Bloomberg reporter Jason Schreier reported Sunday that several studios within Microsoft’s Xbox gaming division are in active negotiations to spin off as independent companies in a bid to avoid closure. The studios named include Montreal-based Compulsion Games (We Happy Few, South of Midnight), San Francisco-based Double Fine (Psychonauts), and Cambridge-based Ninja Theory (Hellblade) — with several others across the Xbox portfolio also said to be at risk. Employees at the affected studios have been told of the situation and given permission to seek new employment elsewhere, though the status of negotiations is described as “in flux.” Later the same day, The Verge reported that Ninja Theory’s closure had been confirmed to staff on a Monday call, with the studio hoping to find an external buyer. Notably, Ninja Theory had announced a new game, Senua, at the Xbox Games Showcase just the previous week.
The potential closures are part of an expected broader restructuring of Microsoft’s gaming division. Xbox boss Asha Sharma recently told a Bloomberg Tech conference that she planned to “reset the business” because it was “not in a healthy spot,” and CEO Satya Nadella has also signalled that Xbox needs to improve profitability. The studios named each have a window to buy themselves back from Microsoft, though such spinoffs would likely involve significant job losses. Schreier noted that the three studios named are not the full extent of the at-risk portfolio, adding that “the Xbox of July will look drastically different than the Xbox of June.” Microsoft has carried out multiple rounds of gaming division cuts in recent years, including the closure of Tango Gameworks and Arkane Austin in 2024 and approximately 1,900 layoffs across the Activision Blizzard and Bethesda units in 2023.