Microsoft began executing Microsoft Xbox studio closures on Monday, July 6, as thousands of employees across Xbox, sales, and consulting received termination notices and five first-party studios moved into closure or sale proceedings. The cuts landed on the first day of Microsoft’s new fiscal year.
Tim Schafer and Double Fine Productions
Tim Schafer founded Double Fine Productions in San Francisco in 2000, and the studio’s fate now sits inside the same round of cuts that placed roughly 325 jobs at immediate risk across Ninja Theory, Double Fine, and Compulsion Games. Double Fine’s Psychonauts 2 remains one of the highest-reviewed games of the current generation, yet the studio was still in closure or buyout negotiations.
Compulsion Games joined those negotiations, while Ninja Theory had already been told on June 15 that it was closing. Ninja Theory’s developers had appeared at the Xbox Games Showcase nine days earlier to announce a new entry in the Hellblade franchise, a release moment that now sits beside the closure notice rather than ahead of it.
Game Pass and studio reviews
The cuts also reached Undead Labs, which was under review, and Arkane Lyon, which was reportedly facing closure and the cancellation of Marvel's Blade. Marvel's Blade had already slipped from a planned 2026 launch to late 2027, extending the timeline around a project that was tied to one of the studios now in the company’s review process.
GamesBeat estimated that Undead Labs and Arkane Lyon added at least another 200-plus positions to the exposure from the three studios with named job estimates. That leaves the total footprint far beyond a single team or title and shows how broadly the July 6 action spread through the division.
Five Xbox studios
The article links the layoffs to Game Pass revenue accounting and Microsoft’s subscription model, which rewards reach across the service rather than direct sales alone. It also says the affected studios were critically acclaimed, mid-tier in development budget, and built to depend on Microsoft’s subscription architecture to find audiences.
Several studios were in negotiations to buy themselves back from Microsoft and operate independently. Which of the five Xbox studios, if any, ends up saved through a buyback or sale is still the question that will decide whether these closure proceedings become final or turn into a smaller list of survivors.
