Monday was a bad day to work at Xbox, and the fallout from it is still spreading. Within hours of each other, Xbox Game Studios head Craig Duncan announced he was stepping down, Microsoft confirmed it is shutting down Ninja Theory, and reports surfaced that Compulsion Games is right behind it, with Arkane Lyon possibly not far off after that. Some of this is confirmed. Some of it isn't. All of it is bad enough that people inside the affected studios are already updating their LinkedIn profiles.
Here is what we actually know, what is still rumor, and why this particular stretch of news hits harder than the usual round of Xbox layoff chatter we've all gotten numb to over the past two years.
Craig Duncan Is Out After 18 Months
Duncan took over as head of Xbox Game Studios in November 2024, a role that put him in charge of a sprawling list of internal teams, Halo Studios, The Coalition, Rare, Obsidian, Ninja Theory, Compulsion Games, Double Fine, Turn 10, Playground Games, and more. Before that, he ran Rare itself for nearly 14 years, the studio behind Sea of Thieves and a long stretch of Nintendo-era classics before that.
According to The Game Business, which broke the news, Duncan is leaving this week. There's no named successor lined up. His studios will report directly to Xbox Chief Content Officer Matt Booty in the meantime, while Microsoft looks for someone to fill the role.
Duncan's exit memo to staff was measured. He thanked his chief of staff, Louise O'Connor, who is also leaving the company, and pointed to "flawless launches" delivered under his watch. He didn't mention the layoffs or closures reportedly driving the timing, and Microsoft hasn't said publicly why either of them chose to leave now.
That timing is the part nobody can quite get past. Duncan and O'Connor are both Rare veterans, and they're walking away the same week the studios Duncan was directly responsible for started getting shut down, one after another. Did he leave because of those decisions, in protest of them, or because the job had simply run its course? Duncan's statement doesn't say, and Microsoft isn't clarifying.
Ninja Theory Is Confirmed Closing, Nine Days After Its Big Reveal
If you want the single image that sums up how brutal this week has been, it's Ninja Theory. The Cambridge studio behind both Hellblade games stood on stage at the Xbox Games Showcase on June 7 to reveal Senua, a third entry in the franchise set after Hellblade II, targeting a 2027 release. Nine days later, on Monday, staff were called into a meeting and told the studio is closing.
This one isn't a rumor anymore. The Verge and Bloomberg both confirmed it, and Microsoft hasn't disputed the reporting. Employees were reportedly told they could start looking for new jobs, which is about as clear a signal as it gets that the decision is final, even though the studio is technically still hunting for a buyer who might keep the team together under different ownership.
What happens to Senua is genuinely unclear. If Ninja Theory finds a buyer, the project presumably survives in some form. If it doesn't, the most likely outcome is cancellation, even though the IP itself stays with Microsoft regardless of what happens to the studio that pitched it nine days before being told to pack up. Hellblade II earned real praise in 2024 for its visual fidelity and sound design, alongside fair criticism for a short runtime and a fairly thin combat loop. None of that, good or bad, seems to have mattered much once the spreadsheet math came back unfavorable.
Compulsion Games Is Reportedly Next
Right alongside Ninja Theory's closure, Kotaku reported that Compulsion Games, the Montreal studio behind South of Midnight and We Happy Few, is also being shut down. Insider Gaming's Mike Straw says he independently confirmed it. More than 100 people work there.
What stings about this one is the timing. South of Midnight came out last year to strong reviews, won a BAFTA, and picked up a Peabody Award for its storytelling, which is a genuinely rare honor for a video game, let alone one from a studio this size. Two months ago, Xbox was publicly praising that win. Now the studio that made it is reportedly being closed too.
A source inside Compulsion told Kotaku that leadership is still in talks with Microsoft about what happens next, so this one might not be fully decided. Employees aren't waiting around to find out either way. Several people at the studio started posting on LinkedIn this week, signaling they're already job hunting. People close to the situation describe months of quiet dread inside Compulsion, going back to Phil Spencer's retirement from the CEO role in February.
