Microsoft is reportedly in the midst of a massive restructuring of its Xbox gaming division, leaving the future of multiple internal studios and development projects uncertain. However, according to a report from IGN, Hideo Kojima's upcoming horror title "OD," a collaboration with Xbox Game Studios, has not been affected and remains in active development at Kojima Productions.
Sources indicate that even as Microsoft re-evaluates its gaming investment strategy, "OD" is considered a project worth keeping. Microsoft previously told Bloomberg that the company is "revisiting the direction of our investments, so we will focus on our highest priorities," emphasizing that it is not reducing its overall investment in gaming but rather shifting which projects and genres it supports.
In contrast, the situation for the highly anticipated "Marvel's Blade" appears far more grim. A report from The Verge claims Microsoft is considering canceling the title and either closing or selling off its developer, Arkane Lyon. The Marvel action game, crafted by the team behind "Deathloop," was internally targeting a late 2026 release but has reportedly been delayed to late 2027 and is over budget.
Five internal Xbox studios are currently rumored to be at risk: Arkane Lyon, Double Fine, Ninja Theory, Compulsion Games, and Undead Labs. Some of these studios are reportedly in talks with Microsoft about potential sales or management buyouts in an effort to continue operations after a split, though even a successful spin-off may not prevent layoffs.
The uncertainty extends to other Xbox-related projects as well. IO Interactive, the developer behind "Hitman" and "Project 007," announced layoffs today. IGN reports that a fantasy game the studio was developing, rumored to be funded by Xbox, has now been canceled by its publisher. Meanwhile, "State of Decay 3" and its developer Undead Labs have also been named as potentially impacted by the shakeup.
Hideo Kojima previously described "OD" as "something no one has ever seen before," revealing that when he initially pitched the concept to various companies, many thought he was "crazy" and couldn't grasp the idea. With "OD" now appearing safe amidst the Xbox restructuring storm, its survival underscores the difficult choices Microsoft is making about which projects are worth saving and which may be sacrificed.