At least three Xbox studios are reportedly facing closure as part of planned layoffs at Microsoft, with Ninja Theory already seeking a new buyer.
In the wake of the Xbox summer showcase, Xbox bosses Asha Sharma and Matt Booty talked about how they had plans for a ‘reset’ to strengthen the Xbox business.
‘Reset’ very much implied layoffs and it quickly became clear that that’s exactly what’s planned, based on insider reports and the abrupt departure of two senior Xbox executives on Monday.
Now, it’s reported that multiple Xbox studios are facing closure and are trying to break away from Microsoft to avoid their fate.
The report by Bloomberg only names Compulsion Games, Double Fine, and Ninja Theory specifically, but adds that several other studios are also at risk.
According to The Verge, Xbox has already settled on shutting down Ninja Theory, which is especially shocking as the studio announced a new Senua game for 2027 during the big Xbox showcase earlier in the month.
It’s not clear if this means the game is being cancelled, but Ninja Theory is reportedly hoping to find a new buyer – so it could be that the new game announcement was meant to attract additional interest.
As for Compulsion and Double Fine, they are reportedly in negotiations with Microsoft and could potentially buy themselves out to become independent again, similar to what Spyro developer Toys For Bob did when it split away from Activision in 2024.
Compulsion was acquired by Xbox in 2018 and since then it has only released two games: We Happy Few, which launched the same year but was already in the works pre-buyout and South Of Midnight in 2025.
Microsoft never shared sales figures for South Of Midnight, but while it doesn’t seem to have done well it has won multiple awards since launch. It won the Games for Impact category at The Game Awards 2025, recently swept the Canadian Game Awards, and won a prestigious Peabody Award last year.
In an April interview with Game File, Xbox chief content officer Matt Booty was more than happy to praise Compulsion for these achievements, saying the Peabody win is ‘such a validation of the storytelling capability of games these days,’ adding ‘we’re also dedicated to places where new [intellectual property] can come to life and where these stories can be told, you know, in our studios like Compulsion…’
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