Xbox is closing Ninja Theory and Double Fine, and Compulsion may not be far behind

[midian182]

What just happened? Ninja Theory, developer of the popular Hellblade series, is being closed down by Xbox – the only hope for the studio is that a buyer will step in. According to reports, Compulsion Games, which was behind South of Midnight, and Tim Schafer's Double Fine are also fighting for their futures.

Sources have told The Verge that Ninja Theory staffers were told on a call on Monday about the closure, leaving the team looking for a buyer so operations can continue.

The news is especially surprising given that Microsoft showcased Senua, the next Hellblade game, during its Xbox Games Showcase just over a week ago. That title had been targeting a 2027 release, though its future is now unclear. Ninja Theory was one of several studios Microsoft bought in 2018 as part of a major expansion of Xbox Game Studios.

Bloomberg reports that several Xbox-owned teams, including Compulsion and Psychonauts developer Double Fine, are in active negotiations with Microsoft in an effort to avoid being shuttered. Some could potentially spin out and become independent again, similar to Toys for Bob after it left Activision. Reporter Jason Schreier writes that both companies are "in active negotiations to spin off as they try to thwart closure."

The prospect of losing Double Fine would be particularly symbolic, given CEO and founder Schafer's long-standing reputation as one of the industry's best-known creative leads.

It's also been reported that Xbox Game Studios head Craig Duncan and chief of staff Louise O'Connor have either left Microsoft or are preparing to depart.

Xbox is going through a tumultuous time right now. Xbox CEO Asha Sharma last week warned staff of a major 100-day "reset," with significant layoffs and budget cuts expected after Microsoft's fiscal year ends on June 30.

Sharma's memo reportedly pointed to an overextended studio system, falling console sales, and rising hardware costs as major pressure points. There's also talk of a "radically different" console business model.

Another recent report claimed that Microsoft may consider restructuring Xbox as a wholly owned subsidiary or even a joint venture.

In 2024, Microsoft closed four Bethesda studios, including Arkane Austin and Tango Gameworks, when the company said it was prioritizing "high-impact" titles. Later that year, another 650 gaming jobs were cut following the $69 billion Activision Blizzard acquisition.

Microsoft spent years buying studios to strengthen Game Pass and fill Xbox's first-party stable. Now, with subscription growth slowing and hardware sales under pressure, some of those same studios appear to be fighting just to survive.

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Xbox is closing Ninja Theory and Double Fine, and Compulsion may not be far behind

 

[winjer]

And nothing of value was lost.
These studios have been making mediocre games for a non-existing audience. Often more concerned about pushing some political agenda, rather than making fun videogames that gamers would actually want to play.

 

[Theinsanegamer]

Good.

Look at what these studios have put out in the last 10 years. Flop after flop, maybe 1 game that sold a million copies. If MS hadn't funded them most of these guys would have gone bankrupt years ago.

Especially compulsion games.

 

[Kirby1]

And nothing of value was lost.
These studios have been making mediocre games for a non-existing audience. Often more concerned about pushing some political agenda, rather than making fun videogames that gamers would actually want to play.

Hellblade 2 is amazing.

We were wondering if Sharma was going to be any better, and now we know. Nope. However you feel about the Hellblade series, to shut it down right after the big reveal just makes it clear they are scrambling and don't know what they are doing, yet again.

 

[winjer]

Hellblade 2 is amazing.

Hellblade 2 is a tech demo with mediocre gameplay. So of course most people skipped it and now the studio is facing closure.

 

[m4a4]

Lets hope that whatever comes from this results in studios that actually have a passion for making games, not whatever HR fest that has plagued studios over the past several years...

And maybe they'll start putting out good games again.

 

[Dreadcthulhu]

Good.

Look at what these studios have put out in the last 10 years. Flop after flop, maybe 1 game that sold a million copies. If MS hadn't funded them most of these guys would have gone bankrupt years ago.

Especially compulsion games.

Yeah, I looked at Compulsion games; their most recent game "South of Midnight" was released in 2025. Their previous game, "We Happy Few" was released in 2018, same year MS acquired the studio. When it takes your team seven years to get out a game with a rather small scope like South of Midnight, you know they have something really broken in their development process.

