Hideo Kojima's mysterious horror project OD will continue despite Microsoft's sweeping restructuring of its gaming division, according to sources familiar with the company's plans. The game remains in active development at Kojima Productions with Xbox Game Studios providing publishing support, even as the tech giant reassesses where it channels its entertainment dollars.
The reprieve comes as Microsoft tightens its belt elsewhere in gaming. IO Interactive, the studio behind the upcoming fantasy title, announced layoffs after its publisher pulled funding. Microsoft confirmed the move is part of a broader strategic reset, stating it is "taking a fresh look at where we invest so we're focusing on our highest priorities."
Five internal Xbox-owned studios face potential closure under the new direction. Arkane Lyon (Blade), Double Fine (Psychonauts), Ninja Theory (Hellblade), Compulsion Games (South of Midnight), and Undead Labs (State of Decay 3) are all at risk, with studio leadership reportedly exploring survival options through selloffs or management buyouts.
Microsoft pushed back against the idea it is cutting overall investment, telling Bloomberg that spending on content will remain flat compared to the previous year. The company is simply reallocating resources to align with what it views as higher-priority projects.
OD, developed in collaboration with Get Out director Jordan Peele, remains largely under wraps. The horror game was originally planned to feature actors Sophia Lillis, Hunter Schafer, and legendary actor Udo Kier. Kier's death last November at age 81 complicated production. Kojima Productions had completed a digital scan of the actor but could not complete filming before his passing.
Kojima recently described the project to Entertainment Weekly as something entirely novel. "I had this OD concept since I was working on Death Stranding and I was working on it just by myself," he explained. "It's something that no one has ever seen before. A new game system."
Pitching the concept to major and emerging studios initially proved fruitless. Kojima said executives uniformly rejected it, telling him "I'm crazy, and that they really don't understand the concept." Former Xbox head Phil Spencer proved the exception, signing the game.
Spencer has since been replaced by Asha Sharma atop Microsoft's gaming business. She appears equally committed to the project. "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," Sharma told Entertainment Weekly.
For Sharma, OD represents something larger: evidence that gaming still has unexplored territory. "The next Kojima is yet to be known," she said, suggesting Microsoft must remain open to unconventional creators if it wants to discover the industry's next breakthrough talent.
Author Emily Chen: "Microsoft keeping OD alive while dismantling five studios sends a clear signal about what the company values most, and it's refreshing to see Kojima's weird vision survive corporate bean counting."
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