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Microsoft makes cuts: Several Xbox studios shuttered, teams merged to reduce expenses

Microsoft’s Xbox division has unveiled plans to close down several gaming studios, including the well-known Arkane Austin, signaling the company’s move to restructure in response to signs of a slowdown in the gaming industry.

Among the studios facing closure are Tango Gameworks, the creator of “Hi-Fi Rush,” based in Tokyo, and Alpha Dog, located in Canada. Matt Booty, the head of Xbox Game Studios, revealed this information in an internal memo obtained by Reuters on Tuesday. The exact number of employees affected by these closures remains undisclosed, and Xbox declined to provide further details when asked about the scale of the layoffs.

According to Booty, the decision to streamline operations and close certain studios is aimed at reallocating resources to strengthen Xbox’s game portfolio and develop new intellectual property. This strategic reallocation of resources underscores Microsoft’s commitment to innovation and future growth in the gaming sector.

All the affected studios are part of ZeniMax Media, which Microsoft acquired for $7.5 billion in 2021, along with Bethesda. Despite these closures, Microsoft’s Xbox content and services segment reported a significant 62% increase in third-quarter revenue last month, largely attributed to the acquisition of Activision Blizzard.

The news of studio closures reflects recent industry trends, with Take-Two Interactive also announcing the shutdown of two subsidiary studios as part of a broader restructuring effort, as reported by Bloomberg News last week. Earlier this year, Microsoft initiated significant layoffs, affecting 1,900 employees across Activision and Xbox.

In response to the closures, some developers from Arkane Austin will transition to other studios within the Bethesda ecosystem, contributing to ongoing projects such as the “The Elder Scrolls” and “Fallout” franchises. Notably, servers for the game “Redfall,” developed by Arkane, will continue to operate, ensuring uninterrupted gameplay experiences for players.

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