 

[OortCloud]

MS just aren't interested in putting money or real effort into anything but AI at the moment. They tried ramping prices to meet ratcheted expected margins on Game Pass and Xbox to get more money to pour into the AI furnace. That, unsurprisingly, was an abject failure so they are now starting to pair Xbox down. The consumer divisions of MS including Windows itself, Xbox, Game Pass and MS Game Studios have been terribly damaged both financially and reputationally over the last couple of years by their obsessing over AI.

 

[Kirby1]

Hellblade 2 is a tech demo with mediocre gameplay. So of course most people skipped it and now the studio is facing closure.

So you didn't play it.

There are people who think it's a tech demo and those who actually played it.

Either way, with a sequel expected next year, stupid move.

 

[winjer]

So you didn't play it.

There are people who think it's a tech demo and those who actually played it.

Either way, with a sequel expected next year, stupid move.

I did play it. Gave up after an hour because it was so boring.
And mind you, I did play the first and completed it.

 

[Theinsanegamer]

So you didn't play it.

There are people who think it's a tech demo and those who actually played it.

Either way, with a sequel expected next year, stupid move.

That's a pretty small pool. Hellblade 1 didnt sell very well for such an expensive game, estimated only 1-1.5 million sales, and Hellblade 2 sold worse then that.

MS just aren't interested in putting money or real effort into anything but AI at the moment. They tried ramping prices to meet ratcheted expected margins on Game Pass and Xbox to get more money to pour into the AI furnace. That, unsurprisingly, was an abject failure so they are now starting to pair Xbox down. The consumer divisions of MS including Windows itself, Xbox, Game Pass and MS Game Studios have been terribly damaged both financially and reputationally over the last couple of years by their obsessing over AI.

For years they have poured billions into the gaming industry, and have gotten very little in return. Eventually they were going to walk away from the underperformers.

 

[Kirby1]

I did play it. Gave up after an hour because it was so boring.
And mind you, I did play the first and completed it.

You missed out, but not every game is for everyone.

 

[Gezzer]

And nothing of value was lost.
These studios have been making mediocre games for a non-existing audience. Often more concerned about pushing some political agenda, rather than making fun videogames that gamers would actually want to play.

For me while I hate that people lose jobs, DF can rot in hell for all I care. Got stung not once but twice with early access titles that were rushed to "release" and were incomplete from them.

 

[Bluescreendeath]

Hellblade 2 is a tech demo with mediocre gameplay. So of course most people skipped it and now the studio is facing closure.

Never played the second Hellblade, but the first Hellblade was supposed to be more of a psychological thriller about its character development, plot, themes, etc. rather than an action competitor to God of War. It scored highly with both audiences and critics, but was for a more niche audience.

That type of game would have done been as an Indie game with a smaller budget.

 

[Bluescreendeath]

And nothing of value was lost.
These studios have been making mediocre games for a non-existing audience. Often more concerned about pushing some political agenda, rather than making fun videogames that gamers would actually want to play.

You must be confusing them with different studios. Double Fine productions makes the Psychonaut games. No political agenda in those games. They just made some bad games.

Ninja Theory makes the Hellblade Senua games. That's more of a psychological thriller type game about the mind of a Celtic warrior woman. Not much political agendas either, but the gameplay and themes do make it for a niche audience. The 1st Hellblade got excellent reviews from both audiences and critics so it's pretty good in terms of quality. The sequel was not as good. These games probably have a niche audience and couldn't make back their AA/AAA budget.

Arkane Austin made the great game Prey (2017) and co-made the great game series Dishonored. They closed after that flop Redfall...which was a really bad game.

Not every failure is due to political agendas. Sometimes they just spent too much money making a good but niche game that doesn't make enough money. Sometimes the game is just bad without a political agenda.

 

[RaXelliX]

I think the current game development model is inherently flawed.

What we have now:
Nearly a decade of development to make a big game that costs 100m, but tanks as soon as the players reject it and dies. 100m and 7+ years wasted. Studio closed.

What I propose instead:
Develop a game like Lego. Make the foundation and one region/hub in 2 years for 10m. Release it to gauge player reception. If it fails you've "only" wasted two years and 1/10th the money. Studio continues to exist. If it succeeds then build another region in two years.

