Over two months ago, a bloodbath happened at Xbox. Thousands of layoffs took place, and several studios were cut out and left for dead. It was hinted at the time that this was just the start of things. Well, another shoe dropped on September 22, 2026. More layoffs, another potential studio closure. On top of all that, a realignment has taken place that underscores how screwed the brand is. The Xbox layoffs are bad enough but what’s left behind may be in a worse spot.
Asha Sharma & the Xbox Layoffs
When Asha Sharma was appointed as the CEO of Xbox earlier this year, she seemed to be making all the right moves to appease fans. She talked about bringing back the Xbox brand, bringing back console exclusives, reducing the Game Pass price, etc. But her previous role at Microsoft was with its AI division. Sharma was not immersed in gaming unlike her predecessor, Phil Spencer. She openly admitted this. But why do you think she was brought in? It’s because the Xbox brand was losing money. And the plan was not to improve it by utilizing the resources they had. The plan was to cut expenses and reduce everything.
In Sharma’s defense, things were totally out of hand under Spencer’s tenure. The acquisitions of Double Fine, Ninja Theory, and other studios was asinine. Or more accurately, it was asinine to acquire them and not use then. It seemed more like a plan to acquire them to keep them away from other companies than anything else. It backfired spectacularly. We talked about that back in July. We also talked about how not only were studios closing but other existing studios were being downsized. That hurt across the board. Id Software, responsible for Doom, was cut down to be nothing more than a support studio. The Xbox layoffs hurt, but the recent consolidation of teams is another gut punch.
Obsidian Effectively Becomes Bethesda
The announcement came down that various companies under the Xbox banner would be realigned to work under other departments. It’s easy to understand with an example. So, take Obsidian for example. That’s the company that made Avowed, The Outer Worlds, and Grounded. Now they’re working under Bethesda. Or as it was worded in the official Xbox internal email, “Bethesda will expand its remit to include Obsidian.”
Of course, internal memos have promoted the idea that Obsidian will still have its creative core. But that’s not going to be the case. Xbox has made it very clear that they are moving to a franchise led model. They’re trying to double down on properties that they want to effectively exploit. The corporate leadership doesn’t want new, original titles. They want more Elder Scrolls and Fallout. They want to beat down the golden goose and they will sure as hell use Obsidian to do that.
Halo Effectively Becomes Call of Duty
Meanwhile, Halo Studios has been gutted. All that will remain is a small support team to maintain the online infrastructure of existing titles. The Halo franchise itself has now been moved to Activision. The same company that does Call of Duty. It’s the worst possible decision that could be made. Halo was notable when Bungie developed it because it was different. It was a sci-fi, story driven adventure. After the property was moved from Bungie to 343 Studios, it was never quite the same. The multiplayer started taking more and more precedence over the campaign mode. It’s as if the series was trying to emulate what Call of Duty was doing. Now it’s in the hands of the company that makes those games.
Halo is basically ruined at this point. Yes, that’s technically an opinion but let’s be realistic here. Xbox is condensing studios, cutting costs, and focused on a franchise-first model. Does this mean annual Halo releases like Call of Duty? Not necessarily, but it does probably mean homogenized content and a lack of innovation. Put it this way, remember what the company BioWare was like before and after being acquired by Electronic Arts? It wasn’t the same company.
What About Rare and Ninja Theory?
So, Halo is effectively dead, Obsidian will basically be a soulless extension of Bethesda. Oh, and Rare is now working under Activision as well. What does that mean for them? God only knows. That’s another company that Microsoft has terribly mismanaged for nearly two decades now. Outside of Sea of Thieves the only other thing thy’ve done in the last 10 years was the horrible reboot of Battletoads. They did have a game called Everwild that spent a decade in development only to be cancelled last year. What’s Activision going to do with them? It’s kind of funny in a way. Rare was the company that created GoldenEye and Perfect Dark for the Nintendo 64. Two first-person shooter titles that redefined the genre for consoles. Now they’re working for the company that puts out the most generic, yearly FPS games of all time.
The news is even sadder for Ninja Theory. Last time the layoff news hit, the developer was working on the game Senua. It was to be their third game in that series. Xbox was reportedly working to sell the company off so that they could complete the title. Now it appears those sales plans have fallen through. Ninja Theory looks to be headed for a complete shutdown with Senua to be cancelled as a result. Yet another case of complete mismanagement.
Xbox Layoffs Give Resources to AI Devlopment
The thing is, if Microsoft wanted to eat these losses and try to build things up, they could. The company, as a whole, has enough money to do that. They make more than enough from their other divisions (Windows is as omnipresent for a reason) to keep the money rolling in. But they’re done with that. Microsoft is full speed ahead on investing in AI. They, like many other tech companies, see that as the future. But that market will hit a critical mass and eventually erupt. The backlash against AI is strong and growing stronger. People don’t want the data centers in their area and they don’t support the resources required to keep them running.
Everything Microsoft is doing right now is short-signed. The Xbox layoffs will save money in the short run. But they’ll cost the company more over time as customers abandon the Xbox altogether. The AI push will sink them as the technology becomes too resource-intensive and people give up on it for the dangers it represents. Dangers to the environment, to cyber security, to creativity, and jobs that can be better serviced by humans.
Xbox is Dead
Xbox is too far gone to be saved. As they roll everything under the “remit” of Activision and Bethesda we may see them exit the console space completely. They’ll keep their main developers and pump out games for other systems. But that’s it. Xbox is dead. Hate to see it happen. Hate it even more to see so many jobs lost and developers destroyed. Xbox as a brand did this to themselves, but its employees deserved better.
