Xbox 'Reset' Hits Ninja Theory Days After Its Showcase Reveal as Microsoft Braces Studios for Cuts Past Fiscal Year-End
Reports say Microsoft is closing Hellblade studio Ninja Theory and put Double Fine and Compulsion in exit talks, days after a public Xbox 'reset' memo.
Editor's Note ·
- Clarification:
- The article quotes Ninja Theory studio head Dom Matthews as saying, "It's a bold new step for Senua into the action-adventure space." The cited Xbox Wire source reads, "It's a bold new step for Senua, as a character, into the action-adventure space." The article shortened the quote by three words inside the quotation marks without marking the elision with an ellipsis. The meaning is unchanged.
Overview
Microsoft’s gaming division has begun what its leadership calls a business “reset,” and several of its own studios are now reported to be facing closure. According to Video Games Chronicle, citing Bloomberg’s Jason Schreier, three Xbox-owned studios — Compulsion Games, Double Fine, and Ninja Theory, the studio behind the Hellblade series — are negotiating to spin off from Microsoft to avoid being shut down. The studios “have the opportunity to buy themselves back from Microsoft and go independent, though employees are likely to lose their jobs as a result,” VGC reported.
The timing for Ninja Theory is conspicuous: the studio had unveiled a new action-adventure game, Senua, at the Xbox Games Showcase on June 7, as detailed by Xbox Wire, barely a week before the closure reports surfaced.
The ‘Reset’ Memo
The restructuring follows a publicly posted memo from Xbox leadership announcing a business “reset.” The memo was authored by Xbox CEO Asha Sharma and Chief Content Officer Matt Booty, according to Game Developer. “It is important to have both optimism and realism as we work to reset the business,” the two wrote, per Game Developer, which reported that “notable changes will be made in the next 100 days.” Sharma separately described the platform as “not in a healthy spot” and said it needed “resetting,” according to Video Games Chronicle.
The memo laid out the financial case for the contraction. Game Developer reported that “Xbox has spent over $20 billion on content, platform, and hardware investments over the past five years,” while seeing “annual revenue decline by almost $500 million over that period.” The memo also cited rising hardware costs, stating that the price paid for console storage components had climbed to “over 5x the prices we paid only two years earlier,” per Game Developer. The same $20 billion investment and nearly $500 million revenue-decline figures were independently reported by Northeastern Global News.
What We Know
The studios caught up in the restructuring are each known for distinctive original games: Compulsion Games developed South of Midnight, Double Fine made Kiln, and Ninja Theory created the Senua and Hellblade titles, according to Video Games Chronicle. Northeastern Global News reported that all three studios are “currently trying to negotiate to go independent, which may still involve major layoffs.”
Affected employees have already been told. “Employees at several studios have been informed of the situation and given permission to seek new work but were told that the status of the studios is still in flux,” Video Games Chronicle reported. The layoffs are expected “shortly after the end of its fiscal year on June 30,” per VGC — consistent with the Reset memo’s timeline of changes following the fiscal year close.
The Senua reveal itself has drawn scrutiny. Video Games Chronicle, citing reporting by Game File, said that “by the time that game was revealed, Microsoft had already planned to sunset or split with the studio,” and that “the promise of a newly announced game would help draw investor interest in the studio.” Game File attributed the account to “a source familiar with Microsoft’s operations,” per VGC.
What Senua Is
Senua is a standalone action-adventure title rather than a numbered Hellblade sequel. Studio head Dom Matthews framed it that way at the showcase: “This is an out-and-out action-adventure game. It’s a bold new step for Senua into the action-adventure space,” he told Xbox Wire. On the decision not to call it Hellblade III, Matthews said, “The title of just Senua really reflects that this is something fresh and new and different.” The game is built in Unreal 5 and is slated for a 2027 release on Xbox Series X|S, Xbox on PC, Xbox Cloud Gaming, Steam, and PlayStation 5, per Xbox Wire.
What We Don’t Know
Microsoft has not officially confirmed the studio shutdowns, and the studios’ fate remains unresolved. Video Games Chronicle reported that staff were told “the status of the studios is still in flux,” leaving open whether the affected teams will be spun off, sold to outside buyers, or closed outright. It is also unclear how many jobs will be lost in total, or what becomes of Senua and other in-development projects tied to the studios.
Analysis
The restructuring extends a turbulent stretch for Microsoft’s gaming business. The company previously named AI executive Asha Sharma as gaming CEO following Phil Spencer’s retirement, cut Game Pass Ultimate pricing and pulled future Call of Duty titles from day-one availability, and saw Double Fine workers file to unionize earlier this year.
Observers see the cuts as symptomatic of wider industry strain. Celia Pearce, a game design professor at Northeastern University, said “the mainstream video game industry has been in a decline,” and pointed to the underlying economics: “You can’t keep increasing your cost of doing business but keeping the product at the same price point,” according to Northeastern Global News. She also suggested a possible upside, telling the outlet, “Even though it’s going to be painful, I think we’re going to get some really talented people once again striking out on their own.”