Xbox Reportedly Closing or Selling Three Studios: Ninja Theory, Double Fine, and Compulsion Games

According to reports from The Verge and Bloomberg on Monday, Xbox is planning to shut down or sell at least three of its studios: Double Fine, Ninja Theory, and Compulsion Games. Ninja Theory employees were informed on Monday that the studio would close, but the team is attempting to find a buyer to keep operations running. This studio is known for the Hellblade series and was featured at the recent Xbox Summer Game Fest showcase, revealing a new entry due in 2027.

Double Fine, the legendary studio founded by Tim Schafer and known for games like Psychonauts, Brütal Legend, and Broken Age, is in active negotiations to buy itself back from Xbox rather than be closed. Similarly, Compulsion Games, the Montreal studio behind Contrast, We Happy Few, and the recently released South of Midnight, is in a similar position, according to Bloomberg.

Bloomberg also reported that several other studios under the Xbox Game Studios umbrella are negotiating for their futures and are at risk of being shut down. The Xbox Game Studios banner officially includes dozens of studios, such as Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax, and Activision Blizzard King.

Microsoft's modern game studio acquisition spree began in 2018 with the purchase of Undead Labs, Playground Games, Ninja Theory, and Compulsion Games, along with the formation of The Initiative. This continued in 2020 and 2021 with the acquisition of eight more studios under ZeniMax Media, including Arkane, Bethesda, and id. In 2022, Microsoft announced the $69 billion purchase of Activision Blizzard, the largest acquisition in video game history, which was completed at the end of 2023.

Since the acquisitions, Microsoft has enacted multiple massive rounds of layoffs affecting thousands of employees in its gaming division, and has also shut down well-known studios, including The Initiative. Longtime Xbox division head Phil Spencer stepped down this year and was replaced by new CEO Asha Sharma. On Monday, Xbox Game Studios head Craig Duncan left the company; he had taken the role in October 2024. Employees across Xbox are bracing for more layoffs in 2026 after an ominous public memo from Sharma in mid-June.