Gaming

Microsoft Handed Two Studios Back to Their Founders

On 6 July 2026 Xbox began cutting 3,200 jobs and letting five studios go. Double Fine and Compulsion returned to their founders with their IP, Ninja Theory and Undead Labs were sold, and Arkane weighs its options. The rare un-acquisition shows what an owner keeps when a deal fails.

GamingBy Servola Tech Desk2026-07-082 min read

AI-assisted, edited by humans. | Editor-in-Chief: Leon Soliman | Editorial standards

Microsoft Handed Two Studios Back to Their Founders

Key takeaways

Xbox is cutting about 3,200 jobs over the coming year and parting with five studios, but instead of shutting them it handed Double Fine and Compulsion Games back to their founders with full IP rights and funding, sold Ninja Theory and Undead Labs to new owners, and left Arkane to review its options, a rare un-acquisition rather than a closure.
Double Fine under Tim Schafer and Compulsion Games under Guillaume Provost regained independence keeping the rights to everything they built at Microsoft, including work made after the takeover, plus runway money to find new publishers, while Ninja Theory and Undead Labs were sold with funding to finish Senua and State of Decay 3.
For any owner the reset shows what actually holds value when an acquisition misses its margins, the team and the IP rather than the org chart, and in Europe the exit is not the buyer's to time, since Arkane in France cannot be dispatched without a works-council process first.

What Xbox announced on 6 July

On 6 July 2026 Xbox chief Asha Sharma told staff the division would remove about 3,200 roles over the coming year, in a memo she called the most significant restructure in Xbox history. Roughly 1,600 of those cuts landed that day, part of a wider Microsoft reduction of around 4,800 people. Sharma was blunt about the reason, writing that the business today is not healthy and that Xbox was running at operating margins three to ten times lower than comparable parts of Microsoft. Five studios were pulled out of the first-party roster. What makes the move unusual is not the number of jobs, painful as it is, but what happened to those studios next.

Two bought back, two sold, one left waiting

Double Fine, led by founder Tim Schafer, and Compulsion Games, led by founder Guillaume Provost, were handed back to their founders as independent studios. Both kept the rights to everything they had built inside Microsoft, including IP created after the acquisition, and both received runway funding to start new games and court fresh publishers. Ninja Theory, the Cambridge maker of the Hellblade series, and Undead Labs were instead sold to undisclosed new owners, with funding attached to finish and grow their in-progress games Senua and State of Decay 3. A fifth studio, Arkane, was left reviewing what Microsoft called potential strategic options, its future not yet settled.

The quiet lesson in an un-acquisition

Buying a studio and later handing it back, IP and all, is close to unheard of, and it says something an owner can use. When an acquisition fails to deliver the margin it was bought for, the value worth preserving is the team and the intellectual property, not the corporate wrapper that failed to lift them. A managed spin-out that keeps a studio alive and independent protects that value, and the relationship, far better than a fire-sale closure. There is also a European wrinkle. Arkane sits in France, where a works-council consultation must run before any such decision is final, so the timing of the exit is not the buyer's to set. In much of Europe an acquirer inherits not just the studio but the process for letting it go.

Frequently asked questions

Which studios is Xbox letting go, and are they closing?

Five studios left the Xbox first-party roster on 6 July 2026, but most are not closing. Double Fine and Compulsion Games returned to their founders as independent studios with their IP and funding, Ninja Theory and Undead Labs were sold to new owners with money to finish their games, and Arkane is reviewing its options.

Do the studios keep the games they made at Microsoft?

Double Fine and Compulsion kept the rights to everything they built inside Microsoft, including IP created after the takeover, according to the studios and reporting on the reset. Ninja Theory and Undead Labs move to new owners with funding to continue Senua and State of Decay 3.

Why did a division that ships hits cut so deeply?

Xbox chief Asha Sharma told staff the business was not healthy and was operating at margins three to ten times lower than comparable Microsoft units. The cut of about 3,200 roles over the year is framed as closing that gap rather than reacting to any single game.

The studios that walked out with their names, their people and their IP are the ones that lost the least, and that is the part of this reset worth remembering.

XboxMicrosoftAsha SharmaDouble FineCompulsion GamesNinja TheoryStudio DivestitureMergers and Acquisitions

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