Xbox Needs New IP After Shedding Its Original Studios

Xbox CEO Asha Sharma told staff at an Oct. 6 town hall that the company will not survive if it only relies on the past. The warning comes while Xbox is still cutting approximately 3,200 jobs through fiscal 2027 and moving original-game studios off its books.

She said Xbox is backing its strongest franchises and wants those games to become global billion-dollar brands. She also said the company has to keep making enduring new IP. That is a narrower brief than it sounds. Xbox already decided it is a poor home for many of the studios that invent for a living.

Sharma Tells Staff Xbox Will Not Survive on Old Hits

Transcripts of the Oct. 6 all-hands, later confirmed as accurate aside from one misheard verb, put Sharma on content first. She told the room that content is the change people are seeing most.

We’re backing our strongest franchises. I want our great games to become great global billion-dollar franchises. I would also like to see us continue to create enduring new IP. We will not survive if we only rely on the past. We have to find new ways, and courage, to have invention on new IP, that reaches new sets of audiences.

Asha Sharma, Xbox CEO, Oct. 6 town hall

The same meeting covered hardware. Sharma described Project Helix as a family of devices, with a console first and partners for other form factors. She said that after an all-time low, Xbox had started to return to growth, more than two to three times what it was, and that the company expected that to continue.

She joined as CEO in February, after Phil Spencer. By June she was already telling staff that a reliable pipeline of exclusives and new IP was critical, and that Xbox had not funded its defining franchises well enough to win. The Oct. 6 line is the same argument with sharper language, delivered after the cuts had begun.

64 Cents Lost for Every Dollar Invested

On July 6, Sharma called the reset the most significant restructure in Xbox history. About 1,600 roles went that day. Another wave of cuts was scheduled through FY27, for a total of approximately 3,200. She said the business was not healthy, and that Xbox was running at margins three to 10 times lower than comparable platform and publishing companies.

The content section of that note is the part that explains the town hall. Since 2018, Xbox had bought studio after studio while the industry’s monthly output of new games raced past the prior decade. Sharma wrote that it is neither possible nor desirable to own every great independent studio, and that Xbox is not the best home for every type of studio. In a typical year, she said, the company had lost 64 cents for every dollar it invested.

THE MONEY BEHIND THE RESET

• Five-year spend: Excluding Activision Blizzard King, Xbox spent over $20 billion on content, platform, and hardware subsidy while annual revenue fell by nearly half a billion dollars.
• The margin: Leadership said the fiscal year would end at about a 3% accountability margin, down from the year before.
• Hardware costs: Console storage was already more than twice the prior fall when Sharma arrived, then doubled again, and was heading over five times the price paid two years earlier.
• The org chart: Platform teams were 40% larger than at the start of the generation even as the player base shrank, with work passing through as many as 14 management layers.

She told staff Xbox would cut those layers to no more than five, and to three where possible, and would cut vendor spend by 50%. Helen Chiang became chief operating officer with P&L across content, hardware, platform, and services. None of the first-party games then in public were cancelled in that July round. The original-IP problem sat one layer down, in studios Xbox no longer wanted to own.

THE RESET CALENDAR

1. June 10, 2026: Sharma and chief content officer Matt Booty publish the next-100-days note, flagging the 3% margin, the $20 billion spend, and the hardware crunch.
2. July 6, 2026: Approximately 3,200 jobs are put on a FY27 clock, with about 1,600 cuts that day and four studios told they will leave.
3. August 2026: Compulsion Games and Double Fine return to their own management with IP, catalogs, and runway funding.
4. September 22, 2026: Booty cuts 268 more roles and says the work since July, including the studio exits, is roughly three-quarters of the way through the announced reset.
5. October 6, 2026: Sharma tells the all-hands that Xbox will not survive if it only relies on the past.

Those dates read as one plan, not a change of heart. The town hall is the creative language for a financial decision already on paper.

Double Fine Walked Out With Its Own Catalog

July named four studios leaving Xbox, with a fifth in French labor talks. August and September then split those five into very different endings. Two walked out with their games. One found a publisher. One is in a proposed closure. One is still in consultation.

WHERE THE FIVE STUDIOS LANDED

Booty’s Sept. 22 note is blunt on Cambridge. “Unfortunately, two separate agreements for Ninja Theory fell through,” he wrote. “We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward.”

By Oct. 5, Ninja Theory staff were posting that their roles were at risk or already gone. Senua, the third Hellblade game, had been shown at the June showcase for a 2027 window. Its home studio no longer has a buyer.

WHAT WE KNOW

• Compulsion and Double Fine: Both left with their IP, back catalogs, and runway funding, so South of Midnight and Double Fine’s originals are no longer Xbox’s to sequel.
• Undead Labs: The State of Decay team completed a similar move, and Xbox still gets State of Decay 3 on Game Pass at launch.

WHAT IS UNCONFIRMED

• Ninja Theory: Closure is proposed, not finished; Booty said Xbox would keep looking at other paths while consultation ran.
• Arkane: Marvel’s Blade and the Lyon studio remain in works-council talks with no public end state.

The same Sept. 22 note folded remaining makers into franchise houses. Activision picked up World’s Edge and Rare, plus the next Halo, built by a new team kept apart from Call of Duty. Bethesda added Obsidian, which keeps Grounded and a new Fallout with Bethesda Game Studios. Playground and Turn 10 became one studio on Forza and Fable. King added Microsoft Casual Games. That is a company arranging itself around names it already owns.

