Microsoft’s Xbox division is reportedly preparing to shutter Compulsion Games, the developer behind We Happy Few and the upcoming South of Midnight. According to a report from GamesIndustry.biz, the closures may also extend to other major first-party studios, including Tim Schafer’s Double Fine Productions and Hellblade developer Ninja Theory.
The report, published on Monday, cites sources familiar with Microsoft’s internal restructuring plans. It states that Xbox leadership is considering these closures as part of a broader cost-cutting initiative following the company’s $68.7 billion acquisition of Activision Blizzard in October 2023.
No official announcement has been made by Microsoft. The company declined to comment on the report when contacted by news outlets. The alleged plans have not been confirmed by any of the studios involved.
Background on the affected studios
Compulsion Games, based in Montreal, Canada, was acquired by Microsoft in 2018. The studio is currently developing South of Midnight, a third-person action-adventure title set in the American South. The game was first unveiled during an Xbox showcase in June 2023 and has not yet received a release date.
Double Fine Productions, founded in 2000 and known for cult hits such as Psychonauts and Broken Age, joined Xbox Game Studios in 2019. The studio released Psychonauts 2 in August 2021 to critical acclaim.
Ninja Theory, based in Cambridge, UK, was acquired by Microsoft in 2018. The studio is best known for the Hellblade series. Its most recent release, Senua’s Saga: Hellblade 2, launched in May 2024 exclusively on Xbox Series X/S and PC.
Context for the potential closures
The reported studio closures come amid a period of significant layoffs and restructuring across Microsoft’s gaming division. In January 2024, the company cut 1,900 jobs from its gaming workforce, largely within Activision Blizzard. In May 2024, Microsoft closed four Bethesda studios, including Arkane Austin and Tango Gameworks.
Industry analysts note that Microsoft has been consolidating its game development operations to focus on fewer, larger projects and to reduce operational costs. The company has emphasized a shift toward subscription services such as Xbox Game Pass and cloud gaming.
These reported moves follow a broader trend across the video game industry, which has seen more than 10,000 layoffs in 2024 alone, according to tracking data from the game industry analyst firm Game Industry Layoffs.
Impact on the gaming community
If confirmed, the closure of Compulsion Games, Double Fine, and Ninja Theory would mark the end of three distinct creative teams that have produced critically recognized titles. Fans and developers have expressed concern over the loss of studios that specialize in narrative-driven and experimental games.
The potential closure of Double Fine, in particular, has drawn attention due to the studio’s long history of independent development before joining Microsoft and its close ties to the adventure game genre.
No statements have been issued by the leadership of any of the affected studios.
Expected next steps
Microsoft is expected to provide further details on its studio portfolio strategy in the coming months, possibly during its annual Xbox showcase or in a forthcoming earnings call. The affected studios may continue development on existing projects until official decisions are finalized. Industry observers will be watching for any formal communication from Microsoft regarding the status of these teams and their projects.
Source: GamesIndustry.biz
