Rough seas on the horizon for XBOX Games Studios.

Over the past two weeks, we were bombarded with numerous news articles of a bleak future for employees and studios under the XBOX Game Studios umbrella. The downward spiral all started with a memo released on June 10, 2026, by XBOX CEO Asha Sharma and Matt Booty outlining the next 100 days at XBOX. The key piece of the memo that got everyone’s attention was the final line – “Let’s reset for a stronger XBOX…” This lone statement sent the games industry into a tailwind of reports ranging from studio closures to mass layoffs.

Bleak News

Kotaku was one of the first sites to release news that Compulsion Games was in danger of closing, followed shortly after by Jason Schreier reporting that Double Fine and Ninja Theory are on the chopping block and in negotiations with XBOX. Two days later, Jason then released a YouTube video stating that “the word bloodbath has been thrown around among people I talk to who know about what’s going to happen. It’s going to be bad.” Leading many to believe that there are going to be mass layoffs soon.

With this news coming on the heels of XBOX Games Showcase, opinions of XBOX have gone from jubilant and excited to angry and borderline hostile. I have been listening to a few podcasts where the hosts are saying that it is XBOX’s fault for the situation they are in and that the studio closures and layoffs are purely to appease Microsoft CEO, Satya Nadella, and shareholders. Which, to some extent, could be true, as Satya Nadella has publicly stated that XBOX must become profitable. However, this issue goes so much further than appeasing Satya and shareholders, stemming from three key groups – Xbox, the individual studios, and the gamers.

Starting at the roots

One of the most common talking points when getting into the abysmal mess that we call Xbox is the mismanagement of the studios they acquired. Hindsight being 20/20, it’s easy to point out that Xbox should have been more hands on, rather than the laissez faire approach that Phil Spencer and company took. While I am a fan of Phil, as he presented himself as a “gamers first” CEO, I wish he and his team had done a better job assessing the trajectory of how studios released small, first party games on Game Pass. That was the goal of many of these acquisitions, to allow these smaller studios to be creative and provide a constant stream of content for Game Pass.

Back in 2018, Matt Booty mentioned in an interview with gameindustry.biz that XBOX was interested in purchasing small studios who “are making games on a two to three year cadence”. I believe this sets the clear expectation that smaller studios acquired by XBOX would be expected to release games at a faster pace than those creating AAA experiences. This just never came to fruition.

Branching Out

Which leads into the second point, the three studios at risk of shutting their doors for good – Compulsion Games, Ninja Theory, and Double Fine – have struggled to produce a steady flow of games since being acquired by XBOX. The leaders at these studios should have understood they were acquired to make games for Game Pass. At least we hope XBOX explained this to them, as XBOX was constantly proclaiming to gamers and the industry at large this was the plan. Unfortunately, all three studios failed to produce a consistent flow of content.

A Quick History

Compulsion Games was acquired by Xbox in 2018. From acquisition to today, Compulsion Games released DLC content for We Happy Few, a game released prior to being acquired, in 2019 and South of Midnight in 2025. I would expect the DLC content to have been nearly complete by the time XBOX acquired Compulsion Games, meaning Compulsion Games took six years to produce a single game.

The silver lining for Compulsion Games: South of Midnight went on to win multiple awards. However, critical success doesn’t equal financial success. Listening to multiple podcast, such as Kinda Funny Games Daily and Game Scoop,  lead me to believe that South of Midnight sold poorly and likely didn’t get significant attention on Game Pass.

Ninja Theory was acquired by Xbox in 2018, announced at E3 alongside the Compulsion Games acquisition. Since being acquired, they have released three games: A Star Wars VR Series: Vader Immortal – Episode 1 in 2019, Bleeding Edge in 2020, and Senua’s Saga: Hellblade 2 in 2024. Of the three studios that are at risk of closing, Ninja Theory had the most consistent release cadence.

Additionally, Ninja Theory did have a game canceled that was set to release in 2026 code named “Project Mara”. Obviously, this is a setback and may have limited the game output that Ninja Theory could have had.

Finally, we have Double Fine, who was acquired in 2019 and also release three games since being acquired. However, their release cadence was sporadic and had a significant time gap between games. They released Psychonauts 2 in 2021 and did not release another game until 2025, when they released Keeper. Their most recent release, Kiln, came out earlier this year. Keeper and Kiln both struggled to find and keep an audience, with the former having minimal marketing and the latter releasing to middling reviews.

As you can see, none of these three studios delivered on the goal of producing a consistent flow of content for Game Pass, the whole reason they were purchased. Why is that the case? Were the hands-off approach taken by Phil Spencer and XBOX a key factor? Was there disagreement between these studios and XBOX on what content to produce? Did the heads of these studios take for granted the security of being under the XBOX umbrella of studios? We can’t say for certain, but what I feel confident was part of the problem – lack of sales and time played on Game Pass.

The Final Piece

At the end of the day, these studios are shuttering because their games didn’t produce a positive return on investment, whether that be financially or time played by Game Pass subscribers. I think it is unfair to consider financial success of these games, given they were intended to be Game Pass content. On the other hand, I think it’s valid to pass judgement based upon the time people spent playing them on Game Pass. Xbox doesn’t release stats for “time spent playing”, but it is reasonable to guess the games mentioned above didn’t see the level of attention XBOX had hoped for.

Meaning part of the blame falls on us, the gamers. If you’re reading this and you purchased, played, or even recommended any of these games, you did you part. You put in the effort to enjoy the art created by these studios and have every right to be angry by what could happen to these studios.

On the other hand, for gamers, like me, who failed to purchase or play any of the games I mentioned, we are partially liable for these closures. We failed these studios just as much as XBOX has. By no means am I saying we don’t have the right to be disappointed by the news, but it seems to be a tad condescending to decry XBOX’s actions when we did nothing to support these studios. On the contrary, I think we should be disappointed, disappointed in ourselves that we failed to support three amazing studios.

Where Do We Go Next

Ultimately, it sucks that XBOX is potentially closing studios and laying people off, but that’s what happens when products fail to meet expectations. A hard lesson is being taught – if you want a studio to succeed and continue making games, you must support those studios.  Support can range from buying the game for true indies to spending time playing on Game Pass.

If you take nothing else from this post, remember this: buy and play games from studios you love so we can continue experiencing wonderful works of art.