Several studios within Xbox Game Studios are in talks with Microsoft’s management over a possible spin-off from the company’s gaming division. Bloomberg has reported, citing sources, that the studios in question include Compulsion Games, Double Fine, Ninja Theory and several other teams that risk being affected by a future wave of redundancies.
Sources told Bloomberg that the studios are seeking to avoid closure by buying out their independence. This move would enable the teams to continue operating outside the Xbox structure, although a significant number of employees could still lose their jobs.
Employees at some studios have already been informed of the situation and have been allowed to look for new jobs. However, final decisions have not yet been made and negotiations are ongoing.
Last week, Bloomberg reported that Xbox is preparing for large-scale redundancies as part of a reorganisation led by the division’s new CEO, Asha Sharma. She took the helm of Xbox in February 2026 and, according to Bloomberg, plans to focus the company’s resources on its biggest franchises in order to return the business to growth following a decline in revenue and profitability.
Among the studios that may change their status are:
- Compulsion Games, the creators of South of Midnight;
- Double Fine, the studio known for the Psychonauts series as well as recent projects Keeper and Kiln;
- Ninja Theory, the developers of the Hellblade series.
All three studios have received critical acclaim and industry awards, yet their projects have not become major commercial hits.
The situation is particularly notable given Microsoft’s significant investments in the gaming industry. In 2023, the company completed its US$69 billion acquisition of Activision Blizzard, the largest deal in the history of the video game industry.
Last week, Craig Duncan, former head of Xbox Game Studios, stepped down from his role.
Read also: Satya Nadella says Xbox monetisation is “mostly on YouTube”, flags weak gaming revenue
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