Yesterday, Xbox announced it was splitting up five major studios in the latest round of “historic” restructuring, with 1,600 jobs instantly lost and 1,600 more layoffs to follow in the next financial year. This is the latest in a series of failures on the part of Xbox executives, who have repeatedly butchered the division after a clearly overly ambitious wave of acquisitions dating back to the 2010s. This has, at least, not yet resulted in outright studio closures.
Double Fine and Compulsion become independent again thanks to a small amount of funding from Microsoft, thus retaining ownership of their games. Ninja Theory and Undead Labs have been sold to new, unnamed owners. And then there’s Arkane, the developers of Dishonored and Marvel’s Blade, whose fate is still being negotiated.
Microsoft acquired Arkane as part of its purchase of ZeniMax Media in 2021. Following the abrupt and deadly closure of Prey (2017) and Redfall creators Arkane Austin in 2024, the studio is now staffed exclusively by Arkane Lyon. Being based in France, Arkane is naturally subject to French labor law, which requires owners and management to consult on any major restructuring with a works council within the office, or Social and Economic Committee, representing the needs of employees.
Under French law, the formation of a works council is obligatory for any private company with 11 or more employees, with employees voting themselves for council representatives. These works councils are not the same thing as unions, although works councils and unions can often work together. As explained the French civil service websitea works council must be kept informed and consulted on everything relating to the organization, management and general functioning of the company, including in the event of a change of ownership and any measures likely to result in dismissals.
Microsoft will probably have made a proposal to Arkane Lyon on the future of the studio, in parallel with the announcements concerning Double Fine and the rest. From now on, the Xbosses and potential buyers must negotiate everything with the management of Arkane Lyon and the works council. In the latest game file, Stephen Totillo suggests that everything is on the table: the company could be sold, bought out by management or closed. Certainly, Arkane Lyon is in a better position than Arkane Austin in 2024: American labor law offers employees much less protection against layoffs and sudden closures. Concerning the number of people who may be affected, Arkane had 206 employees in 2025 according to Pappers.fr.
Xbox discounts apply company-wide. Even the makers of tried-and-tested games like Elder Scrolls are taking it by the neck. As for why Microsoft might want to wash its hands of Arkane Lyon in particular, The Verge report that Marvel’s Blade is late and over budget, but to be frank, that describes many (most?) successful video game projects. And this is a Marvel adaptation we’re talking about – they often get it right! While the Austin team’s last game, Redfall, was legendarily charmless, compromised by the desire to make a live service game, Arkane Lyon’s previous Deathloop appears to have been a reasonable success. It had “reached” five million players as of February 2023, although that includes people who played it through Microsoft’s Game Pass service.
That said, Xbox CEO Asha Sharma has made a big refocus on Xbox’s “core business” and moved away from acquiring “independent creators.” The term “core business” is equivalent to Fallout, Forza, Candy Crush Saga and Minecraft. “Indie creators” can plausibly be translated as “French weirdos who create complexly depressing games about witches and dead whales.” This is just speculation, but it’s possible that Microsoft also finds Arkane difficult to work with – Arkane’s union workers made headlines in 2025 by denouncing the company’s involvement in the Israeli army.
It’s unclear when we’ll hear more. Negotiations between Microsoft, studio management and the works council could take days or even months. The most positive thing I read about Arkane Lyon this week is probably an admittedly fanciful Bluesky post by car from former Arkane co-founder Raphael Colantonio on Arkane’s buyout from Xboxers. But Colantonio, who is now the boss of Weird West developers WolfEye, he doesn’t have the money for such an adventure himself. “This would require capital investment,” he comments, “and right now investors prefer to put their money into AI.”
