Engadget

Xbox is preparing to shut down or sell at least three of its studios — Double Fine, Ninja Theory and Compulsion Games — according to reports from The Verge and Bloomberg on Monday. 

Ninja Theory employees were informed on Monday that the studio would be closing, according to The Verge, but the team is attempting to find a buyer that 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, Brütal Legend, Broken Age, Keeper and all manner of LucasArts adventures, founded by Tim Schafer and friends in 2000. Double Fine leaders are in active negotiations to buy themselves back from Xbox rather than be closed altogether, Bloomberg said. 

Compulsion Games is in a similar position, according to the report. Compulsion is the Montreal studio behind the uber-stylish games Contrast, We Happy Few and South of Midnight, the latter of which came out in April 2025.

Bloomberg reported that several other studios under the Xbox Game Studios banner are also negotiating for their futures and are at risk of being shut down. As it officially stands, the Xbox Game Studios umbrella covers dozens of studios, including Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax and Activision Blizzard King. We have contacted Xbox for clarification on the reported closures and buyout talks.

Microsoft's modern game-studio acquiring spree kicked off in 2018 with the purchase of Undead Labs, Playground Games, Ninja Theory and Compulsion Games, plus the formation of The Initiative. This momentum continued building at a concerning pace in 2020 and 2021, when Xbox acquired eight more studios under ZeniMax Media, including Arkane, Bethesda and id. Everything came to a head in 2022 with the announcement that Xbox planned to purchase Activision Blizzard for $69 billion, the largest acquisition in video game history. That deal finally went through at the end of 2023, after a lengthy battle with regulators.

Since the acquisitions, Microsoft has enacted multiple massive rounds of layoffs affecting thousands of employees in its gaming division, and also shuttered well-known studios, including The Initiative. Unfortunately, Double Fine, Ninja Theory, Compulsion and the other at-risk Xbox studios are in good company.

Longtime Xbox division head Phil Spencer stepped down this year and was replaced by new CEO Asha Sharma, alongside other executive-level changes. Also on Monday, Xbox Game Studios head Craig Duncan left the company; he first took the role in October 2024. Employees across Xbox are bracing for more layoffs in 2026 after an ominous public memo from Sharma dropped in mid-June, just as the glow of Summer Game Fest fully faded.