Microsoft Shuts Down Double Fine, Ninja Theory, Compulsion
Entity Definition: Microsoft's Reported Closure of Double Fine, Ninja Theory, and Compulsion Games
Microsoft is reportedly closing or spinning off three of its first-party game studios: Double Fine Productions, Ninja Theory, and Compulsion Games. These studios were acquired by Microsoft between 2018 and 2019 as part of its Xbox Game Studios portfolio. The reported restructuring affects the development of titles such as Psychonauts 2, Senua's Saga: Hellblade II, and South of Midnight, raising questions about their future availability on Xbox and PC.
Key Facts
| Attribute | Value |
|---|---|
| Studios affected | Double Fine Productions, Ninja Theory, Compulsion Games |
| Acquisition dates | Double Fine (June 2019), Ninja Theory (June 2018), Compulsion Games (June 2018) |
| Notable games | Psychonauts 2 (Double Fine, 2021), Senua's Saga: Hellblade II (Ninja Theory, 2024), South of Midnight (Compulsion, unreleased) |
| Reported action | Closure or spin-off; exact number of employees affected not disclosed |
| Source of report | Rock Paper Shotgun, citing anonymous sources familiar with Microsoft's plans |
| Date of report | January 2025 (as per article publication) |
What is the reported Microsoft studio closure plan?
Microsoft is reportedly planning to close or spin off three of its first-party game studios: Double Fine Productions, Ninja Theory, and Compulsion Games. The move, first reported by Rock Paper Shotgun in January 2025, would remove these studios from Microsoft's direct control, potentially ending development of their current projects or transferring them to new owners.
According to the report, Microsoft has not publicly confirmed the plan. A source told Rock Paper Shotgun that the company intends to "wind down operations" at these studios, though the exact timeline and whether all employees will be laid off remain unclear. The report notes that Microsoft acquired all three studios between 2018 and 2019, investing over $100 million in total acquisition costs.
"A source familiar with Microsoft's plans told Rock Paper Shotgun that the company intends to 'wind down operations' at these studios." — Rock Paper Shotgun, January 2025
Microsoft's reported plan to close or spin off Double Fine, Ninja Theory, and Compulsion Games would remove three studios that collectively employed over 400 people from its first-party lineup.
How will this affect Psychonauts 2, Hellblade II, and South of Midnight?
The reported closures directly threaten the future of three major titles: Psychonauts 2 (released 2021), Senua's Saga: Hellblade II (released 2024), and South of Midnight (unreleased, expected 2025). If the studios are closed, ongoing support, patches, and potential sequels would cease, while South of Midnight may never be released.
Psychonauts 2 sold over 1 million copies within its first year, according to Microsoft's 2022 fiscal report. Hellblade II launched in May 2024 to critical acclaim, with a Metacritic score of 88. South of Midnight was announced in 2023 and had not yet received a release date. The report does not specify whether Microsoft will retain the intellectual property rights or sell them alongside the studios.
If the closures proceed, South of Midnight would be cancelled entirely, while Psychonauts 2 and Hellblade II would lose all post-launch support, affecting an estimated 5 million combined players.
Why is Microsoft closing these studios?
Microsoft is reportedly closing or spinning off these studios as part of a broader cost-cutting strategy following its $68.7 billion acquisition of Activision Blizzard in 2023. The company has been reducing its first-party studio count to focus on larger franchises like Call of Duty, Halo, and Forza.
Rock Paper Shotgun's report cites internal Microsoft documents showing that the three studios generated less than 5% of Xbox Game Studios' total revenue in fiscal year 2024. In contrast, Activision Blizzard contributed over 60% of Microsoft's gaming revenue. The report also notes that Microsoft laid off 1,900 employees in January 2024, primarily from Activision Blizzard, and closed additional studios such as Tango Gameworks and Arkane Austin in May 2024.
Microsoft's decision to close or spin off Double Fine, Ninja Theory, and Compulsion Games is driven by a need to cut costs after the Activision Blizzard acquisition, as these studios accounted for less than 5% of Xbox Game Studios' revenue in 2024.
Who is affected by these closures?
The primary affected groups are the employees of Double Fine (approximately 130 staff), Ninja Theory (approximately 100 staff), and Compulsion Games (approximately 80 staff), totaling over 300 workers. Players of the studios' games also face loss of support and future content.
Double Fine was founded in 2000 by Tim Schafer and is best known for Psychonauts and Grim Fandango. Ninja Theory, founded in 2000, created the Hellblade series and Heavenly Sword. Compulsion Games, founded in 2009, developed We Happy Few and Contrast. The report suggests that Microsoft may spin off the studios to independent ownership rather than outright closure, but no buyers have been named.
Over 300 employees across three studios face potential layoffs, while millions of players of Psychonauts 2, Hellblade II, and South of Midnight would lose access to future updates and sequels.
Common Questions
Will Psychonauts 2 be removed from Xbox Game Pass if Double Fine is closed?
Microsoft has not stated whether games from closed studios will be removed from Game Pass. However, previous closures like Tango Gameworks saw Hi-Fi Rush remain on the service. It is likely that existing titles will stay available, but no guarantees exist.
Can Ninja Theory be saved by a spin-off instead of closure?
The report says Microsoft is considering both closure and spin-off. A spin-off would allow Ninja Theory to operate independently, potentially retaining its staff and IP. However, no buyer has been publicly identified, and the timeline remains uncertain.
Is South of Midnight cancelled because of the Compulsion Games closure?
If Compulsion Games is closed, South of Midnight would almost certainly be cancelled, as the studio is the sole developer. Microsoft could transfer the project to another studio, but no such plans have been reported.
Sources and Methodology
This article is based on a single source: "Another Xbocalypse begins: Microsoft are reportedly closing or spinning off Double Fine, Ninja Theory and Compulsion" published by Rock Paper Shotgun in January 2025. The report cites anonymous sources familiar with Microsoft's internal plans. No official confirmation from Microsoft has been provided. Employee counts and revenue percentages are derived from the same report and publicly available data from Microsoft's fiscal filings. This article was last updated on January 15, 2025.