Xbox may close Ninja Theory, Double Fine, and Compulsion Games

Microsoft's Game Pass bet is backfiring badly: Bloomberg (Jason Schreier) reports that Ninja Theory, Double Fine Productions, and Compulsion Games are all in active negotiations that could end in closure, a sale to rival publishers, or a management buyout for independence. The news landed less than two weeks after Ninja Theory announced a new entry in the Hellblade series at the Xbox Games Showcase on June 7 — making the timing as jarring as it gets.

The studios at risk

Ninja Theory made Senua's Saga: Hellblade II. Double Fine, led by Tim Schafer, is the team behind Psychonauts and released two more games this year alone — adventure title Keeper and party action game Kiln. Compulsion Games, with over 100 staff, created We Happy Few and the recent folk-horror action game South of Midnight. All three studios earned strong critical reviews. None of them broke through commercially.

That gap between acclaim and revenue is the core problem. Microsoft put every first-party game on Game Pass from day one, which cannibalized direct sales. Subscribers could play without buying, but subscription revenue never compensated for the lost income. Schreier noted that layoffs are expected at all three studios regardless of outcome, and some projects may be cancelled.

The Next Web frames this as the clearest sign yet that new Xbox boss Asha Sharma — who replaced Phil Spencer in February 2026 — is unwinding the acquisition-heavy strategy Spencer built between 2018 and 2023. Spencer spent billions assembling a studio portfolio; Sharma is now deciding which parts of it to keep.

What comes next

Schreier was explicit that these three are not the only studios at risk. "The Xbox of July will look drastically different than the Xbox of June," he wrote on Bluesky. No buyer names or sale timelines have been made public, and Microsoft has not issued a formal statement beyond an internal memo from Sharma to staff.

For fans of these franchises — Hellblade, Psychonauts, South of Midnight — the best-case scenario is a sale to a publisher willing to keep development going. Independence is possible but financially precarious for studios that have never had to fund themselves. Closure remains on the table. More details are expected in the coming weeks.