Xbox announced major restructuring consolidating studios and cutting 268 jobs as part of planned 3200 layoffs. Multiple franchises including Halo, Rare, and World's Edge are being moved under Activision, while Obsidian shifts to Bethesda. Analysts describe this as a 'reverse acquisition in slow motion' reflecting Xbox's identity crisis as it prioritizes multiplatform publishing over console competition.
Undead Labs, developer of State of Decay 3, has completed its separation from Xbox after over a decade and is now an independent, employee-owned studio. The team continues development on State of Decay 3, which remains in alpha with a closed beta planned before year-end and a 2027 launch targeted for PS5, Xbox, and PC.
Obsidian Entertainment is being restructured under Bethesda as part of Xbox Game Studios reorganization, shifting focus to major franchises including a new Fallout game. Microsoft's nearly decade-long Game Pass content strategy has been refocused to prioritize fewer blockbuster titles like Diablo, The Elder Worlds, and Fallout, with remasters of earlier Fallout titles also in development.