Multiple Xbox studios are in negotiations to go independent in an attempt to avoid closure, sources say.
That’s according to Bloomberg, which first reported the news, and corroborated by VGC’s own sources, who indicated that Compulsion Games, Double Fine, and Ninja Theory are among those in active negotiations to spin off from Xbox.
The Xbox studios are said to be at risk of being shuttered, but have the opportunity to buy themselves back from Microsoft and go independent, though employees are likely to lose their jobs as a result, according to Bloomberg’s Jason Schreier.
“Employees at several studios have been informed of the situation and given permission to seek new work but were told that the status of the studios is still in flux,” he wrote.
Cambridge, England-based Ninja Theory (Hellblade) announced a new game, Senua, just last week at the Xbox Games Showcase. Both Compulsion (South of Midnight) and Double Fine (Kiln) have released games in the last year. All three studios are known for creating award-winning original games, but not necessarily commercial hits.
The potential studio closures or sales come as part of expected widespread cuts at Microsoft’s gaming division, which were foreshadowed this week by comments from CEO Satya Nadella, and Xbox boss Asha Sharma, who warned that the Xbox business needed to be more profitable in the future.
Concerns first arose last week that Xbox was planning another round of layoffs, after Sharma stated during a Bloomberg Tech conference that she planned on “resetting the business” because it was “not in a healthy spot”.
Shortly after, Bloomberg reported that Microsoft was planning significant cuts to its gaming division, reportedly planned to take place shortly after the end of its fiscal year on June 30.
In the same time frame, Sharma sent a surprisingly candid note to staff, in which she shared “realities that we need to navigate”, claiming that Xbox’s annual revenue had declined nearly half a billion in five years, with hardware costs up 4x, and its studio system “overextended”.
News of the cuts comes a week after Xbox’s big Games Showcase, where it shared updates on its biggest upcoming titles, and committed to releasing new Xbox console exclusives. The digital Showcase was followed by a lavish Fan Fest celebration and media event in Los Angeles.
News of the expected cuts comes exactly a year after Microsoft’s huge 9,000 job cuts last summer, which saw the Xbox division hit hard. Notably, a planned Perfect Dark reboot was canceled, alongside Rare’s Everwild and other projects.
Microsoft also made significant cuts to its Xbox division in 2024 and 2023, including 1,900 staff cuts across Activision Blizzard, Bethesda, and Xbox.
Earlier on Monday, Xbox Game Studios boss Craig Duncan announced he is leaving the company, just 18 months after taking on the role. Studios will report directly to Xbox Chief Content Officer Matt Booty until a replacement is found.
