Ethan Crossfield 
If you follow Xbox releases—or just want to track what happens behind the scenes—this is a story worth watching. Multiple Xbox-owned studios are reportedly in survival negotiations as the company reportedly prepares another round of layoffs, and employees have already begun looking for new roles.
What changed: shutdown talk tied to an “Xbox Reset”
Kotaku reported that Compulsion Games, the studio behind South of Midnight, may be closing following last week’s reporting that Xbox leadership was planning significant layoffs. While Compulsion’s status has not been officially confirmed, Bloomberg adds that Compulsion may not be alone.
Bloomberg’s reporting—sourced to people close to the situation who were not authorized to speak publicly—states that Compulsion Games, Ninja Theory (Hellblade), and Double Fine (Psychonauts) are at risk of being shut down as part of Xbox restructuring. According to those sources, each studio is negotiating with Xbox to “buy itself back” and operate independently, but that path would reportedly come with major job cuts. Employees at these studios have reportedly been informed and allowed to seek new work.
Who is affected: Compulsion, Ninja Theory, and Double Fine
The studios named in the reports have recent and upcoming visibility within the Xbox portfolio.
Compulsion Games was acquired by Microsoft during E3 2018, and its latest game, South of Midnight, launched in 2025 to positive reviews. Kotaku also noted the studio had announced it was hiring only two months earlier for work on a new IP.
Ninja Theory was also acquired during E3 2018, and it most recently revealed a new Hellblade project titled Senua. The game is billed as a pure action experience, and it’s scheduled for release in 2027.
Double Fine was purchased by Microsoft in 2019. The studio released a multiplayer party game, Kiln, earlier this year, and it has previously shipped 2024’s Keeper and 2021’s Psychonauts 2 under the Xbox umbrella.
Separately, employees at Compulsion have reportedly been signaling uncertainty through social media. The source specifically mentions posts from writer Bijan Stephen and senior writer Zaire Lanier indicating they are looking for work. Game Informer also contacted Compulsion for comment and said it would update the story if the studio responds.
What comes next: independence talks, leadership context, and no official answers yet
The latest shutdown claims align with earlier reporting about Xbox leadership preparing for layoffs. The source points to a message from Xbox CEO Asha Sharma and chief content officer Matt Booty to staff describing an “Xbox Reset.” In that internal note, leadership reportedly argued Xbox “overextended” itself by acquiring many studios over recent years, while also citing business pressures including declining revenue, hardware component shortages, and systems described as overly complex and not ready for the years ahead.
For readers, the practical takeaway is that nothing here is confirmed by Microsoft or the studios themselves. The reports describe negotiations and employee guidance, but official outcomes are still pending. If you’re tracking upcoming games like Senua (2027) or the next phase of Compulsion’s new IP, this is the kind of industry shift that can affect timelines and staffing quickly—so it’s smart to follow updates as studios respond, or as Microsoft clarifies what “restructuring” will mean in practice.
What players should know
- Three Xbox-owned studios are reportedly at risk of shutdown: Compulsion Games, Ninja Theory, and Double Fine.
- Sources say studios are negotiating to become independent, but that route would reportedly mean significant job cuts.
- Employees have reportedly been told to expect uncertainty and are being allowed to look for new work.
- Compulsion’s latest release (South of Midnight, launched in 2025) and Ninja Theory’s next (Senua, scheduled for 2027) are part of the wider context—so studio decisions could impact future output.
Expert View
This looks less like a single studio incident and more like a broader cost-and-structure reset at Xbox. The key uncertainty for fans is timing: reported negotiations and employee signals don’t guarantee closures, but they do suggest leadership is moving fast. Until Microsoft or the studios issue official statements, treat the situation as developing—and keep an eye on staffing updates and confirmation of any independence plans.
