Xbox Studio Faces Potential Closure Just Two Weeks After Game Announcement

The situation at Xbox is becoming increasingly dire. A recent report revealed that Microsoft is contemplating shutting down Compulsion Games, the studio known for the acclaimed South of Midnight. Additionally, it appears that other notable studios within Xbox, such as Double Fine (creators of Psychonauts 2) and Ninja Theory (working on Senua’s Saga: Hellblade 2), are also at risk of closure.

Ninja Theory had just announced a new installment in the Hellblade series, titled Senua, during the Xbox Games Showcase on June 7. All three studios—Compulsion Games, Double Fine, and Ninja Theory—were acquired by Microsoft during a significant acquisition spree over the past two years.

While there may be a chance for these studios to regain their independence from Microsoft, sources indicate that this would likely lead to substantial layoffs. Furthermore, it seems that these three studios are not alone in facing potential shutdowns, as employees across various Xbox teams have been given the green light to explore new job opportunities. Reports from last week suggested that major cuts were anticipated for Xbox this July.

This news follows a memo from newly appointed Xbox CEO Asha Sharma and chief content officer Matt Booty, informing staff that the games division is experiencing a revenue decline that “cannot continue.” They attributed this downturn to a mix of high hardware costs, disappointing game sales, and prolonged development timelines, creating a challenging environment. Several executives have recently left the Xbox division, including the former head of Xbox Game Studios, Craig Duncan, and the previous chief of staff, Louise O’Connor.

The troubles at Microsoft come on the heels of its aggressive acquisition strategy, which included the $68.7 billion purchase of Activision Blizzard in 2023 and the $7.5 billion acquisition of ZeniMax in 2021. Despite this consolidation, it appears that the expected benefits from these acquisitions have not materialized.

Recent reports suggest that Xbox plans to refocus on its flagship franchises, such as Halo and The Elder Scrolls, after titles like Senua’s Saga: Hellblade 2 and South of Midnight fell short of expectations. Microsoft is even contemplating the possibility of spinning off Xbox into a separate entity or joint venture. At this stage, it seems that almost any option is on the table for Microsoft.

The potential closure of Compulsion Games may just be the beginning of widespread layoffs at Xbox.