Double Fine Is Also in the Mix
Less talked about, but apparently just as live, is Double Fine, the long-running studio founded by Tim Schafer. Multiple reports place Double Fine alongside Compulsion in active closure or buyout negotiations, which would make three Xbox-owned studios facing the same fate inside a single week. Nothing about Double Fine's situation has the same level of confirmation as Ninja Theory's closure, but the studio's name keeps showing up in the same sentence as Compulsion's in reporting from outlets that have gotten the rest of this story right so far.
Arkane Lyon's Future Is Murkier, and Maybe Worse
The fourth name in this is Arkane Lyon, the French team behind Dishonored, Deathloop, and the still-barely-announced Marvel's Blade. Straw describes Arkane employees as "scared," and says he's been hearing directly from people inside the studio about overheard conversations regarding its future. One French industry reporter has gone further, naming Arkane Lyon as the next confirmed casualty, though that claim hasn't been corroborated by the bigger outlets the way Compulsion's situation has.
Nobody has nailed down Arkane Lyon's closure the way Ninja Theory's has been confirmed. But there's a pattern here that's hard to ignore. Microsoft already shut down Arkane's Austin studio back in 2024, the one that made Redfall. Marvel's Blade got announced in late 2023 with a short cinematic teaser and zero gameplay, and the studio has said almost nothing since. A project that quiet, this far into development, coming from a team this exposed right now, isn't a great sign on its own, closure rumors or not.
If Arkane Lyon does go, Xbox loses one of the few studios in its lineup that didn't feel interchangeable. Dishonored and Deathloop were never the biggest sellers Microsoft had, but they gave Xbox's first party output some actual character, somewhere outside the usual shooters and open-world checklist games. Losing that twice, Austin first and now maybe Lyon, would leave the Arkane name attached to nothing but whatever's left of Marvel's Blade, assuming it ships at all.
Why This Is All Happening Right Now
Every part of this traces back to the same source: Xbox CEO Asha Sharma's "reset" memo, published on Xbox Wire on June 10, written jointly with chief content officer Matt Booty. In it, Sharma called the studio system overextended and pointed to steep revenue declines as the reason for what she described as hard decisions ahead. The framing matters here. Sharma's memo specifically described a studio pipeline that had expanded to support changing strategies, a fairly clinical way of describing Xbox's pivot toward putting its games on PlayStation and other platforms instead of keeping them exclusive.
There's a real financial story underneath the reset too. Xbox Chief Strategy Officer Matthew Ball acknowledged publicly at The Game Business Live on June 8 that Game Pass lost millions of subscribers after a price hike pushed Game Pass Ultimate from roughly 20 dollars a month to 30 dollars in October 2025. The price has since come back down to 22.99 dollars, and subscriber numbers are reportedly recovering, but the damage to the subscription math in the meantime appears to be part of what's driving the urgency now.
Bloomberg's Jason Schreier had already reported that internal memos pointed to a fresh round of mass layoffs landing around the end of June, right after Microsoft's fiscal year closes on the 30th. The Verge later added that those layoffs could include outright studio closures, not just headcount cuts inside teams that stay open. Ninja Theory's closure suggests that report was accurate, and that Microsoft didn't even wait for the fiscal year to close before acting on at least one of the names involved.
What Happens Next
Ninja Theory is closing. That part is settled, even if the studio is still chasing a buyer that could save the team in some form. Compulsion and Double Fine are reportedly negotiating their own fates right now, which means there's still a window, however small, for either or both to survive as something other than fully shut down. Arkane Lyon's situation is the least confirmed of the four, resting mostly on one journalist's sourcing rather than the multi-outlet corroboration backing the other three.
What's already certain is that Xbox Game Studios is now without its head, without its chief of staff, and down at least one confirmed internal team, all inside the same handful of days. Whatever comes out of Microsoft's fiscal year closing on June 30 is likely to add more names to this list rather than fewer. We'll keep this page updated as the rest of it shakes out.
