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According to reports published on Monday by The Verge and Bloomberg, Xbox plans to shut down or put up for sale at least three of its subsidiary studios, including Double Fine, Ninja Theory, and Compulsion Games. As The Verge notes, the Ninja Theory team received official notice of the closure on Monday, but the development team is currently trying to find a third-party investor capable of keeping the company operational. The studio is known for creating the Hellblade franchise, and its upcoming project, scheduled for release in 2027, was recently showcased at the Xbox Summer Game Fest.
Double Fine, meanwhile, is a legendary team founded by Tim Schafer and his colleagues in 2000, which gave the industry the Psychonauts series, the games Brütal Legend, Broken Age, Keeper, as well as various titles under the LucasArts brand. According to Bloomberg, Double Fine’s leadership is currently in intense negotiations to have the company acquired by Xbox to avoid complete liquidation. The Montreal-based studio Compulsion Games, which created the exceptionally stylish and original games Contrast, We Happy Few, and South of Midnight – the latter of which was released in April 2025 – has found itself in a similar situation.
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The Bloomberg article also highlights that several other teams under the Xbox Game Studios umbrella are negotiating their future due to the threat of closure. Currently, Xbox Game Studios officially brings together dozens of well-known developers, including Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax, and Activision Blizzard King. Journalists have already sent an official request to Xbox seeking clarification regarding potential closures and negotiations for the acquisition of these companies.
Microsoft’s large-scale campaign to acquire modern gaming assets began in 2018, when the corporation acquired Undead Labs, Playground Games, Ninja Theory, Compulsion Games, and established the internal team The Initiative. In 2020 and 2021, this pace accelerated significantly, causing some concern within the community, as Xbox acquired another 8 developers as part of the ZeniMax Media conglomerate, including Arkane, Bethesda, and id Software. This process culminated in 2022, when Xbox announced its intention to acquire Activision Blizzard for a record-breaking $69 billion in the history of the gaming industry, and after lengthy disputes with antitrust authorities, the deal was finally closed at the end of 2023.
Following the completion of these mergers and acquisitions, Microsoft carried out several waves of large-scale layoffs that affected thousands of employees in its gaming division, and also completely shut down certain well-known studios, such as The Initiative. So, unfortunately, Double Fine, Ninja Theory, Compulsion Games, and other teams found themselves in a situation that has become all too familiar in today’s reality.
This year, Phil Spencer, the long-time head of the Xbox gaming division, stepped down from his position, and he was replaced by new CEO Asha Sharma, a move accompanied by other personnel changes at the top management level. In addition, Craig Duncan, who had led Xbox Game Studios since October 2024, left the company on Monday. Currently, employees across various Xbox divisions are preparing for another round of layoffs in 2026 following an alarming official statement from Asha Sharma in mid-June, which was published immediately after the excitement surrounding Summer Game Fest had completely faded.
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