Xbox layoffs, studio closures, and spin-offs: everything announced today. Despite promises of a reset, the unveiling of a fancy new logo, and a charm offensive for its new leadership, the news at Xbox has been getting increasingly worse throughout 2026. Between massive price increases for Xbox hardware-and possibly another one soon-the fluctuating price of Xbox Game Pass, and the cancellation of funding on several collaborative projects, it has been a tough time to be a fan of Xbox. Can the news get any worse? Yes, if you're an employee of the company-or a fan of its studios, really. In recent weeks, Microsoft has been talking about how the Xbox division needs to start pulling its financial weight, and it has long been rumored that Xbox layoffs will start on July 6. Following a buying spree in the late 2010s and early 2020s, Xbox amassed a sizable portfolio of studios and employees, but it looks like many of them will be in the crosshairs as the gaming division aims to slim down. Several studios are reportedly up for sale, but if a buyer isn't found, it could be the end of the road for them. On what could be the bleakest Monday in Xbox history, GamesNu'll be keeping an eye on all changes hitting the various studios today. Compulsion Games. South of Midnight developer Compulsion Games will be leaving Xbox Game Studios and will once again become an independent studio. Jul 6, 2026 Double Fine Productions. Double Fine Productions is also exiting Xbox and will transition back into an independent game studio. Ninja Theory. Discussions for a new owner of Ninja Theory are underway, and the studio will continue to work on the Senua franchise. Undead Labs. State of Decay 3 developer Undead Labs is also in talks to find a new owner and continue working on its open-world zombie apocalypse series.

Xbox spins off Compulsion Games, Double Fine Productions, Undead Labs, and Ninja Theory while Blade maker Arkane reviews 'potential strategic options' A number of Xbox studios are leaving as part of a larger shake-up under new boss Asha Sharma Today, Microsoft announced another massive wave of layoffs. This follows previous reporting that layoffs were coming. As part of this, Xbox CEO Asha Sharma shared a memo with team members and staff discussing the future of many of its various studios. As explained in a memo shared with Kotaku on July 6, Double Fine Productions, the studio behind Psychonauts 2, as well as Compulsion Games, the team behind South of Midnight, will "transition" back to being independent studios as they were before being acquired by Microsoft. Both studios will retain rights to all of their IP, including anything created after Xbox bought them up. Microsoft is also providing runway funding to both studios to help them start new games and find future investors and publishers. Meanwhile, Ninja Theory and Undead Labs have signed contracts to "join new ownership," according to Sharma's memo. Both studios will receive funding to complete and "grow" their respective in-development games, Senua and State of Decay 3. Microsoft isn't revealing what companies have purchased the studios yet. Over in France, Arkane Lyon, the studio behind the upcoming Blade game, has entered "required consultation with its Works Council" to begin looking at "potential strategic options." Due to local laws in the country, Arkane Lyon's future has yet to be figured out. Xbox is preparing to lay off approximately 3,200 of its employees in what Sharma calls "the most significant restructure in Xbox history." According to the internal email seen by Kotaku, 1,600 of these cuts will happen today. The rest will come later. Xbox later posted the full memo online. According to a source who spoke to Game File, selling and spinning off these studios will account for more than 300 jobs leaving the Microsoft Gaming division. It has been reported that Hideo Kojima's Xbox horror game, OD, won't be affected by the massive shift in plans. "We're grateful for the years we spent with Xbox," posted the official Compulsion Games account on Bluesky following the news. "As an independent studio, we're excited to continue building the distinctive games that define Compulsion while taking the next steps in our journey. Our immediate priority is to support our team throughout this transition period." "We are confident in the future of Compulsion Games and look forward to this next chapter where one thing will remain constant: we will create unique games that tell important stories, all with the goal of touching the hearts and minds of our players." Shortly after the memo was shared online, Double Fine and its founder, Tim Schafer, also posted a message about transitioning back to being an indie studio on social media. "Once again, Double Fine Productions will be an independent studio. We're thankful to Xbox for seven great years together, and for working with us to reach an outcome which preserves our history and culture, and returns ownership of our games to us," said the studio online. "To everyone who reached out to us these past few weeks: Thank you for all your kind words, we've been deeply touched by your messages. We will share more soon on what comes next. Your continued support is greatly appreciated." Level up your inbox.

Xbox is reportedly considering closing State of Decay developer Undead Labs. Jun 30, 2026 - 13:16 Undead Labs, the team behind the State of Decay series, was revealed to be among the Microsoft-owned studios under threat of closure. Undead Labs is currently working on survival shooter and management sim State of Decay 3, and the game was part of the Xbox Showcase earlier this month. The information comes from GamesBeat, which names the studio alongside Double Fine, Compulsion, and Ninja Theory as all being studios that Microsoft could close. While Ranzware has known about the other three, this is the first time Undead Labs has been revealed to be at risk of closure as Microsoft seeks to 'reset' the Xbox brand. Should Microsoft fail to find buyers for these studios, according to the report, hundreds of jobs could be lost. That's 110 jobs for Undead Labs, 100 jobs for Double Fine, 90 jobs for Compulsion, and 135 for Ninja Theory. Indeed, it's also possible for some of those studios to regain their independence and buy themselves out from Xbox. Members of those studios represented by the Communications Workers of America (CWA) held a press conference to call out the impending layoffs. The union, which now represents over 3,500 people at Microsoft, said those workers "will not be traded as disposable." The news is particularly shocking, and would make Undead Labs the second studio to have an in-development, publicly announced game set for release next year to be at risk of closure, the other being Ninja Theory with Senua. This might explain why more State of Decay 3 gameplay footage has been coming out recently. The initial showing earlier this month was limited, and Ranzware didn't expect another look at gameplay for a while. Despite that, more footage has been popping up since, after Undead Labs allowed content creators to share gameplay from recent testing sessions. The pending layoffs and studio closures are expected to begin in early July, following the end of Microsoft's financial quarter. Already, Ranzware has seen members of those studios let go, with at least a dozen recently announcing their departure from Compulsion Games. New CEO Asha Sharma's big 'reset' plan is expected to include multiple layoffs and studio closures across the entire Xbox division, in an effort to make it profitable. Microsoft has not publicly discussed any of the following reports.