Xbox are reportedly closing or spinning off Psychonauts developers Double Fine, Hellblade studio Ninja Theory, and South of Midnight creators Compulsion Games, as Microsoft commence efforts to yet again "reset" their billion dollar gaming business after already laying off thousands of staff, cancelling games, and closing several studios over the past couple of years.

All three studios are apparently now haggling for their continued existence, as the end of Microsoft's financial year looms, with many other Xbox teams said to be affected, and certain employees quietly encouraged to start seeking work elsewhere.

The report comes from Bloomberg, who cite anonymous staff at several studios. The Verge (paywall) also have an article in which they claim that Ninja Theory are in the process of trying to find a buyer, after being informed that they will be closed on Monday. Ninja Theory have literally just announced a new Senua game. Like, days ago.

The three studios named in Bloomberg's report all share one quality: they make well-regarded, interesting games that do not sell the kind of meganumbers preferred by the actual billionaires at the mountain's summit. They are "brilliant for prestige and rotten for the spreadsheet," as one analyst recently put it to IGN. Speaking for myself, they are among the teams that make it hardest to adhere to the BDS boycott against Greater Microsoft's involvement with Israel's assault on Gaza.

Double Fine are absolute wizards, a studio of irrepressible wit who have given us games about walking lighthouses and pugnacious pottery, on top of their absurd, but thoughtful portrayals of mental illness in the Psychonauts series. Ninja Theory's Hellblade games have their detractors, but personally, I enjoy the original Senua's Sacrifice for its theatrical representation of psychosis and its bleak reinventions of Norse and Celtic myth. Compulsion's We Happy Few is an admirably botched Kubrickian satire of little England; their more recent South of Midnight is an absorbing study of a North American latitude that is generally caricatured as swampy hicksville.

Microsoft have yet to comment on all this, but the alleged impending closures are in keeping with the language of Xbox CEO Asha Sharma and Xbox Game studios head Matt Booty's memo from last week.

The memo painted a gloomy picture of falling revenues despite some enormous investments, and rising hardware costs due to generative AI. Amongst other things, it revealed that Xbox currently have an "accountability margin" – Microsoft's hazy equivalent for profit margin - of 3%, a fall on previous years. In itself, a margin like that isn't necessarily a disaster; the problem for Xbox internally is that Microsoft have other divisions with much fatter margins. Line Go Up, but Line could Go Up More? Specifically, 27% more?

As Julian wrote last week, the memo is a piss-boiling read for dancing around how executive mismanagement has contributed to the Xbox division's woes. Booty has been a big cheese at Xbox since 2010; he's been involved with plenty of blockbuster Microsoft deals, including the Activision Blizzard merger and all the layoffs that followed. Sharma is a new face, but she's also former president of Microsoft's CoreAI Product, a key player in the generative AI investment craze that has driven component prices through the roof.

The memo also dabbled in some talk of "realism" that will probably not extend to a frank reconsideration of executive compensation, though a few senior people at Xbox have lost their jobs. Xbox Games Studios boss Craig Duncan and chief of staff Louise O'Connor announced yesterday that they were stepping down, a few hours before the Bloomberg story hit the interwebs.

Only recently, Microsoft were on a PR offensive, hosting a lavish event alongside Summer Game Fest and boasting of 'the return of exclusives', a sparkly effort to hide the reality that a lot of their current big bets are shiny but aimless reboots and remakes.

Seemingly, nothing and nobody is immune from the approaching "reset", not even Call of Duty. Last night, Treyarch revealed that their studio head Mark Gordon is calling it quits after 22 years "to focus on his next chapter". We'll see what the rest of this week brings.