Xbox to Close or Sell Ninja Theory, Double Fine, Compulsion Games Amid Restructuring

Microsoft is preparing to close or sell at least three of its Xbox Game Studios, including Ninja Theory, Double Fine, and Compulsion Games, according to reports from The Verge and Bloomberg on Monday. Ninja Theory employees were informed of the closure on a call that day, though the studio is seeking a buyer to remain operational.

Ninja Theory, the Cambridge, England-based developer behind the Hellblade series, was featured in the recent Xbox Summer Game Fest showcase with a new entry due in 2027. Double Fine, founded by Tim Schafer in 2000 and known for Psychonauts and Brütal Legend, is in active negotiations to buy itself back from Microsoft, Bloomberg reported. Compulsion Games, the Montreal studio behind South of Midnight (released April 2025), is in a similar position.

Buyout Talks and Studio Futures

According to Bloomberg, several other studios under the Xbox Game Studios banner are also negotiating for their futures and are at risk of closure. The Xbox Game Studios umbrella includes Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax, and Activision Blizzard King. Microsoft's acquisition spree began in 2018 with purchases of Undead Labs, Playground Games, Ninja Theory, and Compulsion Games, followed by eight ZeniMax studios in 2020-2021, and culminated in the $69 billion Activision Blizzard deal in 2023.

• Ninja Theory: Hellblade series, seeking a buyer.
• Double Fine: Psychonauts series, negotiating buyout.
• Compulsion Games: South of Midnight, negotiating buyout.
• Other at-risk studios: unnamed, also in negotiations.
• Previous closures: The Initiative was shuttered earlier.

Leadership Changes and Layoff Concerns

Longtime Xbox division head Phil Spencer stepped down this year and was replaced by new CEO Asha Sharma. On Monday, Xbox Game Studios head Craig Duncan left the company, having taken the role in October 2024. Employees across Xbox are bracing for more layoffs in 2026 after a public memo from Sharma in mid-June, following Summer Game Fest. Microsoft has enacted multiple massive layoff rounds affecting thousands in its gaming division since the Activision Blizzard acquisition.

The restructuring reflects a broader shift in Microsoft's gaming strategy, focusing on fewer, larger studios and subscription growth via Game Pass. If buyout talks succeed, the studios would become independent again, but many employees face uncertainty. The closures and negotiations are ongoing, with no final decisions confirmed by Xbox as of Monday.