Compulsion Games is leaving the Xbox umbrella and becoming an independent studio, retaining its intellectual property, as part of Microsoft's "Xbox Reset" restructuring announced in July 2026.
Compulsion Games is one of four studios spinning off from Microsoft's Xbox division as part of a sweeping restructuring announced in July 2026. The studio, along with Double Fine Productions, Ninja Theory, and Undead Labs, will leave the Xbox umbrella. Compulsion and Double Fine will become independent, keeping their intellectual property, while the other two studios will be sold to new owners.
The move is part of what Microsoft Gaming CEO Asha Sharma described as an "Xbox Reset," a plan that includes laying off 3,200 employees by the end of the 2027 fiscal year. The first round of 1,600 layoffs took effect on July 6, 2026, and the reductions follow earlier gaming layoffs at Microsoft in 2024 and 2025. The company cited a profit margin far below industry peers and slowed growth relative to rising costs. An internal memo stated that previously announced first-party games would not be canceled, and Microsoft agreed to provide development funding for Ninja Theory's "Senua" and Undead Labs' "State of Decay 3," but no specific provisions for Compulsion Games were mentioned.
Compulsion Games will regain independence under its founders' leadership, according to the memo. The studio's current projects, staff size, and timeline for the transition were not detailed in the announcements. The restructuring represents a sharp reversal of Microsoft's recent acquisition strategy, which had brought Compulsion Games under the Xbox umbrella in earlier years.
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2d ago
Microsoft Gaming CEO Asha Sharma announced a "reset" of the business, with 3,200 layoffs planned through the 2027 fiscal year, starting with 1,600 immediate cuts. Four studios-Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs-will leave the Xbox umbrella. Compulsion and Double Fine will become independent with their IPs; Ninja Theory and Undead Labs will go to new owners. Arkane France is in consultation. The company aims to reduce management layers and appoint a COO.
6d ago
On July 6, 2026, Microsoft laid off approximately 1,600 employees in its Xbox division, the largest workforce reduction in the division's history. The company plans to cut a total of 3,200 Xbox positions by the end of the current fiscal year. Xbox CEO Asha Sharma sent an internal memo describing the move as an "Xbox Reset," citing the division's profit margin being one-third to one-tenth of industry peers and slowed growth relative to rising costs. Four studios acquired by Microsoft in recent years will regain independence: Double Fine and Compulsion Games under their founders' leadership, and Ninja Theory and Undead Labs through sales. The memo stated that previously announced first-party games will not be canceled, and Microsoft agreed to provide development funding for Ninja Theory's "Senua" and Undead Labs' "State of Decay 3." Arkane Studios has begun labor-management consultations about its future. Employees across Bethesda Game Studios, ZeniMax Online Studios, and Obsidian Entertainment also reported layoffs, with some saying they received no prior warning. The reductions follow earlier Microsoft gaming layoffs of 1,900 in 2024 and over 6,000 in May 2025. The layoffs on July 6 represent half of the 3,200 planned; the remaining cuts are expected within the fiscal year.