Microsoft’s Bethesda shake-up explained: studio shutdowns, scrapped games, refunds and more

Microsoft has plunged a stake through its comatose open-world game Redfall a year after its release.

The game’s developer Arkane Austin is shutting down in widespread cuts at its owner, and Microsoft subsidiary, Bethesda, leaving Redfall dead in the water.

Arkane has announced it will no longer support the troubled game and is promising refunds for players who forked out for updates that have yet to materialise.

Which Bethesda studios are shutting down?

Alongside Arkane Austin, Microsoft is closing several other Bethesda-affiliated studios it inherited after acquiring gaming giant Zenimax Media in a $7.5 billion (£6bn) deal in 2021.

Tango Gameworks is also closing down, dashing hopes for a sequel to its rhythm action game Hi-Fi Rush, as is Alpha Dog Games, maker of mobile game Mighty Doom, a cartoonish offshoot of the gory Doom series.

Meanwhile, Roundhouse Studios, rumoured to be working on a major comic book game, is being absorbed by Elder Scrolls Online developer Zenimax Online Studios. That is according to IGN, which first broke the news. The amount of layoffs has not been confirmed.

Microsoft’s surprise move has prompted a backlash among the more vocal gamers on social media, with some even calling for Xbox chief Phil Spencer’s resignation. The cuts come during a turbulent time for the wider gaming industry grappling with a prolonged hangover following a pandemic-induced high in video game consumption.

Layoffs at multiple big-name studios have caused numerous games to be cancelled, including Naughty Dog’s The Last of Us online multiplayer spinoff, Pokemon Go maker Niantic’s Marvel and NBA games, and numerous Ubisoft and Take Two Interactive titles.

What’s happening with Redfall?

Redfall was already on life support before Microsoft pulled the plug by axing Arkane Austin.

The vampire shooter from the studio behind vaunted RPGs Dishonored and Prey was supposed to be the next big Xbox blockbuster, but instead, it went up in flames. Redfall’s botched launch involved myriad technical issues and lukewarm reviews. So bad was its reception that it earned the infamous criticism of “worst Xbox exclusive”.

Despite a well-received update last October, it never recovered from that false start. Before its demise, Redfall had a paltry 30 simultaneous players on Steam.

In an email to staff, Xbox Game Studios head Matt Booty said the game and its servers would remain online, meaning it would still be available to play.

In a statement on X (formerly Twitter), Arkane confirmed its closure and said: “Development will not continue on Redfall.” It added that Redfall players who bought the game’s special editions would be eligible “to receive the value of the upgrade”.

However, it’s unclear what type of refunds players will receive. Booty said, “we will provide make-good offers to players who purchased the Hero DLC.” A support page on the Bethesda website states that it is “working to finalise details for the Redfall credit programme.”

On the other hand, Mighty Doom is shutting down its servers entirely and directing players to the Bethesda website to sign up for refunds for purchased in-game currency.

What about Hi-Fi Rush?

Booty said Hi-Fi Rush “will continue to be available to players on the platforms it is today.” The game launched on Xbox and PC last January before arriving on PS5 in March of this year. There were rumours of a Nintendo Switch version, but based on Booty’s statement, this now seems unlikely — as does Hi-Fi Rush 2.

Bethesda’s relationship with Tango Gameworks was far from smooth. The Japanese company’s founder and leader Shinji Mikami departed last February, citing issues around creative control, and formed a new studio called Kamuy shortly afterwards.

How are people reacting?

Microsoft’s cuts have largely generated widespread opprobrium from fans and developers alike.

Some players fear that the company’s bar for success is too high, putting other studios in peril of facing the chop if their releases aren’t gargantuan hits. Following its acquisition of Activision Blizzard last year, Microsoft now owns a hulking stable of 36 first-party developers. Following the deal, Microsoft laid off 1,900 workers in its gaming division.

“My biggest worry now…is what this means for the safety of all the devs still under them that I enjoy the work of. If HiFi Rush wasn't enough for Tango, what do Obsidian, InXile, Ninja Theory, etc need to do to stay valuable,” RPG enthusiast Kevin Kenson posted on X.

Developers echoed his trepidation. “Don't matter if you make a game that's a best seller, award winner or a cult classic. You're getting shut down by corporate sooner or later, pal,” said Dave Oshry, co-founder of New Blood Interactive, maker of Amid Evil and Dusk.

Meanwhile, Arkane Lyon boss Dinga Bakaba publicly criticised Microsoft for its decision to close several studios, calling it “absolutely terrible”.

He elaborated that higher-ups were sacrificing developers for their own mistakes. “Don't throw us into gold fever gambits, don't use us as strawmen for miscalculations/blind spots, don't make our work environments darwinist jungles,” Bakaba said.

Others are calling for Phil Spencer’s head and say that even the most ardent Xbox supporters will find the news difficult to stomach.

“I don't think Phil Spencer will remain at Xbox for much longer. But tbh, it doesn't even matter who replaces him. Whatever unique identity Xbox had that lingered on from its inception has been diluted completely by the larger umbrella that is Microsoft,” YouTuber Septic Sauce said on X.

Why is Microsoft making the cuts?

For its part, Microsoft said it was “reprioritising” its titles and resources to focus on “high-impact” games, and further investing in Bethesda’s “blockbuster” output.

Microsoft said it was “doubling down” on hit franchises and building new ones. “We are making these tough decisions to create capacity to increase investment in other parts of our portfolio and focus on our priority games,” it told staff.

Microsoft assured employees “Bethesda remains one of the key pillars of Xbox with a strong portfolio of amazing games and thriving communities.”

More broadly, a confluence of events has led to the latest layoffs. The economic feasibility of Xbox Game Pass, Microsoft’s Netflix-style game service, remains unclear. Some believe it encourages players to subscribe instead of buy games, upending an age-old system without a safety net for developers.

But, it may not have a choice. Sales of Xbox consoles are tanking and the industry fears a younger generation of gamers are content with playing on their tablets and phones. At the same time, players face gaming fatigue as new releases pile up, while long-running live service games including Call of Duty and Fortnite pump out new content. There isn’t enough time to play all the available games.