Microsoft has initiated a series of significant cuts at Bethesda, leading to the closure of multiple game development studios and an expected wave of layoffs. This restructuring affects several notable studios including Arkane Austin, creators of Redfall, Hi-Fi Rush and The Evil Within developer Tango Gameworks; and others. The move by Microsoft, a company with a current valuation surpassing $3 trillion, points to a strategic consolidation and prioritization of its gaming assets.

Alpha Dog Games, the team behind the mobile game Mighty Doom, will also be shut down. Roundhouse Studios, another affected entity, will be integrated into ZeniMax Online Studios, the team behind The Elder Scrolls Online. The exact number of jobs lost has not been disclosed, but given the scale of the studios involved, the layoffs are expected to be substantial.

One of the most prominent cancellations affects the vampire co-op game Redfall. Despite previous promises for continued updates and expansions, including an offline mode and new character DLC, Microsoft has halted all development on the game. Although Redfall will remain available online, this cessation marks a significant retreat from planned enhancements. Microsoft has pledged some form of compensation for those who invested in the Hero DLC, though details of this “make-good” offer are still forthcoming.

Despite these closures, some studios under the Bethesda umbrella will continue operations. Arkane Lyon is currently developing Marvel’s Blade and is not affected by the cuts. Other major studios like Bethesda Game Studios, Machine Games, and id Software will also continue their work, focusing on high-profile titles such as Fallout, The Elder Scrolls, Starfield, Indiana Jones, and The Great Circle.

The restructuring was communicated to employees via an email from Matt Booty, head of Xbox Game Studios, which IGN has verified. The email explains that the closures and layoffs are part of a broader strategy to focus on high-impact titles and further invest in Bethesda’s portfolio of blockbuster games. Booty’s message emphasized the need to double down on successful franchises and potentially build new ones, necessitating a hard look across the business to identify the best opportunities for success.

“Today I’m sharing changes we are making to our Bethesda and ZeniMax teams,” Booty wrote. “These changes are grounded in prioritizing high-impact titles and further investing in Bethesda’s portfolio of blockbuster games and beloved worlds which you have nurtured over many decades.”

Here is the entire email he sent out:

 Booty, head of Xbox Game Studios, Microsoft blamed the cuts on a “reprioritization of titles and resources”. The email, verified by IGN, is below:

The statement acknowledged the studio’s creative pedigree and assured that some team members would join other Bethesda projects. Considering that it’s boom time for them with Bethesda’s Fallout series being a breakout hit on Prime Video.

For Alpha Dog Studios, the shutdown comes with the sunset of Mighty Doom, scheduled for August 7. The game will no longer accept purchases as it winds down. Tango Gameworks, celebrated for its contributions to the industry, will see its recent release, Hi-Fi Rush, continue to be available to players despite the studio’s closure.

Roundhouse Games will merge into ZeniMax Online Studios, which Booty suggests will strengthen the development of The Elder Scrolls Online by bringing in a team that has been instrumental in many recent game launches.

This consolidation is described not as a reflection of the creativity or skill of the affected studios but as a strategic necessity to create capacity for greater investment in other parts of Bethesda’s portfolio. “These changes are not a reflection of the creativity and skill of the talented individuals at these teams or the risks they took to try new things,” Booty explained. The subtext is that Microsoft is doing it not because it makes any sense from a creative or productive standpoint, but simply because they want to reconfigure their dollars in to bigger, fewer projects. This might satisfy short term investers, but how it benefits either Microsoft or the game industry as a whole remains a mystery.

As for the broader implications within the gaming industry, the layoffs at Bethesda are part of a larger trend affecting the sector. Over the past year, the video game industry has seen a series of layoffs and studio closures, despite a period of blockbuster hits and significant revenue generation. Estimates suggest that the number of workers laid off last year in the games industry approached or exceeded 10,000, with a recent Game Developers Conference (GDC) survey indicating that one-third of all game developers were impacted by layoffs, either directly or through their company.

These developments have sparked reactions across the industry. Arkane Lyon’s Dinga Bakaba publicly criticized the cuts, emphasizing the need for corporations to support their creative talent, especially during challenging times. “To any executive reading this, friendly reminder that video games are an entertainment/cultural industry, and your business as a corporation is to take care of your artists/entertainers and help them create value for you,” Bakaba tweeted.

As Microsoft restructures its gaming operations, the impact of these layoffs and studio closures will likely resonate across the industry, reshaping how games are developed and which projects receive the green light in an increasingly competitive market.

These are dark times indeed for the gaming industry, but it will — eventually — recover, and when it does, it won’t be because Microsoft was there to save it from the abyss.

If you love gaming, the legacy of gaming is in the hands of the creatives who actually do the work. From our perspective, Microsoft has completely forgotten that fact.

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