Xbox May Shut Down Three Major Game Studios

Xbox is preparing to shut down or sell at least three of its game studios, according to reports from The Verge and Bloomberg.

The studios named in the reports are Ninja Theory, Double Fine, and Compulsion Games. Several other Xbox Game Studios teams are also reportedly negotiating for their future and remain at risk of closure.

Ninja Theory

Ninja Theory employees were told on Monday that the studio would be closing, according to The Verge. The studio is now trying to find a buyer who can keep it operating.

Ninja Theory is best known for the Hellblade series. The studio was also featured during the recent Xbox Summer Game Fest showcase, where it revealed a new entry due in 2027.

Double Fine

Double Fine is also facing an uncertain future. According to Bloomberg, Double Fine leaders are in active talks to buy the studio back from Xbox instead of letting it close.

The studio was founded by Tim Schafer and others in 2000. It is known for Psychonauts, Brütal Legend, Broken Age, Keeper, and several LucasArts adventure games.

Compulsion Games

Compulsion Games is reportedly in a similar position. The Montreal-based studio is known for Contrast, We Happy Few, and South of Midnight.

South of Midnight was released in April 2025.

Other Studios At Risk

Bloomberg reported that several other studios under Xbox Game Studios are also negotiating for their futures.

The Xbox Game Studios label currently includes several major names, including Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax, and Activision Blizzard.

Xbox has been contacted for clarification on the reported closures and buyout talks.

Xbox’s Acquisition Spree

Microsoft’s modern game studio buying spree began in 2018. That year, Xbox acquired Undead Labs, Playground Games, Ninja Theory, and Compulsion Games. It also formed The Initiative.

The expansion continued in 2020 and 2021, when Xbox acquired eight more studios under ZeniMax Media, including Arkane, Bethesda, and id Software.

In 2022, Xbox announced plans to buy Activision Blizzard for $69 billion, making it the largest acquisition in video game history.

The deal was completed at the end of 2023 after a long regulatory battle.

Layoffs and Closures

Since those acquisitions, Microsoft has carried out several major rounds of layoffs affecting thousands of employees in its gaming division.

It has also closed well-known studios, including The Initiative.

The latest reports suggest Double Fine, Ninja Theory, Compulsion Games, and other Xbox studios may now be caught in the same restructuring.

Leadership Changes

Xbox has also gone through leadership changes this year. Longtime Xbox division head Phil Spencer stepped down and was replaced by new CEO Asha Sharma.

Xbox Game Studios head Craig Duncan also left the company on Monday. He had taken the role in October 2024.

Employees across Xbox are now preparing for more layoffs in 2026 after Sharma sent a public memo in mid-June that signaled more changes ahead.