Reports indicate that Xbox is looking to either close or sell three of its studios—Double Fine, Ninja Theory, and Compulsion Games. These developments were highlighted by various sources on Monday.
Employees at Ninja Theory were informed that the studio would be closing, but efforts are underway to find a buyer willing to keep the studio operational. Ninja Theory is well-known for the Hellblade series and recently appeared at the Xbox Summer Game Fest, showcasing a new installment anticipated in 2027.
Double Fine, celebrated for creating the Psychonauts series, Brütal Legend, Broken Age, and numerous LucasArts games, was established in 2000 by Tim Schafer and other collaborators. According to reports, leaders at Double Fine are actively engaged in negotiations to buy back the studio from Xbox to avoid closure.
Compulsion Games finds itself in a similar predicament. The Montreal-based studio is recognized for stylish titles such as Contrast, We Happy Few, and the recently released South of Midnight, which debuted in April 2025.
Additionally, there are indications that several other studios under the Xbox Game Studios label are also in discussions regarding their futures and may face shutdowns. Currently, the Xbox Game Studios division comprises numerous studios, including Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax, and Activision Blizzard King. Xbox has been contacted for more information regarding the potential closures and ongoing buyout negotiations.
Microsoft’s aggressive acquisition strategy began in 2018 with the purchase of Undead Labs, Playground Games, Ninja Theory, and Compulsion Games, followed by the establishment of The Initiative. This trend continued with a significant number of acquisitions in 2020 and 2021, including eight additional studios under ZeniMax Media, such as Arkane, Bethesda, and id. A landmark announcement in 2022 revealed plans for a $69 billion acquisition of Activision Blizzard, which became the largest deal in gaming history. That acquisition was finally completed at the end of 2023 after a protracted regulatory review.
Since these acquisitions, Microsoft has implemented several large-scale layoffs impacting thousands of employees in its gaming sector, as well as shutting down notable studios, including The Initiative. Sadly, Double Fine, Ninja Theory, Compulsion, and other studios facing uncertainty are not alone in this trend.
This year marked a shift in leadership within Xbox, as longtime division head Phil Spencer stepped down and was succeeded by new CEO Asha Sharma, along with other significant executive changes. Additionally, on the same day, Xbox Game Studios head Craig Duncan announced his departure after leading the organization since October 2024. Employees across Xbox are reportedly preparing for more layoffs in 2026, following a concerning memorandum from Sharma in mid-June, just when the excitement of Summer Game Fest had subsided.
