Microsoft considers closing Arkane and canceling Marvel’s Blade amid Xbox studio layoffs

As Xbox hits thousands more workers with layoffs, I'm desperately hoping that Arkane Studios will be saved.

Yesterday, we officially heard what has been rumoured for the past few weeks: Microsoft is set to lay off thousands of people from its Xbox division, losing four game studios and making its remaining studios pivot to tried-and-tested franchises, all as part of a big 'reset' overseen by newly-appointed Xbox leader Asha Sharma. Read more

Microsoft spent a large chunk of time--and cash--acquiring new studios throughout the 2010s and 2020s, but its biggest move was the $68.7 billion acquisition of Activision Blizzard in October 2023. Trumpeted as a deal that would greatly bolster its portfolio of first-party studios and further enhance the appeal of its Xbox Game Pass subscription service, the acquisition has been followed by several waves of restructuring since then. Thousands of roles at the company have been cut, the plug has been pulled on several game projects, and several major studios have been shut down. Today's new round of cuts might feel like deja vu, and it's all part of Xbox CEO Asha Sharma's plan to "reset" the Xbox. Sharma has said that the Xbox business is "not healthy" thanks partly to risky bets, while Xbox Game Pass hasn't worked out as envisioned. This isn't the first time that Microsoft has slashed its Xbox employee headcount, but following the Activision Blizzard acquisition, the cuts have been deeper and far more frequent. In case you need a reminder, here's a closer look at what Xbox has had to endure over the last couple of years. January 2024 Project Odyssey The first big wave of layoffs hit in January 2024, with 1,900 people out of 22,000 from Microsoft's video game division being cut from the company--almost 9% of all Xbox employees. At the time, head of Xbox Phil Spencer spoke about "the painful decision" to reduce the headcount, adding that it was done to create a "sustainable cost structure" across the company. Spencer said that areas of overlap were primarily affected. One of the video game casualties of the layoffs was Blizzard's Project Odyssey, an unannounced survival MMO that would have been the studio's first original IP since Overwatch in 2016. May 2024 Hi-Fi Rush Fast-forward to a few months later, and the next round of cuts at Xbox saw several of its studios shuttered. Arkane Austin (Redfall), Alpha Dog, and Tango Gameworks (Hi-Fi Rush) were all impacted, while mobile games developer Roundhouse Studios was merged with Zenimax Online Studios. At the time, Microsoft said that the closures were "tough decisions to create capacity to increase investment in other parts of our portfolio and focus on our priority games." Exact numbers of staff who were let go weren't revealed at the time, but there was some good news--PUBG publisher Krafton acquired Tango Gameworks, and under a new agreement, the studio would continue developing the Hi-Fi-Rush IP and explore future projects. September 2024 In yet another round of layoffs in 2024, 650 positions were impacted across corporate, support, and administrative roles. July 2025 Everwild After several months of relative calm, the Microsoft axe swung downwards once again as part of a massive job loss at the corporation. Over 9,000 employees were laid off--around 4% of Microsoft's global staff--and Xbox was hit particularly hard with layoffs at multiple studios, game cancellations, and entire studio closures. Once again, Microsoft Gaming CEO Phil Spencer addressed the cuts and claimed these were necessary to allow for the "enduring success" of Xbox. Some of the affected studios included Call of Duty developer Raven Software, Forza Motorsport developer Turn 10 Studios, which reportedly lost nearly 50% of its staff, Rare's long-in-development game Everwild was canceled, and a new MMORPG from The Elder Scrolls Online developer ZeniMax Online Studios, reportedly codenamed Blackbird, was also dropped. The hits didn't stop there either, as The Initiative was shuttered along with its first game, Perfect Dark, longtime Call of Duty co-developer High Moon Studios was impacted, Call of Duty co-developer Sledgehammer Games was hit with layoffs, and Blizzard announced that Warcraft Rumble support was winding down. Finally, Halo Studios weathered staff reductions as it continued to work on multiple Halo projects, while John and Brenda Romero announced that an unspecified publisher--widely believed to be Microsoft--had canceled funding for their new game at Romero Studios. July 2026 State of Decay 3 That brings us to today's new round of layoffs, which will see roughly 20% of Xbox's staff let go. This has already kicked off with 1,600 layoffs across the division, with another 1,600 people being affected throughout the current financial year. There have been broad cuts across all divisions within Xbox, while studios like Double Fine, Compulsion, Ninja Theory, and Undead Labs will exit Xbox. Double Fine and Compulsion will become independent developers once again and will retain all their IP, while Ninja Theory and Undead Labs will soon have new owners. Arkane is also leaving the company, but it could be a while before the Marvel's Blade developer finds a new owner, as it has to go through a mandatory strategic review and consultation period with its Works Council in France. 

