Microsoft Reportedly Has Until November 13 to Sell Arkane Lyon or Close the Dishonored and Deathloop Studio

By CriticalPixel · 2026-10-23

Arkane Lyon, the French studio behind Dishonored and Deathloop, may be down to its last few weeks. According to a report from Le Monde, summarized by Eurogamer, Microsoft told the studio's management on July 16 that it planned to shut the place down, and the legal clock for finding a buyer runs out on November 13. If nobody steps up, 217 people in Lyon lose their jobs. Microsoft has not confirmed the closure, but it has not denied it either, which tells you most of what you need to know.

Deathloop screenshot from the Steam store page, the last game Arkane Lyon shipped

What the Le Monde report actually says

Le Monde spoke with delegates from the Printemps Ecologique union and the Video Game Workers' Union (STJV), who say Xbox management told Arkane Lyon on July 16 that the studio was facing closure. One union delegate described a shock that quickly turned into deep anger over a decision the union calls incoherent. The paper puts the number of threatened jobs at 217. The wrinkle is French law: a 2014 rule known as the Florange law forces any group with more than 1,000 employees to spend three months looking for a buyer before it can close an operating site. That search started in mid-summer alongside a consultation and negotiations over an employment protection plan, and it ends on November 13.

Here is where it gets ugly. A union representative told the paper that the redundancy talks, which reportedly include efforts to move Arkane staff to other Microsoft studios, are going badly, and that the unions are trying to buy more time. Several forms of takeover are reportedly being considered, so a rescue is not off the table. Microsoft's line to Le Monde was that it continues to explore various options for Arkane as part of the ongoing French consultation process. Internal documents the paper saw say a plan for the total and definitive cessation of the company's operations would begin at the end of 2026 and run through the first quarter of 2027.

How Arkane ended up in the Xbox blender

None of this came out of nowhere. On July 6, Xbox CEO Asha Sharma published a letter on Xbox Wire announcing "the most significant restructure in XBOX history." Sharma said she would cut roughly 3,200 roles across fiscal 2027, with about 1,600 eliminated that day, and that four studios would leave Xbox. Compulsion Games and Double Fine were headed for independence with their IP, while Ninja Theory and Undead Labs were pointed at new owners. Arkane got a single sentence saying its management was beginning required consultation with its Works Council to review strategic options in France. Sharma also justified the whole thing by saying that in a typical year Xbox lost 64 cents for every dollar it invested, which is a brutal number to put in writing and explains why the knife keeps coming out.

Microsoft picked up Arkane in 2021 when it bought ZeniMax, and the studio's next game, Marvel's Blade, was announced in 2023 and has not been seen since. Eurogamer also reports that Hellblade studio Ninja Theory is now likely to close after two acquisition deals fell through, which leaves Arkane Lyon as the one uncertain case among the studios named in July. The same report says three more rounds of Xbox layoffs are still expected, possibly starting before October is over. Arkane is not an isolated bad day. It is one line in a very long restructuring spreadsheet.

Deathloop gameplay screenshot showing the stylized time loop island

What happens to Marvel's Blade

Xbox promised in July that none of its first party publicly announced games or projects were being cancelled, which on paper keeps Marvel's Blade alive. In practice, a game cannot be finished by a studio that no longer exists, and nothing in the reporting says who would take it over if Arkane Lyon goes under. Earlier this year Blade was rumored to be dead, and a follow up report from The Verge claimed it was over budget but now aimed at a 2027 release after an internal delay. Any buyer would be inheriting an over-budget superhero game from a company that clearly wants out of the studio business. That is a hard sell, and the buyer also has to want 217 salaries in France.

How players are reacting

Reaction in the Eurogamer thread was small but lopsided, so treat it as a limited sample of a handful of replies rather than a verdict. One reader pointed out that Dishonored 2 turns 10 on November 11, two days before the buyer deadline, and called it a rough way to spend an anniversary. Another said Deathloop was a lot of fun for them and that this is one of the few cut studios they hope finds someone. A third asked whether companies even acquire studios anymore, arguing that both Xbox and PlayStation have stopped trying to swallow the market and are shutting studios down instead. Nobody in that sample was defending Microsoft.

The CriticalPixel take

Microsoft bought studios aggressively from 2018, then decided in one letter that the portfolio lost 64 cents on every dollar. Fine, that is a business argument. But there is a gap between a studio that gets spun out with its IP and runway, like Double Fine and Compulsion, and one that gets a legal countdown clock and a press statement about exploring options. Arkane Lyon is the Deathloop team, the people who made one of the sharpest immersive sims of the last decade, and it is being handled like inventory. If Microsoft wanted this team to survive, it had the same playbook available that it used for Double Fine. Instead it ran the process French law demands and, by the unions' account, is not making the redeployment talks any easier.

Deathloop screenshot of a firefight, a reminder of what the Lyon team built

Watch November 13. Either a buyer or a union won extension shows up, or the plan Le Monde describes kicks in at the end of the year and Arkane Lyon winds down through spring 2027. My bet leans toward an extension, since the unions are already asking for time and the takeover talk is on the record. But if you care about immersive sims, this is the moment to say so loudly, because the Xbox reset is not finished, and a studio that gave us Dishonored and Deathloop should not get a quiet exit. We will update this story the moment Microsoft or the unions say something new.