Xbox in Talks to Close Double Fine and Ninja Theory

Microsoft is in talks that could close Double Fine and Ninja Theory, the studios behind Psychonauts and Hellblade, as part of broader cuts to its Xbox division, Bloomberg first reported on June 15. The two studios, along with South of Midnight maker Compulsion Games, are weighing whether they can avoid closure.

Leadership at the studios is in active negotiations to spin off as independent companies, according to GameSpot, an outcome that could involve buying out Microsoft’s stake or finding new financial backers, though it would still likely bring heavy job losses. No formal closure has been announced, and employees have been told they can seek new work while the studios’ status remains in flux.

The talks land days after Ninja Theory revealed a new game, Senua, at the Xbox Games Showcase. The Cambridge, England, studio said the action-adventure is set after 2024’s Senua’s Saga: Hellblade II and is due in 2027, and that it had canceled an experimental project, code-named Mara, to focus its team on the new title.

Senua's face emerges from rippling golden liquid, a triple-spiral symbol on her forehead, in a Ninja Theory game. — Senua, Ninja Theory’s newly revealed game. (Ninja Theory / Xbox)

Double Fine, the San Francisco studio founded by Tim Schafer and acquired by Microsoft in 2019, is best known for the Psychonauts platformers, including a 2021 sequel. Microsoft bought Ninja Theory the year before, in 2018, as part of a wave of studio acquisitions that Xbox leadership has since described as having left it “overextended.”

The franchises at risk

Closing the studios without a buyer would put several Microsoft-owned series in limbo. Among the franchises tied to the three studios:

Psychonauts, from Double Fine
Hellblade and its new entry, Senua, from Ninja Theory
South of Midnight and We Happy Few, from Compulsion Games

The studios also made games whose rights sit with other publishers, including Ninja Theory’s DmC: Devil May Cry and Heavenly Sword and Double Fine’s Brütal Legend, which would not be affected by a closure.

Senua, in a helmet and red-and-black war paint, glares ahead in Ninja Theory's Hellblade. — Senua, the warrior at the center of Ninja Theory’s Hellblade series. (Ninja Theory / Xbox)

The negotiations are part of a wider restructuring at Xbox, which is preparing significant layoffs after the close of Microsoft’s fiscal year on June 30, as VGC reported. The head of Xbox Game Studios, Craig Duncan, resigned this month. Microsoft did not respond to a request for comment.