Xbox's founding intellectual property. Development of the next mainline Halo title is being handed over to Activision, the mega-publisher Microsoft acquired in 2022. A new, purpose-built team within Activision will lead the project, operating entirely separately from the publisher's ongoing Call of Duty pipeline.[2][4][5]

Halo Studios, which is bearing an undisclosed portion of the 268 newly announced layoffs, will be reduced to a smaller team tasked with supporting existing games and the active community. Activision's expanding remit will also absorb oversight of Sea of Thieves developer Rare and Age of Empires custodian World's Edge, centralizing some of Microsoft's most historic properties under the Activision banner.[2][4][5]

The consolidation extends across the rest of the first-party portfolio, prioritizing massive, unified teams over independent subsidiaries. Obsidian Entertainment is being rolled into Bethesda's purview, where the two will collaborate on a new Fallout project alongside Obsidian's ongoing work on Grounded. Meanwhile, Playground Games and Turn 10 Studios are formally merging into a single entity focused entirely on the Forza and Fable franchises, formalizing a technological partnership that has existed for over a decade.[2][5]

This week's moves bring Microsoft roughly 75 percent of the way through a massive restructuring phase that began earlier this year. That cycle previously saw 3,200 roles cut and studios like Tango Gameworks closed outright. For the remaining developers navigating the final 25 percent of the reset, the message is clear: the era of sprawling, independent-minded Xbox subsidiaries is over, replaced by a consolidated pipeline designed to maximize the output of a few guaranteed hits.[1][2][5]