Xbox's Reverse Acquisition Sparks Concerns Over Poor Studio Management

Xbox's latest move has sent shockwaves through the gaming industry. With analysts and experts alike questioning the wisdom behind the company's decision to fold its prized IPs into Activision. The firm it acquired in 2023.

Microsoft's acquisition of Activision Blizzard King in late 2023 has been marked by annual rounds of layoffs. And now it appears that the company is taking a step back to re-evaluate its approach to managing its studios.

"Folding Halo, one of Xbox's prized IPs, into Activision, the firm it acquired in 2023, is surprising at best. At worst, it's evidence of how poorly Xbox was running its studios," says Joost van Dreunen, a professor at the NYU Stern School of Business and games industry analyst.

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"Bringing Halo under Activision, even with a dedicated team, is a logical step. But it doesn't guarantee success," he notes. Citing that Call of Duty's biggest launch with Black Ops 6 saw a sharp drop-off of players by the time spring rolled around.

Playground Games and Turn 10 have been merged, Bethesda Game Studios is now managing Obsidian Entertainment. Meanwhile, Rare, World's Edge, and the Halo franchise have been moved under Activision Blizzard. Microsoft has had annual rounds of layoffs since acquiring Activision Blizzard King in late 2023.

And we're now reaching the point where – through rampant studio closures and a number of studios now falling under the remit of Bethesda. Activision Blizzard, and King – Xbox Game Studios is down to a handful of studios.

Disney's 2006 purchase of Pixar is often cited as an example of a successful merger. With senior Pixar members being put in charge of Disney's then-struggling in-house animation studio. However, van Dreunen notes that Microsoft's acquisitions were less about the IP and more about the managerial talent.

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"People are making money, so I don't know why there's a big loss of jobs," says Double Fine boss Tim Schafer, who is baffled by the terrible state of the game industry. Microsoft has announced plans to cut 3,200 jobs across Xbox throughout FY27, with the likes of Halo Studios and The Coalition affected.

Microsoft has paid $69 billion for the division best equipped to run the studios Microsoft built itself, according to van Dreunen.