Microsoft Shuts Down Ninja Theory, Puts Compulsion Games and Double Fine Into Spinoff Talks

Since Xbox CEO Asha Sharma sent a memo last week warning of a broad 'reset,' the restructuring has moved from warning to execution: Ninja Theory, the Cambridge-based studio behind the Hellblade series, was told on a call Monday that it is being shut down, according to The Verge. Staff are holding out hope that a buyer will emerge, but no deal exists as of June 15, 2026.

The Verge also reports that Compulsion Games and Double Fine are in 'active negotiations' about spinning off from Xbox. Bloomberg first reported those spinoff talks. Kotaku reported earlier Monday that Microsoft was planning to close Compulsion outright, and later updated its story to note that studio leadership is now in negotiations. The Compulsion situation remains unresolved.

Microsoft did not respond to The Verge's requests for comment on either story.

What Sharma and Booty Said

In their public 'reset' memo, Sharma and chief content officer Matt Booty were blunt: Xbox has 'over extended' with its studio system and has 'not adequately funded' its major franchises 'to compete and win.' The memo flagged that the hardware component crisis is 'significantly driving up prices' and called for a reassessment of investment priorities over the next five years.

That language was a clear setup for cuts. Tom Warren at The Verge had reported the week before that the changes could 'involve a studio closure, or changes to the Xbox studio lineup.' That prediction proved accurate within days.

Executive Departures Add to the Damage

The studio closures are not the only thing rattling Xbox's leadership structure. Craig Duncan, head of Xbox Game Studios since October 2024 and formerly head of Rare, announced he is leaving. So is Louise O'Connor, the Xbox Game Studios chief of staff, according to The Game Business. Duncan's departure removes one of the more experienced studio-side executives at a moment when Microsoft is actively unwinding parts of what he oversaw.

Sharma, who took over in February 2026, has moved quickly. She cut the price of Xbox Game Pass, locked Gears of War: E-Day and Clockwork Revolution as Xbox console exclusives at the June Games Showcase, and reorganized the Xbox platform team in May, reportedly pulling in executives from Microsoft's CoreAI division. The Ninja Theory closure is the sharpest consequence yet of that consolidation drive.

The Senua Problem

The timing creates a specific, public awkwardness. At the Xbox Games Showcase roughly ten days ago, Microsoft announced Senua, a new game in the Hellblade franchise from Ninja Theory. Now the studio behind it is closing. Whether the Senua project transfers to another team, gets shelved, or becomes a reason for an acquisition offer is an open question as of today. Microsoft has not addressed it.

The Case for the Cuts

The argument for Sharma's approach has merit. Xbox has spent the better part of three years acquiring studios: Activision Blizzard for $68.7 billion, ZeniMax before that. Its first-party games pipeline remained thin while its hardware business faced intensifying pressure from both Sony and the rise of cloud and mobile gaming. Maintaining every acquired studio at full funding while revenue pressures mount is a genuine business problem, not manufactured austerity. Sharma's memo acknowledged that the company was steward of 'industry-defining franchises' with real player demand. The argument is that fewer, better-funded studios produce better outcomes than a sprawling roster that can't compete at the top tier.

The counterargument centers on execution: announcing a new Hellblade game and closing the studio behind it in the same ten-day window suggests either a planning failure or a decision made too quickly after Sharma took over in February. Ninja Theory built a critically respected body of work on relatively modest budgets. Closing it while Double Fine and Compulsion are being offered potential spinoffs raises questions about what criteria drove the closure decision.

What Happens Next

The spinoff negotiations for Compulsion Games and Double Fine are ongoing and unresolved. A spinoff means the studios could continue operating outside Microsoft's ownership, potentially seeking new publishers or going independent. That's a materially different outcome than the Ninja Theory closure, which currently has no announced buyer. Whether Ninja Theory's staff, IP, or the Senua project attract acquisition interest from a publisher, a private equity firm, or a platform competitor is the most concrete open question hanging over Monday's announcement.