The situation at Xbox somehow keeps getting more grim. Following a report earlier today indicating Microsoft is considering shutting down Compulsion Games, the studio behind the award-winningSouth of Midnight, Bloomberg reported that several other celebrated studios at Xbox are on the chopping block as well.

Double Fine (Psychonauts 2, Keeper) and Ninja Theory (Senua’s Saga: Hellblade 2) are reportedly both facing closure. Ninja Theory just announced that it’s working on a third game in the Hellblade series, titled Senua, during the Xbox Games Showcase on June 7. (Compulsion Games, Double Fine, and Ninja Theory were acquired by Microsoft over a two-year period in a studio-acquisition spending spree by Xbox.)

While the studios will reportedly have an opportunity to buy back their independence from Microsoft, even if they do, sources told Bloomberg this would result in significant layoffs. These three studios apparently aren’t the only ones facing closure, either, and employees at many Xbox teams have been given permission to seek new work. Bloomberg reported last week that major cuts were on the way for Xbox this July.

Image: Xbox/Microsoft

The news comes after recently appointed Xbox CEO Asha Sharma and chief content officer Matt Booty sent out a notice to employees that the games division was in a revenue decline that “cannot continue.” They explained that a combination of high hardware prices, lower-than-expected game sales, and lengthy development cycles had created an untenable situation. Numerous executives have recently departed the Xbox division, including the former head of Xbox Game Studios, Craig Duncan, and the former chief of staff, Louise O’Connor.

The downturn at Microsoft comes not long after the company’s acquisition spree, which included the 2023 purchase of Activision Blizzard for $68.7 billion and the 2021 acquisition of ZeniMax for $7.5 billion. Despite the rampant consolidation, it seems the company’s purchases haven’t borne out as it hoped.

Recent reports indicate that Xbox will be refocusing on its biggest franchises, like Halo and The Elder Scrolls, after games like Senua’s Saga: Hellblade 2 and South of Midnight underperformed the company’s expectations. Microsoft is apparently even considering spinning off Xbox from the company altogether, restructuring it into a subsidiary or joint venture. It seems that very little is off the table for Microsoft at this point.