Multiple Xbox Studios Negotiate Survival With Microsoft

According to a report by Bloomberg, at least three Xbox studios are currently in active negotiations with Microsoft over their futures. It includes Compulsion Games, Double Fine, and Ninja Theory. 

Several other unnamed studios are also described as at risk of being shuttered. Arkane, the studio behind Deathloop and the Dishonored franchise, has been separately rumored to be in trouble. All decisions are expected to be finalized by the end of the month.

What Xbox’s Negotiations Could Look Like

The reports outline one possible path for the studios involved. The studios have the option of buying themselves back from Microsoft and operating independently. On paper, that is a more favorable outcome than a straight closure. In practice, a management buyout under these circumstances would almost certainly require significant cost-cutting to become financially viable, meaning job losses would likely accompany independence.

To understand the scale of the recent developments, it helps to look at what these studios collectively represent. Double Fine is one of the most creatively distinctive names in Microsoft's first-party portfolio, having produced Psychonauts 2 to a strong critical reception. 

Compulsion's South of Midnight was notable as one of the few Xbox games to draw on a distinctly Southern American setting and aesthetic. These are studios that did not fit the cost structure Microsoft is now trying to build.

A strong games showcase and a painful internal restructuring can coexist, and Microsoft clearly timed the showcase before the restructuring news became public. But for the developers inside these studios who watched their company present an optimistic vision of Xbox's future last week, only to face closure conversations this week, the sequence is difficult to square. The reset that Sharma described as necessary for Xbox's long-term health is being felt most acutely by the people who had the least visibility of it.