Microsoft reportedly negotiating closures of multiple Xbox studios, including Psychonauts’ Double Fine, South of Midnight’s Compulsion and Hellblade’s Ninja Theory

Multiple Xbox game studios owned by Microsoft are reportedly in danger of shutting down.

According to Bloomberg, the teams behind South of Midnight, Compulsion Games, along with Double Fine—celebrated for Psychonauts and Keeper—and Ninja Theory, creators of Hellblade, have begun talks with Microsoft aimed at reclaiming their independence from Xbox Studios. The goal is to avoid the full closure of these studios. Kotaku also corroborates that Compulsion may be facing the same fate.

Bloomberg did not name any other studios in jeopardy, though the report indicates that “several” additional teams could be at similar risk. While no details have been confirmed by Microsoft, Insider Gaming’s Mike Straw claims that employees at Arkane, a studio within Blade, have been feeling anxious about what may happen next.

In a separate piece from The Verge, sources say Ninja Theory staff were told on Monday about the possibility of closure, though they’re still hopeful the studio will find a buyer. Ninja Theory also unveiled its next project—Senua—at the Xbox Games Showcase earlier this month. Senua is expected to arrive sometime next year on PlayStation 5, Steam, Xbox Series S/X, and Game Pass.

Responding on Bluesky, Bloomberg’s Jason Schrier wrote: “It’s safe to say that the Xbox of July will look markedly different from the Xbox of June.”

This latest development comes after reports from the prior week suggesting that the newly installed Xbox CEO, Asha Sharma, intended to conduct a strategic “reset” for the brand—one that would involve budget reductions and a “significant” decrease in headcount. It was also revealed just the day before that Craig Duncan had stepped down as head of Xbox Game Studios after serving for under two years.

Since Sharma took over, Xbox has shifted its focus toward console exclusives, with both Gears of War: E-Day and Clockwork Revolution not scheduled for PlayStation 5. Earlier this month, Xbox’s chief content officer, Matt Booty, said that future console exclusives would be assessed on a case-by-case basis, even as the company’s major multiplayer and live service titles will continue to be accessible on multiple platforms.

Eurogamer has contacted Xbox to request comments about the alleged studio shutdowns and will share updates when more details come to light.