Xbox is preparing to close or sell at least three of its studios – Double Fine, Ninja Theory and Compulsion Games – according to reports from The edge And Bloomberg Monday.
Ninja Theory employees were informed Monday of the studio’s closure, according to The edgebut the team is trying to find a buyer who can keep them operational. Ninja Theory is the studio behind the Hellblade series and it was featured in the recent Xbox Summer Game Fest showcase, revealing a new entry due in 2027.
Double Fine is the legendary studio behind the Psychonauts games, brutal legend, Broken age, Guardian and all manner of LucasArts adventures, founded by Tim Schafer and friends in 2000. Double Fine executives are in active negotiations to buy out Xbox rather than shutting down entirely, Bloomberg said.
Compulsion Games is in a similar position, according to the report. Compulsion is the Montreal studio behind ultra-stylish games Contrast, We are a happy few And South of midnightthe latter of which was released in April 2025.
Bloomberg reported that several other studios under the Xbox Game Studios banner are also negotiating their future and are at risk of closure. As it stands, the Xbox Game Studios group spans dozens of studios, including Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax, and Activision Blizzard King. We’ve reached out to Xbox for clarification on the reported closures and buyout negotiations.
Microsoft’s wave of modern game studio acquisitions began in 2018 with the purchase of Undead Labs, Playground Games, Ninja Theory, and Compulsion Games, as well as the creation of The Initiative. This momentum continued at a worrying pace in 2020 and 2021, when Xbox acquired eight more studios under ZeniMax Media, including Arkane, Bethesda and id. It all culminated in 2022 with the announcement that Xbox was considering buying Activision Blizzard for $69 billion, the largest acquisition in video game history. This agreement was finally concluded at the end of 2023, after a long battle with regulators.
Since these acquisitions, Microsoft has carried out several waves of mass layoffs affecting thousands of employees in its games division, and has also closed well-known studios, including The Initiative. Unfortunately, Double Fine, Ninja Theory, Compulsion, and other at-risk Xbox studios are in good company.
Phil Spencer, long-time head of the Xbox division, resigned this year and was replaced by new CEO Asha Sharma, alongside other executive changes. Also on Monday, Xbox Game Studios head Craig Duncan left the company; he first took on the role in October 2024. Xbox employees are bracing for further layoffs in 2026 after a disturbing public memo from Sharma was released in mid-June, just as the glow of Summer Game Fest had completely faded.
