Three of Xbox’s most respected studios are fighting for survival. As of 15 June 2026, Compulsion Games, Ninja Theory and Double Fine are in active negotiations to spin off from Microsoft in an attempt to avoid closure, part of the company-wide reset reshaping the Xbox business. Employees have been told the situation is in flux and given permission to seek new work, capping one of the most turbulent stretches in recent Xbox history.
Studios Negotiating to Buy Themselves Back
The closures were reported by Bloomberg’s Jason Schreier and corroborated by VGC sources. The three studios are at risk of being shuttered but have the opportunity to buy themselves back from Microsoft and go independent, though employees are likely to lose their jobs in the process regardless of the outcome. “Employees at several studios have been informed of the situation and given permission to seek new work but were told that the status of the studios is still in flux,” Schreier wrote in his report. Kotaku reported that Compulsion, the Peabody Award-winning maker of South of Midnight and We Happy Few, could see over 100 workers affected, while The Verge reported Hellblade studio Ninja Theory is set to be closed but is hopeful of finding a buyer.
Read More: Xbox Plans Major July Layoffs Under CEO Asha Sharma, Studio Closure Not Ruled Out
Read More: PlayStation Shuts Down Bluepoint Games, Demon’s Souls Remake Studio Closed
Three Studios Known for Award-Winning Originals
The trio represents some of Xbox’s most distinctive creative talent. Cambridge-based Ninja Theory only announced a new game, Senua, at last week’s Xbox Games Showcase.
While Compulsion (South of Midnight) and Double Fine (Kiln, Psychonauts 2) have each shipped a game within the past year.
All three are known for award-winning original titles, which makes their precarious position one of the harder pills of the current restructuring.
A Reset Driven by Falling Margins
The cuts follow Xbox CEO Asha Sharma’s warning that the business needs to become more profitable. Sharma has said Xbox’s annual revenue declined by nearly half a billion dollars over five years, that hardware costs are up fourfold, and that its studio system is “overextended.” For now the affected studios report directly to Xbox Chief Content Officer Matt Booty until a replacement is found for departed Xbox Game Studios head Craig Duncan, leaving the fate of Compulsion, Ninja Theory and Double Fine hanging on negotiations that have yet to conclude.