A new report sheds even more light on the current state of XBOX-owned development studios amid the many changes 2026 has brought to the company.
On June 15, Insider Gaming reported that XBOX was planning to close Compulsion Games, the developer of South of Midnight.
XBOX Studios Reportedly Negotiate to Stay Open Amid Uncertainty
Update: A new report has suggested that Ninja Theory, the creator of Hellblade, is being closed down.
Now, a new report reaffirms that Compulsion, along with other major Studios owned by XBOX, including Ninja Theory and Double Fine, are looking to negotiate with Microsoft’s gaming wing in an effort to prevent being closed down. The studios are looking to buy back their own companies and become independent once more, according to a report by Bloomberg’s Jason Schreier.
“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,” the report notes.
- More XBOX News: XBOX Reevaluating Next-Generation Console Amid Cost Concerns
XBOX recently released an internal memo from CEO Asha Sharma stating that tough decisions lay ahead and that layoffs were being planned for July. The potential studio closures would be part of the restructuring alluded to by Sharma. Also, on June 15, it was reported that XBOX Game Studios head Craig Duncan stepped down from his position. More about that can be learned here.
XBOX was riding a wave of positive momentum following the recent June Showcase event. That event included the announcement of various console exclusives and major games, such as the next Spyro the Dragon title.
However, in the week since that event, the reality of the gaming industry’s turmoil has continued to undermine whatever goodwill Microsoft has generated around the XBOX brand since Phil Spencer’s retirement earlier in 2026. Recently, it was reported that Microsoft hadn’t even ruled out spinning off XBOX entirely.
As the situation continues to change inside XBOX, Insider Gaming will continue to monitor the story and report any updates as more information becomes available.
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