Ninja Theory, Compulsion Games, and Double Fine Productions are reportedly just the beginning in a list of Xbox studios facing an uncertain future.
In his new YouTube video, Bloomberg investigative journalist Jason Schreier stated that the ongoing “reset” at Xbox means that widespread layoffs are imminent following the end of Microsoft’s fiscal year on June 30, 2026, with several first-party studios already engaged in discussions about their future.
Among the studios previously identified by Schreier as facing uncertainty are Ninja Theory, the developer behind the Hellblade series, Compulsion Games, known for South of Midnight, and Double Fine Productions, the studio responsible for Psychonauts and the recently released Keeper. He now mentioned that these 3 teams are “just the beginning,” adding that other Xbox studios are also facing tough conversations as Microsoft evaluates the future of its gaming business.
In the investigative journalist’s view, the problems began during the Xbox One era, when Microsoft’s focus on creating an all-in-one entertainment device resulted in a disastrous launch strategy that allowed Sony’s PS4 to establish a commanding lead in the console market. While Phil Spencer’s arrival as Xbox chief brought a renewed vision focused on Game Pass, that strategy eventually led Microsoft down a path of aggressive acquisitions designed to build a massive content library for its subscription service.
Over the years, Xbox acquired studios including Double Fine Productions, Obsidian Entertainment, Ninja Theory, Compulsion Games, and later Bethesda parent company ZeniMax Media. The strategy culminated in Microsoft’s nearly 69 billion US Dollar acquisition of Activision Blizzard, one of the largest deals in entertainment history. According to Schreier, the latter fundamentally changed Microsoft’s expectations for Xbox. What had previously been a growth-focused division focused on expanding Game Pass suddenly found itself under intense pressure to demonstrate profitability. At the same time, Game Pass subscriber growth reportedly plateaued, Xbox hardware sales continued to lag behind PlayStation, and cloud gaming failed to become the breakthrough Microsoft had hoped for.
The result has been a turbulent period involving multiple rounds of layoffs, project cancellations, and studio closures. Schreier pointed to the closures of Arkane Austin and Tango Gameworks, as well as the cancellations of projects such as Perfect Dark, Everwild, and ZeniMax Online Studios’ unannounced MMO codenamed Blackbird. He noted that many Xbox studios were operating under a completely different mandate when their existing projects entered development. According to him, several teams were encouraged to create award-winning games that would strengthen Game Pass rather than chase blockbuster sales figures. Years later, however, those same studios are being evaluated via a far more profit-driven lens.
The investigative journalist mentioned that new Xbox CEO Asha Sharma has spent months evaluating the business, consulting with employees and executives, and repeatedly referring to the need for a “reset.” While the exact scope of the restructuring is unclear, Schreier warned that the situation could be severe, noting that the term “bloodbath” has reportedly been used by people familiar with the plans. Though, he clarified that not every affected studio is necessarily destined for closure. Some teams may ultimately spin off into independent companies or find new publishing partners. Negotiations are still ongoing, and final decisions have not yet been announced.
