Yesterday, Xbox announced that they were spinning off five major studios in the course of the latest round of "historic" restructuring, with 1600 jobs instantly chopped and 1600 more layoffs to follow over the next financial year. It's the latest in a string of failures on the part of Xbox leadership, who have repeatedly butchered the division after an evidently overambitious acquisition spree that dates back to the 2010s. It has, at least, not yet resulted in any outright studio closures.

Double Fine and Compulsion are going indie again with a little funding from Microsoft, keeping ownership of their games. Ninja Theory and Undead Labs have been sold to unnamed new owners. And then there's Dishonored and Marvel's Blade developers Arkane, whose fate is still being negotiated.

Microsoft acquired Arkane as part of their purchase of ZeniMax Media in 2021. Following the abrupt and bruising closure of Prey (2017) and Redfall creators Arkane Austin in 2024, the studio now consists exclusively of Arkane Lyon. Being based in France, Arkane are naturally subject to French labour laws, which require owners and management to consult on any major restructuring with an in-office work council, or Comité Social et Économique, representing the needs of employees.

Under French law, forming a works council is mandatory for any private company with 11 employees or more, with employees themselves voting on council representatives. These councils are not the same things as trade unions, though work councils and unions may often work together. As explained by the French civil service website, a work council must be kept informed and consulted about anything affecting the company's organisation, management and general operation, including a change of ownership and any measures likely to result in layoffs.

Microsoft will presumably have made a proposal to Arkane Lyon about the studio's future, alongside the announcements about Double Fine and the rest. Now, the Xbosses and any potential acquirers must haggle it all out with Arkane Lyon management and the work council. In the latest Game File, Stephen Totillo suggests that everything is on the table: the company could be sold off, bought out by management, or shut down. Certainly, Arkane Lyon are in a better position than Arkane Austin were in 2024: US labour laws offer employees much less protection against sudden layoffs and closures. As regards how many people could be affected, Arkane had 206 staff in 2025 according to Pappers.fr.

The Xbox reductions are business-wide. Even the makers of proven crowd-pleasers like Elder Scrolls are getting it in the neck. As for why Microsoft might want to wash their hands of Arkane Lyon in particular, the Verge report that Marvel's Blade is running late and over budget, but to be frank, this describes many (most?) blockbuster videogame projects. And this is a Marvel adaptation we're talking about - they often do well! 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 by February 2023, though this includes people who played it via Microsoft's Game Pass service.

All that said, Xbox CEO Asha Sharma has made a big deal of refocussing on Xbox's "core business" and away from the acquisition of "independent creators". The phrase "core business" equates to the likes of Fallout, Forza, Candy Crush Saga and Minecraft. "Independent creators" may be plausibly translated to mean "French weirdos who make intricately depressing games about witches and dead whales". This is speculation, but it's possible Microsoft might also see Arkane as awkward to work with – unionised Arkane workers made headlines in 2025 by speaking out against the company's involvement with the Israeli military.

It's not clear when we'll hear more. The negotiations between Microsoft, studio leadership, and the work council could take days or months. Probably the most positive thing I've read about Arkane Lyon this week is an admittedly whimsical, drive-by Bluesky post from Arkane's former co-founder, Raphael Colantonio, about buying Arkane back from the Xboxers. But Colantonio, who is now boss of Weird West developers WolfEye, doesn't have the cash for such a venture himself. "Would need capital investment," he comments, "and right now investors prefer burning money on AI".