Microsoft Plans Xbox Studio Closures for Three of Its Studios

Microsoft is preparing to close or sell three of its Xbox-owned studios, Ninja Theory, Double Fine, and Compulsion Games, according to reports from The Verge and Bloomberg published on Monday, June 15, 2026. Staff at the three teams were told this week and given permission to look for new work, the reports say. The news comes eight days after Ninja Theory unveiled Senua, the next entry in its Hellblade series, at the Xbox Games Showcase on June 7, 2026.

The reports follow a ‘reset’ memo sent to staff the week before by Xbox CEO Asha Sharma and chief content officer Matt Booty, in which the pair warned that the gaming division had ‘over extended’ itself by snapping up so many studios. Ninja Theory employees were told the studio would close but are attempting to find a buyer. Double Fine and Compulsion Games leaders are in active negotiations to buy their studios back from Microsoft rather than be shut down, according to Bloomberg.

The Three Studios at Risk

Microsoft is moving to shut down or sell Ninja Theory, Double Fine, and Compulsion Games, three of the studios it acquired in the first wave of its first-party build-out. Ninja Theory employees were told on a Monday call that the studio would be closing, according to a source who spoke to the Monday report on Ninja Theory’s closure.

The shape of the three deals differs. Ninja Theory, the studio behind the Senua, the next Hellblade game, has been told the studio will close and is searching for a buyer. Double Fine and Compulsion Games are in active negotiations to buy themselves back, per the Engadget summary of Bloomberg’s reporting and the LA Times. An Xbox spokesperson declined to comment on the reported closures or buyback talks.

What a Buyback Would Mean

The negotiations at Double Fine and Compulsion Games are not a polite fiction. Bloomberg, citing people familiar with the company’s plans, said the studio heads are actively negotiating spinoffs that would let them keep operating independent of Microsoft. Bloomberg also reported that employees at these studios have been given permission to seek new work but were told the status of the studios is still in flux.

The buyback talks come with a cost. Even a successful spin-off would still result in significant layoffs at the studios, the people familiar with the plans said. That is partly because the studios would be operating without the funding and infrastructure that came with being part of Xbox, and partly because the three studios in question had all been hiring into new projects in recent months. Compulsion Games was recruiting for a ‘fascinating, intriguing brand new IP’ as recently as two months ago, per Kotaku, even as South of Midnight, its April 2025 release, was still riding positive reviews.

Ninja Theory’s situation is more concrete. The studio was told the closure is moving ahead, and the buyback effort is a last attempt to keep the team intact. The studio had revealed Senua, the third entry in the Hellblade series, at the Xbox Games Showcase on June 7, 2026, eight days before Monday’s call.

Why These Three Studios in Particular

The three studios hit on Monday share a profile. All three were acquired during the first wave of Microsoft’s first-party build-out, and all three are mid-sized teams relative to the Halo, Gears, and Forza franchises that Sharma’s memo names as priorities for the next 100 days. The LA Times, citing people familiar with the plans, said the studios ‘may still have the opportunity to buy themselves back from Xbox and go independent, although many employees will probably lose their jobs as a result.’ Game Informer reported that employees at the three studios have already taken to social media to announce they are looking for new work.

That phrasing, ‘many employees will probably lose their jobs,’ is the LA Times’ own characterization of the trade-off that even a successful buyback would carry. Several recent releases from the three studios fit a familiar pattern of critical recognition without breakout sales. The LA Times reported that all three studios ‘made award-winning games that were not commercial hits.’

• 2018: year Microsoft’s modern first-party studio acquisition spree began
• $69 billion: Activision Blizzard acquisition price, closed at the end of 2023
• around 1,900: gaming division jobs cut in early 2024
• 9,000: jobs cut company-wide in early July 2025, many within Xbox
• October 2024: when Craig Duncan took the Xbox Game Studios head role

The ‘Reset’ Memo That Set This Up

The studio moves are the sharpest edge of a broader ‘reset’ Sharma and Booty laid out in a public memo to staff the week before. In it, the pair warned that Xbox had over extended itself by acquiring so many studios over the last 10 years, claiming that ‘we have not adequately funded them to compete and win.’

