Hideo Kojima's Xbox Horror Game, OD, Is Safe From Microsoft's 'Reset' Plan, but Other Games Are on the Chopping Block
Hideo Kojima’s OD is set to survive Microsoft’s big “reset” of the Xbox business, IGN understands.
A source familiar with Microsoft's plans indicated Kojima’s upcoming horror game remains in the works at Kojima Productions and with Xbox publishing, even as Microsoft reassesses its video game investments.
007 First Light developer IO Interactive today announced layoffs after the publisher of its upcoming fantasy game pulled the plug. IGN understands this game was being funded by Xbox.
Microsoft told Bloomberg it is “taking a fresh look at where we invest so we’re focusing on our highest priorities.”
“We're not reducing our overall investment in games. We expect to invest about the same in content as we did last year. What's changing is where we're investing and the kinds of projects we're backing.”
Five internal Xbox studios are reportedly at risk from closure as part of the reset: Marvels’ Blade developer Arkane Lyon, Psychonauts developer Double Fine, Hellblade developer Ninja Theory, South of Midnight developer Compulsion, and State of Decay 3 developer Undead Labs. Studio leadership is said to be working to secure their future, either via a studio selloff or management buyout that would see the subsidiaries spun off.
OD, published by Xbox Game Studios in collaboration with Get Out director Jordan Peele, is still shrouded in mystery, but we do know something of what to expect. The original plan was for the game to feature three main actors: Sophia Lillis, Hunter Schafer, and the late Udo Kier. Kier died in November aged 81 , and while Kojima Productions had completed a scan of the legendary actor, it didn’t manage a shoot in time.
"I wanted to do something new. I wanted to do something different," Kojima recently told Entertainment Weekly . "I had this OD concept since I was working on DS1 [Death Stranding] and I was working on it just by myself. I can't reveal much detail, but it's something that no one has ever seen before. A new game system."
"I pitched to many people, to the big companies, and also to the up-and-coming companies. All of them said the same thing," Kojima continued. "They said that I'm crazy, and that they really don't understand the concept — that they will not be able to do it."
Former Xbox boss Phil Spencer did understand the concept, however, and signed the game. Spencer was replaced at the top of Microsoft’s gaming business earlier this year by Asha Sharma, who told EW she’s just as keen on it as her predecessor.
“I've got great artists and creatives that can pick a great game better than I can, and so I want to give it space, but most importantly, I think it just represents another kind of game,” Sharma said.
A game like OD tells her that Xbox has "not reached the boundary of games," Sharma continued, "and, therefore, we need to make sure our platform is sufficiently open so more creators and developers can come on board and be successful, because the next Kojima is yet to be known."
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.
This week, 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.
Photo by Rosdiana Ciaravolo/Getty Images.
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.