Microsoft is shutting down or selling at least three Xbox studios—Ninja Theory, Double Fine, and Compulsion Games—as the gaming division undergoes a reset under new CEO Asha Sharma, leading to layoffs. The Verge and Bloomberg confirmed the moves on Monday, coinciding with the departure of two senior Xbox Game Studios leaders.
Ninja Theory Closure
Ninja Theory, the studio behind the Hellblade series, received the news first. Staff were informed on a Monday call that the studio was closing, though efforts are underway to find a buyer, according to The Verge. The announcement comes just over a week after the Xbox Games Showcase, where Microsoft unveiled a new Hellblade game, Senua, scheduled for 2027. The fate of the game remains uncertain.
Double Fine and Compulsion Games Seek Independence
Double Fine, the developer of Psychonauts founded by Tim Schafer in 2000, is in active negotiations to buy itself back rather than close, per Bloomberg. Similarly, Compulsion Games, the Montreal-based team behind We Happy Few and the upcoming South of Midnight, is pursuing the same path. Bloomberg reports that more Xbox studios are quietly negotiating their futures.
Reasons Behind the Reset
The restructuring traces back to a memo last week. Sharma and content chief Matt Booty warned of a 100-day reset, acknowledging that Xbox had overextended its studio system. Excluding Activision Blizzard King, Microsoft invested over $20 billion in Xbox over five years, while annual revenue fell by nearly half a billion dollars. A hardware component crisis is exacerbating the situation.
Leadership Changes
The studio cuts coincide with top-level departures. Craig Duncan, who led Xbox Game Studios after years at Rare, is leaving, along with chief of staff Louise O'Connor, as reported by The Game Business. Duncan had held the role since October 2024.
Sharma, who replaced Phil Spencer in February, has moved swiftly. She reduced Game Pass pricing and made Gears of War: E-Day and Clockwork Revolution Xbox console exclusives. These bets on major franchises appear to be funded by the sale or closure of smaller studios.
Pattern of Consolidation
The pattern is evident: Microsoft spent years acquiring studios, including Ninja Theory and Compulsion Games in 2018, before the record $69 billion Activision Blizzard deal. The spending spree built an empire, but the reset is now dismantling parts of it.
