As Microsoft cuts Xbox costs, Marvel's Blade and Dishonored Studio Arkane may not survive

Microsoft is weighing whether to cancel Marvel's Blade and shut down Arkane Studios, the acclaimed maker of Dishonored and Deathloop, as part of a brutal round of Xbox layoffs set to begin July 6.

According to The Verge, Arkane is one of at least five studios on the chopping block, and Blade, Xbox's only big first-party Marvel game, is now firmly in danger after its budget ballooned and its release slipped by more than a year.The Verge reports Blade was originally targeting a launch later this year before its internal ship date quietly slid to late 2027. The game, first revealed at The Game Awards in December 2023, has gone completely dark since.

Arkane hasn't shown a single second of gameplay, and unlike the studio's signature first-person work, Blade was being built as a third-person action title. Now it may never see daylight.

Five studios, one reset, and hundreds of jobs at stake

Arkane isn't alone. The Verge says Microsoft is also looking to offload Compulsion Games, Double Fine, Ninja Theory, and Undead Labs, either selling them or closing them outright if no buyer turns up. Bloomberg and GamesBeat had already flagged several of these names in recent weeks.

Compulsion, the team behind South of Midnight, has reportedly told staff to start job-hunting. Ninja Theory learned last month that Microsoft wanted to close or spin off the Hellblade studio.If Microsoft closes five studios, that's roughly 500 people gone before the wider cuts even land. Rumors point to at least 1,000 job losses across the division, with the axe expected to fall on parts of Bethesda and Blizzard too.

For Arkane, a shutdown would hit Arkane Lyon in France, the surviving half of the studio after Microsoft closed Arkane Austin in 2024 following the Redfall flop.

Why Xbox is suddenly cutting so deep

The bloodletting traces back to new Xbox CEO Asha Sharma's June 10 "reset" memo, which laid out the division's ugly math. Microsoft has poured over $20 billion into Xbox over five years, yet annual revenue has slid by nearly half a billion in that time. Sharma bluntly told staff the company had become "over extended" and warned this cannot continue.CEO Satya Nadella backed her up days later on the New York Times' Hard Fork podcast. Microsoft has never stopped investing, he said, but "now we have to turn this into a sustainable business." His sharpest line landed with a chuckle: there's more money being made off Xbox games on YouTube than at Microsoft itself. In other words, the company has been subsidizing the fun rather than profiting from it.The timing stings. Weeks ago, the Xbox Games Showcase had fans feeling good about the green team, and Bethesda boss Todd Howard said in May that Arkane was doing "a really, really great job" on Blade.

Microsoft has stayed quiet publicly beyond Sharma's memo, declining IGN's request for comment.The cuts are already rippling out. Xbox recently pulled funding from IO Interactive's Project Fantasy, triggering layoffs at the Hitman studio, though Hideo Kojima's OD is reportedly safe. For Xbox fans and workers alike, the next few weeks look grim.