Xbox Shuts Down Four Notable Studios in Major Overhaul
After weeks of speculation regarding Xbox’s upcoming changes, CEO Asha Sharma has revealed the details of Microsoft’s reorganization: 3,200 employees will be laid off, impacting at least four studios, including Double Fine Productions and Ninja Theory.
In a memo shared with Xbox Wire, Sharma noted that 1,600 of the layoffs will take effect immediately, calling this the “most significant restructure in Xbox history.”
The four studios transitioning to new management were part of Microsoft’s acquisition spree in 2018-2019, during which the company brought seven independent studios into the fold. Now, four of those studios are departing from the Xbox Game Studios umbrella, with a fifth currently under review.
Here’s what we know so far.
“Compulsion Games and Double Fine Productions will return to independent status, taking their IP, catalog, and future game plans with them,” Sharma stated.
Microsoft acquired Compulsion Games, known for the title We Happy Few, in 2018. Under Xbox Game Studios, they released South of Midnight in 2025.
Double Fine, founded by Tim Schafer, was brought into the fold in 2019 and is celebrated for its unique titles like Psychonauts and Brütal Legend, with their latest releases being Kiln and Keeper.
“Ninja Theory and Undead Labs are negotiating terms to transition to new ownership, with funding secured to continue development on Senua and State of Decay 3,” Sharma mentioned. While the new owners for these studios have not been disclosed, the continued financial support for their upcoming projects is promising for fans anticipating the next installments of Hellblade and State of Decay.
Ninja Theory, acquired in 2018, gained recognition for Hellblade: Senua’s Sacrifice and has since released Bleeding Edge and Senua’s Saga: Hellblade 2 under Xbox Game Studios. Undead Labs, also acquired in 2018, is known for the State of Decay series.
Arkane Studios, based in Lyon, France and part of ZeniMax Media, is “beginning required consultation with its Works Council to explore potential strategic options,” according to Sharma. This means that Arkane’s employee representatives are discussing Microsoft’s unannounced plans for the studio, which could involve selling, closing, or laying off staff.
Acquired by ZeniMax in 2010, Arkane is recognized for its work on the Dishonored series and Deathloop, as well as the upcoming Blade game based on Marvel’s vampire superhero.
Sharma also indicated that reductions will occur across all Microsoft-owned entities, including Activision, Bethesda/ZeniMax, Blizzard, King, and Mojang. This will involve reallocating investments to prioritize key projects, which may lead to game cancellations. However, she clarified that “none of our first-party publicly announced games or projects are being cancelled as part of these reductions.”
In a further shift, Mojang and King will now report directly to Sharma. “These two studios have increasingly become platforms and are our largest by monthly active players,” she noted. “They provide essential geographic, demographic, and differentiation to Xbox.”
Developing…
