Microsoft is reportedly willing to close four of its Xbox game studios if it cannot find anyone to buy them, according to a new GamesBeat report citing sources familiar with the company’s plans. The studios on the list are some of the most respected names Xbox has acquired over the past decade, which makes the report sting that much more for the people who follow this stuff closely.
The four studios named are Double Fine Productions, Undead Labs, Compulsion Games, and Ninja Theory. If you have played anything Xbox-published in the last few years, you have almost certainly touched one of their games.
Xbox Studios Are At Risk
Double Fine is the Tim Schafer studio behind Psychonauts and, most recently, Keeper. Undead Labs is the team that built the State of Decay franchise. Compulsion Games made South of Midnight, which launched only last year. Ninja Theory is the studio behind the Hellblade series and the upcoming Senua project that Xbox literally just showed off at its summer showcase.
According to reports, Microsoft is actively exploring selling these studios rather than closing them outright. The goal, at least on paper, is to preserve jobs by handing the teams off to a new owner who keeps them running. If no buyer materializes, though, the report claims the studios could simply be shut down.
How Many Jobs Are On The Line
The numbers attached to this report are specific, and they are not small. Double Fine could lose around 100 jobs. Undead Labs is looking at roughly 110. Compulsion Games sits at about 90, and Ninja Theory carries the largest headcount at around 135. Add it all up, and you are looking at close to 435 positions hanging in the balance across the four teams.
One source familiar with the situation reportedly described it as potentially the biggest single round of cuts in Xbox history, which says a lot considering how many layoffs the division has already absorbed over the last couple of years.
More Xbox Layoffs Expected In July
The report says Microsoft is expected to kick off a fresh round of Xbox layoffs in early July, right after its fiscal year wraps at the end of June. Other parts of the business, including teams under Bethesda and Blizzard, are reportedly bracing for percentage-based cuts on top of the studio situation. So even if you are not at one of the four studios in the spotlight, the wider Xbox org is clearly not feeling settled right now.
The Communications Workers of America, the union that now represents more than 3,500 Microsoft employees, has already started pushing back. The union held a press call to confront management over the looming cuts, which tells you this is not going to play out quietly behind closed doors.
Two of these studios have games that Xbox publicly announced and dated very recently. Ninja Theory’s next Senua entry is in development with a 2027 window. State of Decay 3 from Undead Labs also showed up at the Xbox Games Showcase this month with a 2027 release across PC, Xbox, and PlayStation 5. Undead Labs even ran extra playtests and let creators share footage afterward, which is not usually how a studio behaves when its future is in doubt.
So you have a publisher hyping up sequels on a big stage one month and reportedly weighing whether to shut the developers down the next. Whether that means the games would move elsewhere, get cancelled, or somehow survive a sale is anyone’s guess at this point.
It is also worth remembering how Xbox got here. Microsoft scooped up Undead Labs, Ninja Theory, and Compulsion back in 2018 during its big studio buying spree, then kept expanding through the ZeniMax and Activision Blizzard deals. The same company that spent billions building the largest studio roster in gaming now appears to be trimming it down piece by piece.
As of writing, this is still a report, and Microsoft has not publicly confirmed the closures or the buyout talks. There is a real chance one or more of these studios will find a buyer and keep the lights on, especially since reporting suggests Double Fine’s leadership has explored buying the studio back themselves. But with the early July timeline closing in fast, the people working on these teams probably will not have to wait long for clarity, one way or the other.
We will update this story as more details come in.
