Xbox Reportedly Looking to Divest Studios Starting with 'Hellblade' Developer Ninja Theory

Hot on the heels of the Summer Game Fest, Xbox is reportedly looking to continue to divest some studios from its portfolio in an effort to help bring down costs ahead of what CEO Asha Sharma is calling her "reset" of the struggling platform in an internal memo which was published on the Xbox Wire.

The first studio on its radar is Ninja Theory, developer of the critically acclaimed Hellblade series, and, perhaps more interestingly, the developer behind Senua, the action-adventure game set in the same universe. It was revealed only on June 7, just a week and change before The Verge began to report that Xbox was considering divesting from the studio.

Now, industry writer Stephen Totilo has reported via his newsletter Game File that Xbox leadership was aware that the studio was about to be shut down, and decided to run the game in its showcase to hopefully garner some investor interest. It's unknown whether Ninja Theory leadership were either aware of or supported this plan. In either case, the studio is currently tight-lipped, but some insiders are saying that they are hoping the studio will find a buyer and see Senua through to release.

Additionally, Bloomberg is also reporting that two other studios are in Xbox's sights: South of Midnight developer Compulsion Games, and Double Fine, most notable for its Psychonauts series. News is scant from the studios themselves, aside from one cryptic emoji tweet from the latter's studio account.

Craig Duncan, the head of Xbox Game Studios, as well as his chief of staff, Louise O'Connor -- both ex-Rare -- also announced their departure from the company just before the news started to break.

Industry veteran George Broussard has also stirred up news of layoffs hitting other studios across the Xbox portfolio, with a tweet (via @georgebsocial) suggesting that jobs are under the axe at ZeniMax, the holding company for ZeniMax Online Studios (the studio behind the Fallout 76 and Elder Scrolls Online live-service titles) and Bethesda. Industry insiders are also suggesting that "anyone not working on Fallout or Elder Scrolls is out" (via @barbaricthrone).

The Boardroom Read

It's clear that Xbox has a lot of work to do in its attempt to "reset" the struggling first-party over the next 100 days. While cuts like this will help the bottom line in the short-term, this raises questions about what Microsoft's strategy will become long-term as it contends with fewer studios to produce first-party titles for its Game Pass service.

Ninja Theory's last Hellblade game, Senua's Saga: Hellblade II wasn't as financially successful as the original, and a now-deleted LinkedIn post suggested that South of Midnight cost around $100 million to produce. Double Fine has historically struggled with funding as an independent studio, needing to resort to an investment and profit-sharing platform to raise funds for Psychonauts 2 before Microsoft acquired the studio.

If ZeniMax is under the microscope, it's clear that Microsoft wants to protect the Fallout and Elder Scrolls brands as tentpoles, but what that means for other studios like MachineGames remains to be seen. Indiana Jones and the Great Circle was well received, but it was also multi-platform (and saw some success with its PS5 release) and on Game Pass from day one, which probably hamstrung its revenue aspirations (and that's before you consider it's a licensed product). What this means for the next Wolfenstein game also remains to be seen.

Then there's the hardware problem: Inflation and AI continue to drive resource constraints and out-of-control costs in a period where Xbox is trying to get Project Helix to market. Both Sharma and Xbox chief strategy officer Matthew Ball have discussed the need to look at subsidised versions of Helix to deliver affordability for their next console offering. Will we enter a world where we need to watch pre-rolls before we launch a game (or, dare we suggest, mid-game ads)?

Satya Nadella is not shy about Xbox's performance either. On The New York Times' Hard Fork podcast (~4:45), the Microsoft CEO jabbed about the company having subsidised Xbox for the past 25 years, and quipped that content creators and platforms like YouTube are able to monetise the platform more than the company itself. While this is a good line to trot out, the reality is the content creation space operates on a completely different model. If Xbox didn't exist, and gaming maintained its popularity, eyeballs would go wherever the games and discourse were.

This is very much an ongoing saga, so we'll be sure to bring you the latest from the Xbox camp as it develops.