The memo also flagged declining revenue, rising hardware component costs, and competition from other forms of entertainment for players’ attention as drivers of the squeeze. Sharma wrote that the company is preparing another major round of layoffs in July, just after Microsoft’s fiscal year closes on June 30, a $20 billion reset moment for the gaming division. ‘We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming, and devices,’ the memo reads, ‘and have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content.’ The memo also called Xbox’s platform systems ‘overly complex’ and not ready for the years ahead.

The financial squeeze is the backdrop against which Monday’s studio reports landed. The cuts are expected to begin shortly after June 30, per Engadget, citing a memo it obtained.

Eight Years of Microsoft Studio Acquisitions

Microsoft’s modern first-party acquisition drive began in 2018, when the company bought Ninja Theory and Compulsion Games alongside Playground Games and Undead Labs, and formed The Initiative from scratch. The move was meant to anchor the Xbox platform against Sony’s PlayStation exclusives, and it came with a new first-party label to bundle the studios together. Two years later, in 2020 and 2021, the company added ZeniMax Media, the parent of Bethesda, id Software, and Arkane Studios. The big move came in 2022, when Microsoft announced a $69 billion deal to buy Activision Blizzard, the largest acquisition in video game history. The Activision Blizzard deal closed at the end of 2023 after a lengthy fight with regulators, adding Call of Duty, World of Warcraft, Diablo, Candy Crush, and the King mobile studio to Microsoft’s gaming roster.

The ZeniMax and Activision deals gave Microsoft some of the largest publisher scale in the industry. They also gave Microsoft’s gaming division a sprawling set of studios to fund, a cost the ‘reset’ memo now says the company is no longer willing to carry. The ‘over extended’ line in the memo is the clearest hint of where the cuts may land, and Bloomberg and The Verge reported on Monday that ‘several’ studios are in active negotiations, suggesting that the current three are not the only names at risk.

1. 2018: Microsoft buys Ninja Theory, Compulsion Games, Playground Games, and Undead Labs, and forms The Initiative from scratch.
2. 2019: Double Fine, the studio Tim Schafer founded in 2000, joins Xbox Game Studios.
3. 2020 to 2021: ZeniMax Media acquisition adds Bethesda, id Software, Arkane Studios, and others.
4. 2022 to 2023: Activision Blizzard deal announced at $69 billion, closes at the end of 2023 after a regulatory fight.

Xbox’s Top Execs Are Leaving Before the Cuts

The studio moves were accompanied by senior leadership exits. Xbox Game Studios head Craig Duncan left the company on Monday, less than two years after taking the role in October 2024, according to the memo on Duncan’s departure. Louise O’Connor, Xbox Game Studios’ chief of staff, is also departing, per the same report.

Duncan and O’Connor’s teams, which include Halo Studios, The Coalition, Playground Games, Rare, Obsidian, Ninja Theory, and Double Fine, will report directly to Xbox chief content officer Matt Booty until a replacement is appointed. Engadget, citing a memo it obtained, said the cuts are expected to begin shortly after June 30, the close of Microsoft’s fiscal year.

The challenge now for us is to think about how do you innovate both in hardware as well as in the games going forward, in an economically viable way. … now we have to turn this into a sustainable business.

Microsoft CEO Satya Nadella said as much at a conference last week, in comments Engadget reported. The leadership gaps leave the gaming division entering its busiest cut window in years with a thinner bench than it had a week ago.

The Games Caught in the Closures

Each of the three studios has a project in the pipeline. Ninja Theory’s Senua was announced at the Xbox Games Showcase on June 7, 2026, and is currently scheduled for release in 2027, eight days before the studio was told it would be closing. Compulsion had been recruiting for a new IP and shipped South of Midnight in April 2025; Double Fine’s most recent project, Kiln, launched earlier in 2026.

The new Hellblade game’s status is the most exposed. The Verge noted that the announcement of Senua came just over a week before the Monday closure call, and that ‘its future with this change is unclear.’

Both the studio and the game had featured heavily in the marketing for the Summer Game Fest showcase, where Sharma also locked Gears of War: E-Day and Clockwork Revolution as Xbox console exclusives, a new bet on console exclusives for the gaming division. Double Fine and Compulsion have more options. The buyback talks Bloomberg reported would let either studio continue as an independent operation, just one without the financial backing of Microsoft.

The LA Times reported that even in that scenario, the studios would carry a lighter headcount. For Ninja Theory, the path is narrower: the studio is looking for a buyer, and Microsoft has not said what would happen to Senua if one does not emerge.