Xbox reportedly mulls shuttering at least five studios and axing Blade

Microsoft is preparing major staff reductions inside its Xbox division that begin next week and could force multiple studio closures along with several project terminations.

Microsoft eyes closure of at least five Xbox studios. People familiar with the plans told The Verge the cuts will trigger studio closures or spinoffs, possible mergers, and canceled titles. The company is reportedly weighing the shutdown of at least five studios, including the one developing Marvel’s Blade.

Arkane Studios built its reputation on the Dishonored series. Sources indicate Microsoft aims to drop Blade amid broader cost-cutting and job reductions across the Xbox gaming unit.

Blade's development has faced delays and budget overruns. The France-based team’s project had been slated for release later this year, according to insiders. Its internal target date has now moved to late 2027 while costs have exceeded the original budget.

Although Microsoft is considering cancellation of Blade, executives are also looking into selling Arkane Studios. Bloomberg reported earlier this month that the company seeks to spin off Compulsion Games, Double Fine, and Ninja Theory as well.

Several studios face uncertain futures as talks continue. GamesBeat reported this week that Microsoft is seeking a buyer for Undead Labs, the studio behind State of Decay. Studios that secure purchasers would escape closure, yet sources caution that negotiations might stretch for months.

Compulsion Games, creator of South of Midnight, has already concluded that shutdown is inevitable and instructed staff to begin searching for new positions. Employees at Ninja Theory learned earlier this month that Microsoft intends either to close the UK studio or divest it.

Beyond the potential studio closures, Microsoft is preparing for a wave of layoffs at Xbox that will drastically reshape its gaming division. These layoffs are due to start on July 6th, according to sources, and will hit most parts of Xbox. Rumors have suggested there could be at least 1,000 job losses, and if Microsoft goes ahead with five studio closures, then that’s at least 500 employees impacted before the wider cuts.

The upcoming layoffs are part of a “reset” for the Xbox division under new CEO Asha Sharma, who hinted about “making hard choices” last month. Sharma has repeatedly warned that the Xbox business isn’t healthy, but also claimed that her “mandate is not 30 percent accountability margins... it’s to be the number one gaming and entertainment company, and that’s what we’re going to do.”