A couple weeks ago, Microsoft announced the largest round of layoffs in the company's history. While most of the loss will come from the Nokia division, several other divisions saw big cuts as well. One division seeing a full cut is the Xbox Entertainment Studios. Xbox head Phil Spencer announced that XES, founded only 2 years ago and about to release its first set of original programming, would be disbanded.
With a collection of top talent onboard, there is still a lot of value in the studio. Because of this, Microsoft is reportedly in talks with Warner Bros. to transition XES from Microsoft's hands into part of Warner Bros. gaming-focused studio Machinima.
The original plan was for former CBS executive Nancy Tellem, Microsoft VP Jordan Levin and a few other high-level studio heads to remain with Microsoft to keep alive existing projects, such as the Halo television series, produced by Steven Spielberg. However, if the studio is not closed and, instead transferred to another owner, it is likely that everyone and everything involved will be transferred as well. This is even more likely when considering the highest value for the studio is the Halo series and Nancy Tellem.
This move could explain the rumored initial series launch on Showtime, rather than the company's own platforms. If this conversation has been in the works since Nadella took over as CEO, it could be Warner Bros. looking to outsource the release of the show, not Microsoft.
Keeping the studio alive, and merging it with established Machinima would enhance both parties. XES has been focusing on scripted, high-produced content. Machinima has always been focused on unscripted walk-throughs and reviews. With no direct overlap in projects, but an almost 100% overlap in target audience, the content to come out of both have the potential to be enhanced by cross pollination. It could also save a lot of jobs.