Why it matters: Ninja Theory, developer of the popular Hellblade series, is being closed down by Xbox – the only hope for the studio is that a buyer will step in. According to reports, Compulsion Games, which was behind South of Midnight, and Tim Schafer's Double Fine are also fighting for their futures.

Sources have told The Verge that Ninja Theory staffers were told on a call on Monday about the closure, leaving the team looking for a buyer so operations can continue.

The news is especially surprising given that Microsoft showcased Senua, the next Hellblade game, during its Xbox Games Showcase just over a week ago. That title had been targeting a 2027 release, though its future is now unclear. Ninja Theory was one of several studios Microsoft bought in 2018 as part of a major expansion of Xbox Game Studios.

Bloomberg reports that several Xbox-owned teams, including Compulsion and Psychonauts developer Double Fine, are in active negotiations with Microsoft in an effort to avoid being shuttered. Some could potentially spin out and become independent again, similar to Toys for Bob after it left Activision. Reporter Jason Schreier writes that both companies are "in active negotiations to spin off as they try to thwart closure."

The prospect of losing Double Fine would be particularly symbolic, given CEO and founder Schafer's long-standing reputation as one of the industry's best-known creative leads.

It's also been reported today that Xbox Game Studios head Craig Duncan and chief of staff Louise O'Connor have either left Microsoft or are preparing to depart.

Xbox is going through a tumultuous time right now. Xbox CEO Asha Sharma last week warned staff of a major 100-day "reset," with significant layoffs and budget cuts expected after Microsoft's fiscal year ends on June 30.

Sharma's memo reportedly pointed to an overextended studio system, falling console sales, and rising hardware costs as major pressure points. There's also talk of a "radically different" console business model.

Another recent report claimed that Microsoft may consider restructuring Xbox as a wholly owned subsidiary or even a joint venture.

In 2024, Microsoft closed four Bethesda studios, including Arkane Austin and Tango Gameworks, when the company said it was prioritizing "high-impact" titles. Later that year, another 650 gaming jobs were cut following the $69 billion Activision Blizzard acquisition.

Microsoft spent years buying studios to strengthen Game Pass and fill Xbox's first-party stable. Now, with subscription growth slowing and hardware sales under pressure, some of those same studios appear to be fighting just to survive.