Xbox Resets Around Core Franchises After 3,200 Layoffs and Studio Sell-Offs

Xbox is restructuring hard. New CEO Asha Sharma has announced a "reset" that cuts 3,200 staff — roughly 20% of the Xbox workforce — and refocuses the entire division on its biggest franchises and its own hardware platform.

Sharma told Fortune that Xbox spread itself too thin chasing too many bets at once: "The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin." The new plan prioritises tentpole IP — Halo, Fallout, The Elder Scrolls, Minecraft — and doubles down on Xbox hardware, which Sharma says represents 80% of the current business. Bethesda boss Jill Braff echoed the shift, telling her teams the studio is moving away from planning around individual studios toward a model that serves "our strongest franchises" and a unified content roadmap. On the studio side, Double Fine and Compulsion are becoming independent, Ninja Theory and Undead Labs have been sold, and Arkane Lyon has entered a mandatory consultation period under French labor law. Xbox hardware itself is in rough shape: the Series X 1TB now retails for $800, up from its $500 launch price, and Series S has doubled from $250 to $500. Xbox hardware revenue dropped 33% in Microsoft's latest financial report, and a second price hike is reportedly on the way. Next-gen console Project Helix is expected to be expensive too, and Microsoft is reportedly considering dropping the disc drive — potentially paired with a disc-to-digital conversion program covering Xbox One and Series X|S games.

This restructuring follows Microsoft's $69 billion Activision-Blizzard-King acquisition, the largest in gaming history, which loaded Xbox with studios and IP it's now struggling to manage. The layoffs are the latest in a series of cuts since that deal closed, and the pivot to franchise-first development marks a significant philosophical shift — away from the "every studio gets to make its game" model that defined the Phil Spencer era. Halo Studios, meanwhile, is already mid-reboot, having ditched its proprietary Slipspace engine for Unreal Engine 5 and shipping Halo: Campaign Evolved as its first UE5 project. id Software — one of Xbox's most consistently productive studios — was hit hard by the layoffs too, with reports suggesting more than half the team was let go.

Industry observers aren't being kind. One expert called the situation "catastrophic mismanagement." The community is watching closely to see whether the franchise-first strategy produces results or just accelerates the contraction of a division that's been losing ground for years.