Microsoft reportedly negotiating closures of multiple Xbox studios, including Psychonauts' Double Fine, South of Midnight's Compulsion and Hellblade's Ninja Theory - Eurogamer
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Microsoft Xbox division is reportedly in active negotiations to close or divest multiple esteemed game development studios, including Double Fine, Compulsion Games, and Ninja Theory, sending shockwaves through the gaming industry. The news, corroborated by multiple reports, suggests these studios, behind titles like 'Psychonauts', 'South of Midnight', and the 'Hellblade' series, are scrambling to negotiate independence to avert outright shutdowns. This sweeping reorganization signals a brutal new phase in Xbox strategy, driven by a directive from new CEO Asha Sharma to curb plunging revenues and shrinking margins. The potential closures underscore the intensifying pressures within Microsoft gaming arm, which recently saw Xbox Game Studios head Craig Duncan step down. New Xbox chief Asha Sharma internal memo lamented a mere 3% profit margin for the gaming business, excluding Activision Blizzard, and a half-billion-dollar annual revenue decline over the past five years despite a $20 billion investment in content and hardware. This 'reset' post-Activision Blizzard acquisition prioritizes mega-franchises and a multiplatform strategy, potentially sacrificing smaller, critically acclaimed studios that struggle to meet stringent profitability metrics. The fate of these studios remains 'in flux', with some employees reportedly informed of impending closures and advised to seek new employment, even as hopes for external buyers persist for entities like Ninja Theory. This pivot suggests a future Xbox landscape dominated by fewer, larger bets and a more aggressive push for monetization across various platforms, rather than nurturing a diverse portfolio of first-party exclusives. Industry watchers anticipate further layoffs and strategic realignments to be finalized by the end of June, reshaping the competitive dynamics of game development for years to come.