Update: Xbox has finalized its decision to close Hellblade and Senua developer Ninja Theory, according to a new report from The Verge. Details are scarce, but staffers were reportedly told about the closure today, and there is apparently still potential for the studio to find a new buyer.
Original story: Following word that South of Midnight developer Compulsion Games is facing closure at Xbox, a new report claims Microsoft is looking to shed even more studios. These studios are reportedly working to negotiate an exit that would let them continue operations independently rather than close their doors outright.
Bloomberg reports that, along with Compulsion Games, who Kotaku has also said is in uncertain talks with Microsoft, Psychonauts dev Double Fine and Hellblade maker Ninja Theory "are in active negotiations to spin off as they try to thwart closure." Additional, unspecified studios are also apparently at risk.
Ninja Theory only just revealed a new game, Senua, during Xbox's Summer Game Fest showing. Since Psychonauts 2, Double Fine has struggled to get anything, now including Kiln and Keeper, to stick. Compulsion, meanwhile, has indicated it was working on a new project, but has only released South of Midnight since being acquired by Microsoft in 2018.
We've already seen employees from developers like Compulsion post online about looking for new jobs. Even if the affected Xbox studios are able to buy their independence, it's expected that they'd still have to lay off staff in order to reach a sustainable headcount at a fraught time for the games industry.
I've reached out to Microsoft for comment but have not heard back.
This reorganization has been overseen by newly appointed Xbox CEO Asha Sharma, who said last week that the business "cannot continue" as-is. She and new Xbox CCO Matt Booty released a joint statement pitching an "Xbox reset" which, to the surprise of no one, will seemingly include heavy layoffs.
"Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue," Sharma and Booty wrote.
In 2024, Xbox infamously closed Hi-Fi Rush maker Tango Gameworks on the heels of a gilded award run, only for PUBG house Krafton to scoop up most of the studio and plans for Hi-Fi Rush 2. Microsoft technically retained The Evil Within and Ghostwire Tokyo, but has not done anything with the IP since.
Last year, Microsoft allegedly backed out of a deal with Romero Games, helmed by John and Brenda Romero, and sent the studio into a tailspin. While not owned by Microsoft, the studio faced a similar predicament: lay off staff and downsize the project to lose weight while you try to build some new wings as the ground gets closer. Thankfully, Romero Games' project survived the drop.
June has been a storm of bad news for people at Xbox, and indeed for anyone hoping to see the games industry stop bleeding. Just today, June 15, Xbox lost its game studios head, Craig Duncan, who'd been in the role for less than two years. Heavy layoffs, evidently including these studio cuts, are expected to officially land in July.
