Microsoft is reportedly considering canceling Marvel’s Blade and shutting its developer, Arkane, down.
The Verge said Arkane is one of five studios the Xbox owner is considering closing, after Blade’s planned late 2026 release window was delayed internally to late 2027 and it went over budget. Blade, from the team behind Deathloop, was announced in December 2023 with a reveal trailer, but we’ve seen nothing of it since.
Arkane may be sold rather than closed, The Verge added, which is in-line with what we’ve heard Compulsion Games, Double Fine, Ninja Theory, and, more recently, Undead Labs, are going through. This process may take some time, and even if the studios are spun off, they may not avoid layoffs.
IGN has asked Microsoft for comment about the layoffs reports, but it has yet to respond. IGN has also asked Marvel Games about the status of Blade, but it failed to respond.
The news of Blade’s potential cancelation comes just days after Bethesda Game Studios head Todd Howard was quoted as saying he’d recently seen what the Deathloop team at Arkane Lyon was cooking up and was impressed. “I’m not at liberty to say when [we’ll see more],” Howard teased, “but I saw some stuff just yesterday [on May 21] and the folks at Arkane [Studios, the developers] are doing a really, really great job.” Fans first began to fear the worst after Blade was a no-show at the 2026 Xbox Games Showcase.
Blade isn’t the only Xbox game under threat of cancelation. There is fresh concern for State of Decay 3 and its developer Undead Labs after reports overnight suggested both are under threat of closure as part of impending layoffs at Xbox. Psychonauts developer Double Fine, South of Midnight developer Compulsion, and Hellblade developer Ninja Theory are also said to be in talks with Microsoft over potentially buying themselves out. Hundreds of jobs are at risk either way, not just at these studios, but across Microsoft’s gaming business, which includes Bethesda and Activision Blizzard studios and publishing operations.
State of Decay 3, like Ninja Theory’s Senua, was at Microsoft’s Xbox Games Showcase earlier this month. According to Game File, Microsoft allegedly planned to close or spin off Ninja Theory when it revealed Senua at the showcase event, and it did so thinking that “the promise of a newly announced game would help draw investor interest in the studio.” Game File’s Stephen Totilo suggests Ninja Theory management may not have even been aware of Microsoft’s plan.
Concern for Xbox kicked off with Xbox CEO Asha Sharma’s “reset” memo, which most took as a signal that Microsoft planned big layoffs and studio closures. Microsoft published the memo just days after Xbox Games Showcase — which had gone down well with core Xbox fans. In it Sharma revealed that Microsoft’s gaming business has a 3% accountability margin (assumed to mean profit margin), which is down year-on-year. “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue,” Sharma said. One analyst told IGN “the studios most exposed are brilliant for prestige and rotten for the spreadsheet.” The likes of Compulsion, Double Fine, and Ninja Theory have struggled for commercial success in recent years.
Reports then emerged that Microsoft had started to take action. The Game Business revealed that Xbox Game Studios boss Craig Duncan had stepped down, and news of various Microsoft studios potentially closing down was not far behind. Bloomberg’s Jason Schreier has warned of a “bloodbath” at Xbox. IGN has asked Microsoft for comment specifically on the studio closure reports but it is yet to respond.
Xbox Games Series Tier List
Xbox Games Series Tier List
Yesterday, unionized Xbox workers called for immediate bargaining following the layoff reports, hosting a press conference to say “we’re done paying for executives’ failures.” A Microsoft spokesperson told IGN it will continue to negotiate with the CWA to reach agreements across Xbox.
“We respect the right of our team members to make their voices heard,” the spokesperson said. “We have a long track record of good faith partnership with labor organizations, as demonstrated by the several finalized bargaining agreements our teams have reached with the CWA and our labor principles. We are continuing to negotiate in good faith with the CWA to reach agreements across Xbox.”
Microsoft cut an eye-watering 9,000 staff in July 2025 in a company-wide round of layoffs that also hit gaming. A number of titles were canceled as part of those cuts, including Rare’s Everwild, and studios shut down, such as Perfect Dark developer The Initiative. Staff who remain at Xbox are now bracing themselves for a potential repeat situation just a year later.
Microsoft closed a number of Bethesda studios, including Redfall maker Arkane Austin, and Hi-Fi Rush and The Evil Within developer Tango Gameworks, in May 2024. The developer of Blade is the surviving Arkane studio, based in Lyon, France.
A recent report claimed Sharma is now speeding up development on new The Elder Scrolls, Fallout, and Halo games as she prepares to hit the reset button. Details on the potential shakeup come from The Information (via Reuters), whose sources indicated that Microsoft hadn’t ruled out turning the Xbox brand into a wholly-owned subsidiary. It’s said the move could result in Xbox being operated as a joint venture with other partners or even potentially sold.
Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at wesley_yinpoole@ign.com or confidentially at wyp100@proton.me.
