Xbox Entertainment Studios is officially no more.

The last staffers of the production entity headed by Nancy Tellem were let go Wednesday as part of the broader layoffs of 3,000 people at the software giant.

Tellem and her top lieutenant Jordan Levin had been trying to salvage some of the projects that they’d been developing under the Xbox Studios banner by bringing them to a new studio. But the pair had initially expected to stay through year’s end at Microsoft, which would have given them more time to sort through the thicket of rights issues involved in relocating the scripted and nonscripted projects.

Now, rights in some cases are reverting back to the creators, and Tellem and Levin are officially free agents.

Xbox Studios became a casualty of the dramatic shift in strategy at Microsoft after Satya Nadella took over the CEO reins from company stalwart Steve Ballmer.

The Ballmer regime had backed a strategy of developing original programming for Xbox in an effort to make Microsoft’s videogame platform more of an entertainment-focused hub. But Nadella has said the company needs to hone its focus on its core software business, which meant layoffs and pulling back on other initiatives such as Xbox Studios.

In April, Xbox Studios made a splashy presentation to advertisers as part of the digital NewFronts, talking up a slew of vidgame-based TV series, including “Gears of War,” “Age of Empires,” plus other wholly original projects such as comedy “Deadlands,” from the banner behind Adult Swim’s “Robot Chicken.” Sarah Silverman and Michael Cera were among the notables also working on comedy projects for Xbox Studios.

Xbox Studios had also been developing a TV spin on “Halo” for Showtime in tandem of Steven Spielberg’s Amblin TV and 343 Industries, the Microsoft unit that oversees the vidgame franchise. That project remains in the works with Showtime, although it does not yet have a series order.

The abrupt shuttering of Xbox Studios amounts to a curveball for Tellem, who joined Microsoft in the fall of 2012 after a long run as one of the TV biz’s most prominent execs. She spent 15 years at CBS as a top lieutenant to Eye chief Leslie Moonves, and before that she worked alongside Moonves during heady days at Warner Bros. TV and Lorimar.

Hiring someone of Tellem’s stature was meant under the Ballmer regime to be a signal to Hollywood that Microsoft was serious about turning Xbox into an entertainment player. The timing seemed opportune, with streaming content taking centerstage via Netflix and other SVOD players and opening the entertainment industry’s eyes to storytelling opportunities outside of linear film and TV distributors.

Speaking last December at Variety‘s Dealmakers gathering, Tellem painted a picture of entertainment content working hand-in-hand with the parent company’s growth ambition for sales of Xbox consoles and subscription services. But that vision changed when Nadella was named CEO in February of this year.

“We’re in this amazing time where these two worlds are coming together,” Tellem said in December. “It’s only now that we’re getting comfortable with each other. Everyone recognizes how important content is in device adoption.”

Most recently, Tellem joined the board of e-commerce startup Dot & Bo, which was co-founded by former Yahoo and CBS Interactive exec Anthony Soohoo.