It's a bleak Monday for Xbox, as the division is losing five of its studios and approximately 20% of its workforce will be laid off throughout the current fiscal year. These changes, referred to as "the most significant restructure in Xbox history" by Xbox boss Asha Sharma, will impact every corner of the business, including Id Software and ZeniMax Online Studios. While the two developers aren't shutting down, reports claim that they will be losing large portions of their respective workforces. According to Bloomberg's Jason Schreier, a "significant" number of staff have been let go, as part of the initial wave of 1,600 layoffs today. Microsoft plans to shed another 1,600 Xbox employees in the months to come. Something Wicked Games CEO--and former Bethesda Studios project lead--Jeff Gardiner has also claimed that Id Software has lost 95 employees, while Bethesda Game Studios laid 35 of its workers off today. https://bsky.app/profile/jasonschreier.bsky.social/post/3mpydldy43226 In an open letter, Sharma briefly mentioned that Xbox will focus on higher-priority projects at its studios, including Bethesda and ZeniMax. Schreier reported that the two studios won't just be focused on Fallout and The Elder Scrolls, but will also continue to work on IP like Wolfenstein, Doom, and Quake. As the Xbox reset continues, Sharma also mentioned that none of its first-party publicly announced games or projects would be canceled as part of the reductions. According to the wording, InXile Entertainment's Clockwork Revolution and The Coalition's Gears of War: E-Day, while Senua and State of Decay 3 from departing studios Ninja Theory and Undead Labs are also still on track to be released. The status of those games could change when the new owners of those studios take over, and the future of Marvel’s Blade at Arkane Studios also seems murky for now.

Microsoft has begun its big reset, cutting 1,600 jobs right now and another 1,600 in the next 12 months. Despite this massive restructuring, the company claimed that these moves don't involve canceling any already announced first-party games. In a lengthy Xbox Wire blog post on July 6, Microsoft announced that some studios (such as Ninja Theory and Undead Labs) are being sold while others (like Arkane Studios) are still awaiting their fate. Tucked within the post was a line about the projects currently in the works at Xbox Game Studios, with the company clarifying that "none of our first-party publicly announced games or projects are being cancelled as part of these reductions." This means that games such as Clockwork Revolution (an action-RPG developed by InXile Entertainment), Gears of War: E-Day (The Coalition's upcoming post-apocalyptic shooter), Senua (the third installment in Ninja Theory's Hellblade franchise), and State of Decay 3 (Undead Labs' next zombie survival game) are all still coming as of now. However, it remains to be seen what the fate of Ninja Theory and Undead Labs' games will be after they are sold. Microsoft may not have canceled any projects now, but any such decision will ultimately rest with their new ownership. The keywords here are "first-party" and "publicly announced." If Xbox doesn't have a hand in the game's development and it hasn't already been made public, then it's unclear what that project's future holds. It's also worth noting that the company recently pulled out of several projects it agreed to fund, including 1666: Amsterdam from the creator of Assassin’s Creed, something Sigil developer Romero Games was working on, and a fantasy RPG IO Interactive had been cooking up. It's hard to know what this means for Arkane Studios' Marvel's Blade, though, given that it's a first-party, publicly announced Xbox game. There is a fear that Microsoft could close the studio and cancel the game, but that remains to be seen. For now, the French studio is "beginning required consultation" as part of the country's labor laws so that Microsoft can "review potential strategic options." At any rate, any first-party Xbox game that we already know about seems to be safe. It's just a shame that the 3,200 people at Xbox--which makes up about 20% of the organization--are losing their jobs.

The Xbox layoffs are now underway, and Arkane Studios has emerged as one of the biggest casualties. According to reports, Microsoft is looking for a new buyer for the studio after Marvel’s Blade reportedly exceeded its budget. Xbox Layoffs Put Arkane’s Future in Doubt Microsoft has just announced that they are cutting over 20% of […] The post Marvel’s Blade in Jeopardy as Arkane Studios Looks for New Buyer Following Xbox Layoffs appeared first on VICE.