Today, via a statement released by CEO Asha Sharma, Xbox confirmed what rumors and unconfirmed reports have hinted at for weeks. Xbox is undergoing a massive restructuring, and two of its studios – Compulsion Games and Double Fine Productions – are being cut loose as independent companies.
The Announcement
Sharma laid out a host of changes in an email to staff, where she frames the decision as a necessary “reset” of Xbox. The cuts are deep. Roughly 3200 jobs across the company are set to be eliminated through 2027 with around 1,600 happening immediately. In addition to explicit layoffs, four studios have been released from Xbox’s first-party lineup.
These studios include Compulsion Games (We Happy Few, South of Midnight) and Double Fine Productions (Psychonauts, Keeper, Kiln). Both studios will return to independent management. One silver lining of this is that the studios will be able to retain ownership of their original IP as well as future revenue. Two other studios, Ninja Theory (Senua) and Undead Labs (State of Decay 3) are being sold to new ownership. These companies should be able to continue work on their respective titles while under new management.
A big reason for the decision has been mounting financial pressure. Sharma states that Xbox’s business has been running on margins “3-10 times lower” than other comparable companies. While players (myself included) may mostly see this news in a negative light, Sharma did mention that no already-announced first-party games would be canceled as a result of the restructure.
Compulsion Games Responds
The subject of multiple rumors and reports for weeks before today, Compulsion Games was founded in Montreal in 2009. The studio joined Xbox Game Studios in 2018 following the success of We Happy Few, and recently released PS5 and Nintendo Switch 2 versions of South of Midnight.
In a statement posted on X, Compulsion confirmed that it will retain the rights to it’s catalogue and return to independence. They go on to share their excitement over being able to keep building studio-defining games during this transition. I am personally excited that the studio can continue to function, as South of Midnight is one of my favourite titles.
While there were reports of staffers beginning to job search on LinkedIn over the past couple of weeks, Compulsion did not suggest that further staff reductions may result from the move.
Double Fine’s Return to Independence
In a similar announcement, Double Fine thanked Xbox ownership for working with them to return ownership of their games. The studio was founded in San Francisco by Tim Schafer in 2000 and had been under Xbox’s wing for 7 years, having been acquired in 2019. Schafer also released his own statement, thanking fans for their support amid the recent uncertainty while not mentioning any explicit details of upcoming plans.
Double Fine’s recent releases, 2025’s Keeper and the more-recent Kiln, were well-received by the public. I was able to go hands-on with Kiln at PAX East in May and was very excited for its release.
What’s Next Going Forward
As mentioned, the Xbox split allows both studios to keep their games and future earnings. This is a notably softer blow than an outright closure, something I had initially feared. Independence though, can result in financial struggles, especially when it comes to marketing and guaranteed funding. Nothing is currently known if the existing titles will remain on Xbox’s stores/Game Pass.
For now, both studios noted that supporting their teams through the current transition is a priority. We should expect, though, more concrete plans for current and future titles being announced within the weeks ahead.
How do you feel about the news that came out today? Is this the best of a bad situation or was there more to be done by XBOX? Let us know your thoughts in the comments below. Alternatively feel free to share your thoughts over at the Gamer Social Club Discord.
