Technology
Microsoft divests four major Xbox studios as part of sweeping gaming overhaul
As part of a historic restructuring, Microsoft is spinning off Double Fine and Compulsion Games to independence while selling Ninja Theory and Undead Labs.
The Verge
Microsoft is executing what leadership calls an Xbox "reset," offloading four game studios and cutting thousands of jobs across the division as the company attempts to right-size its gaming business.
The overhaul includes 1,600 role eliminations today, with plans to cut a total of roughly 3,200 Xbox positions by July 2027. The immediate impact represents about 8 percent of the division's workforce, though when combined with the studio transitions, the total Xbox employment reduction will be substantially larger.
Studios returning to independence#
Two of the departing studios are returning to founder-led independence: Double Fine Productions, helmed by Tim Schafer, and Compulsion Games, now led by Guillaume Provost. Both will take their intellectual property and unreleased titles with them.
Ninja Theory, known for the Hellblade franchise, and Undead Labs, developer of State of Decay, are being sold to new ownership. Microsoft has secured commitments ensuring that Senua (the next Hellblade entry) and State of Decay 3 will still reach players.
Microsoft is also evaluating the future of Arkane Studios, which has been developing the Blade game. The project has faced delays and budget overruns, prompting management discussions in France about potential strategic alternatives.
The thinking behind the shift#
Xbox CEO Asha Sharma explained that the division was operating at unsustainable margins—3 to 10 times lower than comparable platform and publishing businesses. Microsoft acknowledged losing 64 cents for every dollar invested in certain studio acquisitions made under former chief Phil Spencer's tenure.
The strategy shift reflects a hard lesson: owning dozens of smaller independent studios didn't deliver the growth Microsoft expected. Rather than competing across every niche, the company is now consolidating around larger franchises and providing tools for independent developers to thrive outside its structure.
"It is neither possible nor desirable to own every great independent studio," Sharma stated in her internal memo. "We have also learned that we are not the best home for every type of studio."
