Blizzard has reportedly set up a "smaller" team to create AA games based on its franchises

Activision and Microsoft have reportedly approved the creation of a new "smaller" team within Blizzard Entertainment - mostly comprised of employees from Activision's mobile-focused King division - to develop new "AA" games based on existing Blizzard properties.

That's according to Windows Central's Jez Corden, whose sources say the new initiative reflects an eagerness at Microsoft to "explore and experiment" with smaller teams within the larger organisation, in response to the "monstrously ballooning costs" of AAA game development.

Corden notes Microsoft has seen success with the likes of Sea of Thieves and Grounded, both built by comparatively small teams - and, of course, 2023's Hi-Fi Rush, created by a small team within Tango Gameworks, was heralded as a "break out hit" by Microsoft after its release.

And if you're wondering why Microsoft closed Tango Gameworks in May if the studio had already demonstrated success using a development approach it was looking to adopt further, Corden claims Microsoft did see Tango as fitting into its new strategy - but its geographical location made "inter-studio collaboration logistically difficult".

Back to Blizzard's new team, Corden says it's "geared up for agility, eschewing some of the bureaucratic bloat" of larger teams. But as to what it'll be working on specifically, that remains unclear. The goal, though, is reportedly to create smaller-scale, lower budget titles built around Blizzard's existing franchises - which could potentially mean anything from current hits like Overwatch to long-dormant series such as StarCraft.

Xbox boss Phil Spencer told Wired back in 2022, roughly a year before Microsoft's acquisition of Activision was approved, that he was "excited to sit down with the teams at Activision Blizzard and King to talk about back catalogue and opportunities we might have there."

All of which just leaves the question of platforms Blizzard's reported new studio might be targeting, given it's being populated by King developers who've historically created games for mobile. Corden notes a mobile focus would make sense for the new team, given Microsoft is currently looking to launch an Xbox gaming store for iOS and Android following new EU laws demanding Google and Apple open their platforms up to competitors. But with Microsoft exploring a multi-platform strategy for its releases, anything is possible.

Today's report follows the news Microsoft's gaming revenue grew 44 percent in its last quarter, despite declining Xbox console sales, in large part thanks to its $69bn Activision Blizzard acquisition. Without Activision Blizzard on its books, that growth would be just three percent.

Microsoft's is also starting to leverage its acquisition on Game Pass. Diablo 4 became the first Activision Blizzard game to arrive on the streaming service back in March, while Call of Duty: Modern Warfare 3 launched for members this July. Additionally, Black Ops 6 comes to Game Pass on 24th October, but only for Game Pass Ultimate and PC Game Pass subscribers, following Microsoft's recently announced service overhaul.