These reports arrive just a few days after fresh announcements were made for Senua and other games at the Summer Game Fest.
Trouble is rising around Xbox's first-party development teams, after reports claimed that multiple studios are either facing closure or attempting to separate from Microsoft ownership.
According to reports from The Verge and Bloomberg published on Monday, Xbox is preparing to shut down or sell at least three studios: Ninja Theory, Double Fine and Compulsion Games, only a few days after Summer Game Fest 2026. The reports also suggest that several other teams under the Xbox Game Studios banner are currently negotiating their futures.
Is Ninja Theory closing down?
According to The Verge, employees at Ninja Theory were informed on Monday that the studio would be closing. However, the report also claims the team is actively seeking a buyer in the hope of remaining operational.
The studio is best known for the Hellblade series and recently appeared at the Xbox Games Showcase on 7 June, where it announced Senua, the third instalment in the franchise, currently slated for release in 2027. Ninja Theory was acquired by Microsoft during Xbox's studio-buying spree, alongside Compulsion Games and Double Fine as the company expanded its first-party portfolio.
While no official announcement has been made regarding the studio's future, the reported efforts to secure a buyer suggest the team is exploring alternatives to a complete shutdown.
Are Double Fine and Compulsion Games closing down?
Bloomberg has also reported that Double Fine is attempting to avoid closure by negotiating a buyback from Microsoft. Founded in 2000 by Tim Schafer and colleagues, Double Fine has built a reputation through titles including Psychonauts, Brütal Legend, Broken Age, and Keeper, alongside its connections to numerous LucasArts adventure game veterans.
Compulsion Games is reportedly in a similar position. The Montreal-based studio is known for Contrast, We Happy Few, and South of Midnight, the latter of which launched in April 2025. According to the report, both studios are engaged in discussions aimed at continuing operations outside Xbox ownership, rather than being shut down entirely.
What other studios at Xbox Game Studios be sold or shut down?
Bloomberg also reported that additional studios under Xbox Game Studios are negotiating for their futures and could face closure. As it currently stands, Xbox Game Studios oversees dozens of development teams across Microsoft's gaming business, including Arkane, Bethesda, Halo Studios, id Software, Obsidian, Playground Games, ZeniMax and Activision Blizzard King. Neither report identified which additional studios may be at risk, and Xbox has not publicly commented on the reported closures or buyout discussions.
Why are Xbox studios facing closure?
The reported uncertainty surrounding Ninja Theory, Double Fine, and Compulsion Games comes after years of expansion across Microsoft's gaming business.
Xbox's acquisition drive began in 2018 with the purchases of Undead Labs, Playground Games, Ninja Theory, and Compulsion Games, alongside the creation of The Initiative. The company continued to grow its first-party portfolio in 2020 and 2021 through the acquisition of ZeniMax Media, bringing studios including Arkane, Bethesda, and id Software under the Xbox banner.
Its largest move came in 2022 with the announcement of the US$69 billion Activision Blizzard acquisition. Following a lengthy regulatory battle, the deal was completed at the end of 2023 and remains the largest acquisition in video game history. Since then, Microsoft's gaming division has undergone multiple rounds of layoffs affecting thousands of employees.
The company has also closed several studios, including The Initiative, meaning the latest reports would be the latest chapter in a wider period of restructuring across Xbox.
Is Xbox Game Studios head Craig Duncan leaving?
The reports arrive during a period of significant leadership changes across Microsoft's gaming business, with Endgadget also reporting that Xbox Game Studios head Craig Duncan left the company on Monday, less than two years after taking the role in October 2024.
The same day also saw another high-profile departure from Microsoft's gaming portfolio. Treyarch studio announced on X (formerly Twitter) that their head, Mark Gordon, would be leaving the Call of Duty developer after 22 years. Gordon's departure follows that of longtime Treyarch design director David Vonderhaar, who left the studio in 2023 to establish his own company.
The reported studio negotiations come amid growing concerns among employees, following an ominous mid-June memo from Sharma. According to the reports, staff across Xbox are preparing for the possibility of further layoffs in 2026, as uncertainty continues to spread across Microsoft's gaming division.
