Xbox Layoffs Raise Studio Closure Fears After Leadership Shakeup

Xbox’s leadership shakeup under Asha Sharma has kicked off with a fresh round of layoffs today, stirring early concern that the cuts might also wipe out entire studios. While no studio closures were confirmed as part of this latest wave, Xbox is also moving to “release” at least a couple of studios without announcing new owners, leaving their next steps uncertain.

Key takeaways

• Xbox began today’s restructuring with layoffs tied to Asha Sharma’s changes.
• No studio closures were confirmed in this particular round, but some studios are being spun out without replacement ownership.
• Across Xbox’s portfolio from Phil Spencer’s era, the company has effectively lost about one-third of the studios it previously acquired.
• Studios that remain under the Xbox umbrella have also seen significant job reductions, including Obsidian and Bethesda.
• Game Pass is still being described as a priority, but fewer studios may be contractually pushed into the subscription lineup.

Phil Spencer’s acquisitions are shrinking fast

The scale of the shift becomes clearer when you look at how many studios acquired during Phil Spencer’s time are no longer part of Xbox. When you factor in earlier closures alongside today’s releases and independence deals, Xbox has now shed roughly a third of the studios it purchased under Spencer. Even the ones that stayed have often faced major staffing cuts.

Here are the studios acquired by Xbox under Phil Spencer that are, for one reason or another, no longer part of Xbox:

• Ninja Theory — sold to an undisclosed buyer, confirmed today.
• Compulsion Games — set to operate independently, confirmed today.
• Undead Labs — sold to an undisclosed buyer, confirmed today.
• Double Fine — moving to independent status, confirmed today.
• Tango Gameworks — closed in 2024, later acquired by Krafton.
• Alpha Dog Games — closed in 2024, later reopened as an independent studio.
• Roundhouse Studios — closed in 2024.
• Toys for Bob — already independent as of 2024.

Xbox also shut down Arkane Austin in 2024. For now, Arkane as a whole is still operating, but that situation may not last. Because of French labor regulations, Xbox has reportedly started the “required consultation” window—meaning the company can’t immediately carry out further layoffs or a closure until that process runs its course.

Remaining studios face cuts, and priorities are under pressure

Even studios that are still in the Xbox orbit aren’t escaping the impact. Multiple teams have been affected by layoffs both earlier and now, and there are already reports that Obsidian and Bethesda have taken hits. Those two companies were also acquired during Phil Spencer’s leadership period. Together, they’re part of the broader picture of roughly 3,000 job cuts across Xbox.

Where Asha Sharma’s leadership priorities land next remains the big question. She’s currently stating that Game Pass continues to matter, and reporting suggests that the Bethesda cuts are intended to reshape the team so it can concentrate on upcoming entries in the Fallout and The Elder Scrolls franchises. The concern for players and staff alike is that it’s difficult to drive major sequels at that scale with a smaller workforce.

On the Game Pass side, the changes may be just as consequential. With more studios no longer tied to Xbox in the same way, there may be fewer developers compelled to place their games on the subscription service. State of Decay 3 is also in doubt for the lineup after being sold off.

Over the coming week, Xbox will be under heavy scrutiny as more details emerge. What’s already clear is that thousands of developers are losing their jobs, and the earlier Xbox direction is essentially gone for good.