Xbox Faces Studio Closure Reports Amid Executive Exits and “Reset” Initiatives
Reports indicate several Microsoft-owned gaming studios, including Double Fine and Ninja Theory, face potential closure or forced buyouts amidst a significant Xbox restructuring. This turmoil coincides with Xbox Game Studios CEO Craig Duncan's departure and mass layoff considerations, as Microsoft announces new Game Pass titles for June 2026. The company has not yet commented on the studio reports.
Key points
- Reports indicate several Microsoft-owned gaming studios, including Psychonauts developer Double Fine, Hellblade developer Ninja Theory, and Compulsion Games, are facing potential closure or negotiating buyouts to avoid it.
- Xbox Game Studios CEO Craig Duncan stepped down after less than two years in his role, alongside chief of staff Louise O'Connor, as part of broader leadership changes.
- These developments coincide with Xbox boss Asha Sharma's planned “Xbox reset,” which reportedly includes considerations for mass job cuts across the gaming division.
- Double Fine, acquired by Microsoft in June 2019 and known for the Psychonauts franchise, responded to the closure reports with a single emoji — a smiling face with open mouth and cold sweat — after recent titles Keeper (2025) and Kiln (2026) were not commercial hits.
- Concurrently, Microsoft unveiled its Xbox Game Pass June 2026 Wave 2 lineup, featuring titles such as EA Sports FC 26, Call of Duty: Vanguard, Junkster, and RV There Yet?.
- Microsoft has not yet issued an official comment regarding the reports of studio closures or potential buyouts, despite inquiries from multiple media outlets.
Microsoft's gaming division is reportedly undergoing a significant shakeup, with multiple independent sources indicating that several Xbox-owned studios are at risk of closure or are in discussions for buyouts. Among the studios named are Psychonauts developer Double Fine, Hellblade developer Ninja Theory, and South of Midnight creator Compulsion Games, all acquired by Microsoft in recent years. This uncertainty follows reports of recent commercial underperformance for some studios, such as Double Fine's Keeper (2025) and Kiln (2026).
The reports of potential studio closures coincide with major executive departures. Craig Duncan, CEO of Xbox Game Studios, has reportedly stepped down after less than two years in the role, alongside chief of staff Louise O'Connor. These leadership changes are understood to be part of a broader “Xbox reset” initiative spearheaded by Xbox boss Asha Sharma, which is also expected to involve mass job cuts across the gaming business.
While the future of these studios remains unclear, with Microsoft yet to issue an official statement, the company simultaneously announced the second wave of titles for Xbox Game Pass in June 2026. The new additions include high-profile games such as EA Sports FC 26, Call of Duty: Vanguard, and RV There Yet?, among others. This rollout continues the subscription service's expansion amid the backdrop of internal upheaval, with Double Fine’s social media response—a single emoji—offering a subtle, non-verbal comment on the situation.
Sources
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