Everwild, Blackbird and Mara Never Reached Players

The original-IP graveyard is older than Sharma’s job. Rare’s Everwild and The Initiative’s Perfect Dark were stopped in July 2025, and The Initiative was wound down. ZeniMax Online’s Project Blackbird, a new sci-fi online game in the works since 2018, died in the same summer round.

Matt Firor, who founded ZeniMax Online and ran Elder Scrolls Online, later said Blackbird was the game he had waited his whole career to make, and that its cancellation is why he resigned. He called the decision financial. In a later interview he said the team showed up as a number on a ledger, and that the number was always large.

Ninja Theory then killed its own experiment. On June 8 and 9, studio head Dom Matthews said Project Mara, the photoreal horror work announced in 2020 as a grounded study of mental terror, would not go further. He put all 85 creatives on Senua. Hellblade 1 had been a team of about 25. The third game was supposed to be the whole building. A few months later the building itself was on the sale list, then on a closure consultation.

THE CANCELLED ORIGINALS

• Everwild: Rare’s new world, stopped in July 2025 with Perfect Dark.
• Project Blackbird: ZeniMax Online’s sci-fi MMO, cancelled summer 2025; Firor quit over it.
• Project Mara: Ninja Theory’s experimental horror, cancelled in June 2026 so the full studio could finish Senua.

Those three were the in-house answer to “enduring new IP.” Two died before Sharma arrived. The third died so a franchise sequel could use every person in the building, and that sequel’s studio is now the one Xbox cannot sell.

How Xbox Defines New IP After the Cuts

New IP at Xbox now means a short list of scale bets and hired auteurs, not a wide studio roster. InXile’s Clockwork Revolution is still dated 2027 as an Xbox exclusive. Fable sits with the newly joined Playground and Turn 10 group. Halo’s next game moved to Activision. The big machine in the near term is Call of Duty, and Modern Warfare 4 launches October 23 as a standalone release.

The clearest outside bet is Hideo Kojima. Xbox was already publishing OD. On Sept. 9 it added Physint after PlayStation Studios stepped away. Sharma said creators have choices about where they bring ideas to life, and that she was honored Kojima had chosen Xbox. Kojima said the deal expanded the relationship beyond OD, and that Physint would keep trying to redefine action-espionage. The two companies also said they would work together on film and television. In September, Kojima named Bill Skarsgård as Physint’s lead, with Charlee Fraser on the new poster.

That is invention Xbox can buy without owning a 200-person original-IP studio. It is also slow, expensive, and tied to one creator. It does not replace South of Midnight, Kiln, or a Rare world that never shipped. Halo, Fallout, and Call of Duty were new once. The open question is whether Xbox will fund the next name of that size, or only the current ones.

A speech becomes a slate only when a game has a budget, a ship window, and a team that will still be there. Sea of Thieves launched thin in 2018 and Xbox kept paying until it became one of the durable live games. Everwild did not get that runway. Teams still pitching originals are being asked to show courage inside a company that cancelled that Rare game and is consulting on closing the Hellblade studio.

Xbox XP Pushes Halo and Fallout Beyond Games

On Oct. 8, Sharma stood up XP, a new division under Kayleen Walters, a former Lucasfilm and Mojang executive. Chief strategy officer Matthew Ball wrote that Xbox’s aim is to be the number one entertainment company in the world, and that XP exists to grow games into franchises that run across generations.

XP’S FOUR BETS

• Pictures: Film and television versions of Xbox worlds.
• Products: Licensed goods built for the fandoms Xbox already has.
• Partnerships: Sponsors and brand deals around those worlds.
• Places: Broadcasts, live events, theme parks, and other location work.

That unit is how “billion-dollar franchises” leave the disc. It is not how you get a new one. Five days later, on Oct. 13, Sharma sent another note. She pointed to games being decompiled and rebuilt for hardware they were never meant to run on, to Windows builds translated onto Apple silicon, and to browser ports through WebAssembly and WebGPU, which she said was approaching 90% global browser support. She also cited big games remixed into other games’ source.

She asked CTO Scott Van Vliet to stand up a small group of game makers, engineers, and scientists as Xbox Labs. Success, she wrote, would be measured by whether more people are playing and creating. People spend more than 72 billion hours a year in Xbox games, about five times the estimated time spent writing code worldwide. No new staff were hired for the group. A spokesperson described it as existing research pulled under one name, including Apple-silicon ports, browser distribution, and tools for modders.

Labs is invention of a different kind. It is remix, access, and old games on new glass. Sharma said priorities were not changing, and that Labs was a way to explore new technology without abandoning work already underway. The 4Cs, the hardware plan, and stewardship of IP stayed in place. The missing piece is still a funded original that is allowed to be bad on day one.

The First New Franchise Still Has No Runway

Clockwork Revolution is the game that has to make the Oct. 6 sentence true in public. It is new. It is exclusive. It is dated 2027. If Xbox rings a fence around InXile the way it eventually did around Sea of Thieves, Sharma’s courage line will have a product attached. If it is treated as a line item when the next margin review lands, the town hall will read as a wish.

Kojima’s two games can fill the trailer slot. XP can put Master Chief and the Vault Boy on screens that are not consoles. Labs can put old discs in a browser. None of that rebuilds the mid-size original pipeline Xbox spent years buying and then, on the 64-cent math, decided it could not afford to keep.

Sharma closed the July memo by saying history is full of companies that mistake longevity for inevitability, and that Xbox would not be one of them. The Oct. 6 town hall is the same point aimed at the catalog. Old hits will not carry the next decade by themselves. The harder part is still on the calendar: a new name, with a team that still exists, and a budget that survives the rest of FY27.