As part of massive Xbox layoffs planned for July 6, Microsoft plans to close Arkane Studios and cancel the Blade game he has been working on since late 2023, according to Tom Warren of The edge. Combine this with previous reports from Bloomberg And GamesBeatand it appears that Microsoft is preparing to close or sell five studios next week: Compulsion Games, Double Fine, Ninja Theory, Undead Labs and Arkane.
There has been no update on Marvel’s Blade in more than two years, despite our discreet wait, and Edge reports that the game is over budget and facing delays. Xbox is exploring options for selling Arkane, similar to its announced approach with Compulsion, Double Fine, Ninja Theory and Undead Labs.
The entire Xbox division is bracing for layoffs following a memo from new CEO Asha Sharma and chief content officer Matt Booty that warned: “We have found ourselves overburdened… Moving forward, this cannot continue.” Xbox union members represented by CWA expressed disappointment and frustration with Microsoft management ahead of the layoffs, calling for good faith negotiations and transparency.
Arkane Studios is better known as Arkane Lyon, the creator of the Dishonored series and Death loopand the team is known for creating polished first-person stealth experiences in stylish environments. Microsoft has closed Lyon sister studio Arkane Austin, responsible for Prey (yeah) and Red fall (oh no), part of a wave of Xbox layoffs and studio closures in 2024.
At the time, Dinga Bakaba, co-creative director of Arkane Lyon, shared the following message:
“This is absolutely terrible. Permission to be human: To any executive reading this, a friendly reminder that video games are an entertainment and cultural industry, and that your business as a company is to take care of your artists/animators and help them create value for you. Don’t throw us into gold fever games, don’t use us as front men for miscalculations/blind spots, don’t make our work environments jungles Darwinists. You say we make you proud when we make a good game. Make us proud when times are tough. We know you can. We’ve seen it before.
The video game market lost about 14,600 employees to mass layoffs in 2024, following an already staggering loss of about 10,500 in 2023, according to the gaming industry layoff tracker.
Microsoft’s $69 billion purchase of Activision Blizzard King – the largest acquisition in industry history – was completed in 2023, following the company’s $7.5 billion purchase of ZeniMax (including Arkane Studios) in 2021 and previous studio buying sprees.
In January 2024, Microsoft cut 1,900 jobs at Xbox, Activision, Blizzard and ZeniMax, kicking off another terrible year of layoffs in the gaming industry. Xbox closed Arkane Austin and Alpha Dog Games, sold Tango Gameworks and laid off 650 more employees in 2024. The Xbox division was again rocked by layoffs and studio closures in the summer of 2025, when Microsoft laid off 9,000 employees companywide.
It looks like the upcoming Xbox layoffs in 2026 have already affected Hitman and 007 First Light developer IO Interactive, who was reportedly working on a fantasy game with Xbox as publisher. IOI announced that its relationship with “an external partner” had recently ended and that it had to reduce its workforce as a result. On the other hand, Kojima Productions’ game DOreleased by Xbox, will not be affected by the layoffs, according to IGN.