Yes it sucks having to wait two years for content to a good game, but the current model is schizophrenic where they try and develop a full game for ungodly amount of money and when it fails the studio goes under. Waiting two years is a better alternative to what we have currently. Much faster development. Less risk. Less money spent. Continued development only if the reception is good and no more money wasted on things people reject.

 

[Theinsanegamer]

You must be confusing them with different studios. Double Fine productions makes the Psychonaut games. No political agenda in those games. They just made some bad games.

Ninja Theory makes the Hellblade Senua games. That's more of a psychological thriller type game about the mind of a Celtic warrior woman. Not much political agendas either, but the gameplay and themes do make it for a niche audience. The 1st Hellblade got excellent reviews from both audiences and critics so it's pretty good in terms of quality. The sequel was not as good. These games probably have a niche audience and couldn't make back their AA/AAA budget.

Arkane Austin made the great game Prey (2017) and co-made the great game series Dishonored. They closed after that flop Redfall...which was a really bad game.

Not every failure is due to political agendas. Sometimes they just spent too much money making a good but niche game that doesn't make enough money. Sometimes the game is just bad without a political agenda.

How convenient that you left out the 4th studio, Compulsion, that made South of Midnight.

Nope, that definitely wasnt intentional on your part, LMFAO.

I think the current game development model is inherently flawed.

What we have now:
Nearly a decade of development to make a big game that costs 100m, but tanks as soon as the players reject it and dies. 100m and 7+ years wasted. Studio closed.

What I propose instead:
Develop a game like Lego. Make the foundation and one region/hub in 2 years for 10m. Release it to gauge player reception. If it fails you've "only" wasted two years and 1/10th the money. Studio continues to exist. If it succeeds then build another region in two years.

Yes it sucks having to wait two years for content to a good game, but the current model is schizophrenic where they try and develop a full game for ungodly amount of money and when it fails the studio goes under. Waiting two years is a better alternative to what we have currently. Much faster development. Less risk. Less money spent. Continued development only if the reception is good and no more money wasted on things people reject.

Nobody buys into the model you listed. That is how MMOs function. Name me a successful recent MMO that isnt WoW.

The model is not what is broken, it is the studios. They are spending like they make games that sell 10+ million copies, but they are not making those kind of mass market games. Their staff counts are ridiculously high yet they take entire generations to get a game out.

 

[Gezzer]

I think the current game development model is inherently flawed.

What we have now:
Nearly a decade of development to make a big game that costs 100m, but tanks as soon as the players reject it and dies. 100m and 7+ years wasted. Studio closed.

What I propose instead:
Develop a game like Lego. Make the foundation and one region/hub in 2 years for 10m. Release it to gauge player reception. If it fails you've "only" wasted two years and 1/10th the money. Studio continues to exist. If it succeeds then build another region in two years.

Yes it sucks having to wait two years for content to a good game, but the current model is schizophrenic where they try and develop a full game for ungodly amount of money and when it fails the studio goes under. Waiting two years is a better alternative to what we have currently. Much faster development. Less risk. Less money spent. Continued development only if the reception is good and no more money wasted on things people reject.

That was the whole idea behind early access. Get a game to a semi-playable state and then let the community enjoy what you release and help direct the game's development. Problem is too many studios have abused the model. It shouldn't be for funding, and games that use it for that almost always fail by being abandoned or rushed to a "release".

The real problem IMHO is the fact that games are most often not created out of a love for video games, but instead are totally profit driven. BG3 is a perfect example of a video game done right. The developers love video games and had a solid vision that they never lost focus of. Most of the ones that fail were at least 2-3 different games during development as the publishers were trying to find the best monetization model.

 

[Bluescreendeath]

How convenient that you left out the 4th studio, Compulsion, that made South of Midnight.

Nope, that definitely wasnt intentional on your part, LMFAO.
.

You really dont need to speculate about any malicious intentions.

I have never heard of compulsion and dont know their games, so I left it out. I have heard of the other 3 studios and have actually played their games. That is why I mentioned the other 3. Those other 3 failed because they made good games or bad games that didnt sell well. No politics needed.

If compulsion failed because they made political games then fine. The other 3 failed because of different reasons as I mentioned above.

We dont need a knee jerk reaction to claim politics is the reason every time a game studio fails.