The fate of Xbox’s vulnerable game studios

Story written with contributions from Rachel Kaser Five Microsoft game studios were considered to be vulnerable to the chopping block as Xbox leaders announced extensive layoffs today. Now that the layoffs have been announced, we can delve into what will become of those studios. Xbox CEO Asha Sharma announced on Twitter (X) that she was taking action to implement major layoffs at the division to deal with falling revenues and profit margins. The studio is laying off around 3,200 people in total, with 1,600 of those layoffs happening today. However, the studios who are set to depart Xbox’s stable — which employ over 500 people, by GamesBeat’s estimates — are not counted among that number. There were five candidates for shutdown among the studios. The list included Arkane (Marvel Blade, Dishonored), Double Fine (Kiln, Keeper), Undead Labs (State of Decay 3), Compulsion Games (South of Midnight) and Ninja Theory (Senua). Sharma outlined the fate of the five studios in her announcement: Double Fine and Compulsion Games are becoming independent, taking with them their intellectual property and game catalogs. Ninja Theory and Undead Labs have “entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3.” Ninja Theory is working on Senua. Source: Xbox As for Arkane, Sharma says that the French management is “beginning required consultation with its Works Council to review potential strategic options.” This studio’s games, including the upcoming Blade title, are the only ones not thus far addressed in Sharma’s announcement. Sharma also noted that it was also making reductions at Activision, Bethesda, ZeniMax, Blizzard, King, Mojang and Xbox Game Studios. She also said that “no first-party publicly announced games” are being canceled. Kiln from Double Fine. In her first hundred days, Sharma took decisive action on matters like getting rid of an unpopular ad campaign (“This is an Xbox”), cutting subscription prices and taking Call of Duty out of it, and keeping more exclusives for the the dedicated Xbox fans. But she saw a need to address bigger problems. As word surfaced of big Xbox layoffs coming, Microsoft told studios that they were candidates for closure if they did not find an outside buyer or make their own bids to buy themselves out. If they did not succeed, their studios would be shut or severely cut. Arkane is working on Marvel Blade. Source: Xbox Sharma said in her announcement that the reason for cutting these particular studios is that the expansion of its portfolio of owned studios put it at a disadvantage compared with both larger publishers and more agile indie studios. She noted: “It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As we reset XBOX, we will help independent creators succeed by providing open development tools and audiences to realize their vision.” Compulsion Games is making South of Midnight. We also heard that Obsidian was also considered as a candidate for possible sale, but then we also heard that this decision was reversed. It was a fluid situation. The post The fate of Xbox’s vulnerable game studios appeared first on GamesBeat.

Jul 6, 2026 - 22:30

The fate of Xbox’s vulnerable game studios

Story written with contributions from Rachel Kaser

Five Microsoft game studios were considered to be vulnerable to the chopping block as Xbox leaders announced extensive layoffs today. Now that the layoffs have been announced, we can delve into what will become of those studios.

Xbox CEO Asha Sharma announced on Twitter (X) that she was taking action to implement major layoffs at the division to deal with falling revenues and profit margins. The studio is laying off around 3,200 people in total, with 1,600 of those layoffs happening today. However, the studios who are set to depart Xbox’s stable — which employ over 500 people, by GamesBeat’s estimates — are not counted among that number.

There were five candidates for shutdown among the studios. The list included Arkane (Marvel Blade, Dishonored), Double Fine (Kiln, Keeper), Undead Labs (State of Decay 3), Compulsion Games (South of Midnight) and Ninja Theory (Senua).

Sharma outlined the fate of the five studios in her announcement: Double Fine and Compulsion Games are becoming independent, taking with them their intellectual property and game catalogs. Ninja Theory and Undead Labs have “entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3.”

Ninja Theory is working on Senua. Source: Xbox As for Arkane, Sharma says that the French management is “beginning required consultation with its Works Council to review potential strategic options.” This studio’s games, including the upcoming Blade title, are the only ones not thus far addressed in Sharma’s announcement.

Sharma also noted that it was also making reductions at Activision, Bethesda, ZeniMax, Blizzard, King, Mojang and Xbox Game Studios. She also said that “no first-party publicly announced games” are being canceled.

Kiln from Double Fine. In her first hundred days, Sharma took decisive action on matters like getting rid of an unpopular ad campaign (“This is an Xbox”), cutting subscription prices and taking Call of Duty out of it, and keeping more exclusives for the the dedicated Xbox fans. But she saw a need to address bigger problems.

As word surfaced of big Xbox layoffs coming, Microsoft told studios that they were candidates for closure if they did not find an outside buyer or make their own bids to buy themselves out. If they did not succeed, their studios would be shut or severely cut.

Arkane is working on Marvel Blade. Source: Xbox Sharma said in her announcement that the reason for cutting these particular studios is that the expansion of its portfolio of owned studios put it at a disadvantage compared with both larger publishers and more agile indie studios.

She noted: “It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As we reset XBOX, we will help independent creators succeed by providing open development tools and audiences to realize their vision.”

Compulsion Games is making South of Midnight. We also heard that Obsidian was also considered as a candidate for possible sale, but then we also heard that this decision was reversed. It was a fluid situation.

The post The fate of Xbox’s vulnerable game studios appeared first on GamesBeat.

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