When the news broke on Bloomberg that several Xbox Studios are facing uncertain futures, including South of Midnight maker Compulsion Games, Kiln maker Double Fine, and Hellblade developer Ninja Theory, the big concern for some was how they got to this point. Several analysts have shared their opinions on the matter.
According to the report, Ninja Theory is in conversation with Xbox, just like several other studios that are facing closure risks. Sources familiar with the matter said the goal of the negotiations is to try to prevent the closure.
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“Nothing was definitively said, but there was nothing said to assure us that things were okay,” said a high-level Compulsion employee. “We were just left hanging when the topic would be brought up. Just feels like a matter of time.”
Asha Sharma, CEO of Xbox
One option at the table for the Xbox Studios facing closure threats is to buy themselves back and become independent. This will likely lead to mass layoffs, according to sources that declined to be named. The uncertain future has been communicated to employees of several of the affected studios, and given permission to look for work elsewhere.
The closure concerns of Compulsion Games and Ninja Theory may come as a surprise to many because both released games that were thought to be commercially successful. However, looking back at the closure of Tango Gameworks, even after the success of Hi-Fi Rush, it is certain that the problem runs deeper than commercial success.
Why Xbox Studios are facing an uncertain future
The Bloomberg report said the potential closures are part of the new CEO Asha Sharma’s broader reorganization since ascending to the role in February 2026. In a memo sent to staff, Sharma lamented the state of Microsoft’s gaming business in recent years, saying, “Going forward, this cannot continue”.
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The problem facing Xbox Studios and the gaming division at large did not start with Sharma. In 2023, Microsoft acquired Activision Blizzard for $69 billion. The deal has yet to churn out the benefits that the company had hoped for.
Researcher and strategist Robin Boyar offered insights on the problem with Xbox Studios and why the reset was inevitable. According to Boyar, Xbox invested $20 billion over 5 years, and annual revenue dropped by $500 million.
“The only person who can get away with this level of fiscal mismanagement is Mark Zuckerberg and Reality Labs (loss of $80 billion since 2020),” Boyar said. “And that’s because he controls voting power of Meta. At some point, your Board or investors says, ‘Enough’. Clean this mess up. Unfortunately, this is where we are with Xbox.”
“Asha Sharma has been called to Aisle 5. To her credit, instead of throwing some sawdust at the problem, she’s been transparent about Xbox’s failings. Now, if you get caught in the crossfire of leading Xbox Game Studios, you have three choices: 1) Oversee massive layoffs or 2) Be forced out 3) Quit.
So now sadly, you have all these studios that thought they were finding a safe harbor in Xbox Studios, once again at risk. The number of potential suitors this time around is very small… perhaps some will be saved by the newly formed Paramount Games? But in interim, it’s going to be very, very, messy for all those about to be laid off.”
The leader of Xbox Games Studios, Craig Duncan, has departed the business after serving just 18 months. His chief of staff, Louise O’Connor, is also leaving, after joining less than a year ago.
Do you think any of the Xbox Studios at risk of closure can be saved? Share your thoughts in the comment box below.
