Report: Halo Studios was hit by Microsoft and Xbox layoffs, too — dev says nobody “is really happy about the quality” of the next game

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Last week, Microsoft, the publisher for Windows and Xbox, carried out massive layoffs, dismissing more than 9,000 employees. The Xbox division suffered a significant blow from these reductions, leading to the cancellation of Rare’s Everwild game, abandonment of Perfect Dark project, and closure of its developer The Initiative. Further information has emerged since then revealing that numerous other studios were affected. A recent report indicates that Halo Studios (previously known as 343 Industries) was one of the affected parties.

According to an Engadget report, a developer from Halo Studios communicated with them, revealing that at least five team members were dismissed from the Halo team due to Microsoft’s recent job cuts. It’s worth mentioning that this studio had already experienced a significant round of layoffs by Microsoft in 2023.

Last week, I received an Xbox-wide email from Phil Spencer, the Microsoft Gaming CEO, hinting at upcoming organizational changes aimed at enhancing agility and efficiency. This past day, those impacted by these shifts at Halo Studios were summoned to a gathering with their superiors, where they were informed about job cuts.

The developer expressed frustration, stating, “I’m really disappointed that Phil boasted about record profits for Xbox in an email while also announcing layoffs at the same time. It left me unsure which aspect I should feel happy about.

The developer allegedly mentioned that there’s a lot of stress at the studio currently, and tension has been present even prior to last week’s layoffs. As Halo Infinite’s support is phasing out, it’s rumored they are working on several projects using Unreal Engine 5; among these, a potential new Halo game that could be released later this year, timed with Xbox’s 25th Anniversary, seems to have faced considerable challenges during its development process.

The developer shared with Engadget that, at present, it seems no one is genuinely satisfied with the product’s quality. They mentioned there has been a considerable amount of stress and encouragement attempts aimed at motivating people to release the product.

After that, they moved to debating a transition from hiring temporary individual workers, which has been heavily condemned by ex-Halo Studios developers, to now bringing in entire studios for development assistance instead. However, according to the employee’s perspective, this change hasn’t yielded significant results thus far.

The person stated that the Xbox seems to be lagging significantly in terms of game development, causing unnecessary delays and exertion. Moreover, they noted Microsoft’s attempts to automate jobs using AI agents wherever possible. Lately, there have been rumors that Microsoft intends to substitute laid-off salespeople with “solutions engineers” to boost AI sales. Furthermore, Julia Liuson, the President of Microsoft’s Developer Division and GitHub, emphasized that incorporating AI is no longer a choice but a necessity.

Halo needs a win — will it get one?

As an analyst, I expressed initial excitement upon learning about 343 Industries’ Halo Studios rebrand and their transition to Unreal Engine 5. This shift, I opined, would foster the first glimmer of optimism I had experienced in a long time regarding Halo. My rationale was that adopting a widely recognized engine would expedite and enhance development processes, potentially preventing future releases such as Halo 5: Guardians and Halo Infinite from feeling incomplete for extended periods.

If all information in this document is accurate, it seems there remain significant challenges ahead for the main series of Xbox (Halo), a concern that extends to the team at Halo Studios and the anticipated quality of their upcoming project.

For more than a decade, Halo has failed to regain its past glory in terms of popularity, and I believe this is due to the trend of new games being released with minimal content initially, followed by gradual and lackluster updates. While they eventually introduce substantial features at regular intervals, unfortunately, many players have already moved on before these updates arrive.

As a researcher studying the Halo franchise, it’s evident that the series seems to be losing its relevance. However, what it desperately needs is a triumphant return – a fresh game that, upon release, feels polished and coherent in every aspect. Unfortunately, after reading the developer’s recent comments, I find myself less optimistic about this outcome.

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2025-07-09 01:09