Xbox Studios Negotiate Buyouts to Avoid Closure

Several studios inside Microsoft Corp.'s Xbox gaming division are in active negotiations to spin off and buy themselves back from the company, a last-ditch effort to avoid being shuttered, according to people familiar with the plans.

Montreal-based Compulsion Games and San Francisco-based Double Fine are among the studios in active talks. Cambridge, England-based Ninja Theory, the developer of Hellblade, is also in conversations with Xbox. The studios may still have the opportunity to go independent. Many employees would likely lose their jobs as part of the transaction, the people said. An Xbox spokesperson declined to comment.

Employees at several studios have been told the situation is still in flux and have been given permission to seek new work. The people asked not to be named because they were not authorized to speak to the press.

The potential closures are part of a broader reorganization being led by Asha Sharma, who took over as Xbox's chief executive officer in February. Bloomberg reported last week that the gaming division is planning significant layoffs. Sharma sent a memo to staff lamenting the bleak state of the business, writing that revenue and margins have plummeted and "this cannot continue."

Craig Duncan, head of Xbox Game Studios, stepped down last week ahead of the layoffs, the people said. Gaming newsletter The Game Business previously reported his departure.

Compulsion Games shipped South of Midnight last year. Double Fine is best known for the Psychonauts series and released the smaller titles Keeper and Kiln over the past 12 months. Ninja Theory's Hellblade series won awards but never became a commercial blockbuster. Even some of Xbox's more commercially successful studios are unsure how they fit into Sharma's new mandate, which prioritizes the biggest franchises as the company looks to return to growth.

Xbox faces these challenges despite the $69 billion acquisition of Activision Blizzard Inc. that closed in 2023. That deal was meant to strengthen the content pipeline. The division is still under margin pressure from years of underperforming sales and a crowded market.

Microsoft shares rose 2.36% to $399.97 on the day. The move puts the gaming division's turmoil in a broader context of a company generating strong cash flows from its cloud and enterprise segments. The stock carries an Alpha Score of 57 out of 100, a Moderate label that captures the mixed signals between the core earnings engine and the ongoing restructuring inside Xbox. For the full profile, visit the MSFT stock page.