Xbox’s Shocking Studio Shake-Up: Double Fine, Ninja Theory at Risk?

Bloomberg reports that three Xbox studios—Double Fine, Compulsion Games, and Ninja Theory—face imminent shutdown, prompting staff to explore new opportunities while executives engage in negotiations to salvage what remains.

Earlier today, we disclosed that Xbox was moving toward closing Compulsion Games, the South of Midnight studio, with its leadership in active talks about the company’s future. Bloomberg has now confirmed that Double Fine, the creators of Psychonauts, and Ninja Theory, the Hellblade developers, are in comparable positions—even though Ninja Theory has recently announced a new title slated for next year. One possible resolution is that the studios could spin off as independent entities, but this scenario would almost certainly trigger significant workforce reductions.

These developments arrive only days after Xbox chief executive Asha Sharma and Microsoft Game Studios head Matt Booty sent an open letter to employees, outlining a host of challenges. They accused the company of having “over‑extended” itself through aggressive studio acquisitions, attempting to manage too many platform strategies, and failing to adequately fund its studios to remain competitive. The letter disclosed that Xbox has invested $20 billion in studios over the past five years—excluding the $69 billion acquisition of Activision Blizzard King—while its annual revenue has slipped by almost half a billion.

In tandem with the letter, Bloomberg warned of a looming wave of layoffs slated for after Microsoft’s fiscal year ends on June 30. Earlier today, Craig Duncan, the head of Xbox Game Studios, stepped down from his role.