According to The Hollywood Reporter, Xbox Entertainment Studios could become a "standalone entity" based at Warner Bros and merged with the Machinima "video game-centric YouTube network".
The development comes in the wake of Microsoft's plan to reduce its workforce by 18,000 people, as part of its efforts to refocus on core areas including computing and video gaming, as well as Windows Phone devices.
Xbox Entertainment Studios had not long ago unveiled a drama production partnership with Channel 4, before Microsoft called time on its future.
More after the break
[via The Hollywood Reporter]