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Xbox Spins Off Major Studios: Double Fine, Arkane, Undead Labs & More Go Independent
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Xbox Spins Off Major Studios: Double Fine, Arkane, Undead Labs & More Go Independent

Jul 7, 20266 sources0 comments

In a seismic shake-up of the gaming industry, Microsoft has announced it is parting ways with several of its most storied Xbox Game Studios developers — including Double Fine Productions, Arkane Studios, Undead Labs, Compulsion Games, and Ninja Theory — as part of a sweeping business "reset" that has resulted in thousands of layoffs across the gaming division. Xbox Gaming CEO Phil Spencer confirmed the restructuring, which marks one of the most dramatic consolidations in Microsoft's gaming history and sends beloved studios out on their own.

In a silver lining for fans, Double Fine (Psychonauts 2) and Compulsion Games (South of Midnight, We Happy Few) have confirmed they are leaving the Microsoft umbrella while retaining full IP rights to their games. Both studios issued statements expressing gratitude toward Xbox while signaling optimism about their futures as independent developers. Meanwhile, Undead Labs reaffirmed that State of Decay 3 is still in development and remains on track for a PS5 release, underscoring the multiplatform future now open to these newly freed studios. Arkane's situation is more complicated — the Lyon-based studio is temporarily shielded from immediate closure by French labor law, but its long-term fate remains uncertain. In a telling moment, Arkane founder Raphael Colantonio — now head of WolfEye Studios — publicly asked Phil Spencer on social media "how much" Microsoft wants for Arkane, cheekily adding "I'm asking for a friend," stoking speculation about a potential buyout or revival of the studio under new ownership.

Key Insights

  • 1Microsoft is parting ways with at least five major first-party studios — Double Fine, Arkane, Undead Labs, Compulsion Games, and Ninja Theory — as part of a massive Xbox business restructuring involving thousands of layoffs.
  • 2Double Fine and Compulsion Games are exiting the Microsoft umbrella with full IP rights intact, meaning franchises like Psychonauts and We Happy Few remain with their creators.
  • 3Undead Labs has committed to continuing development on State of Decay 3, which is now positioned as a multiplatform title including PS5.
  • 4Arkane Studios is temporarily protected from immediate closure by French labor law, but its future remains deeply uncertain — drawing attention from none other than Arkane founder Raphael Colantonio.
  • 5Colantonio's public question to Phil Spencer about purchasing Arkane has fueled speculation about the studio potentially finding a new owner or returning to independent status.

Sources

Xbox are parting ways with Double Fine, Arkane, Undead Labs, Compulsion, and Ninja Theory in the course of thousands of layoffs

Rock Paper Shotgun · 6d ago

Independent again: Double Fine and Compulsion react to leaving Xbox and taking all their games with them

Eurogamer · 6d ago

Newly Independent Devs Thank Xbox and Keep IP Rights to Their Games

Push Square · 6d ago

Arkane temporarily spared in Xbox bloodbath thanks to French law, but its future is up in the air

PC Gamer · 6d ago

Arkane founder asks Xbox CEO "how much" Microsoft wants for the studio: "I'm asking for a friend"

GamesRadar · 6d ago

'State of Decay 3 Is Still Coming': Undead Labs Commits to PS5 Survival Game As It Exits Xbox

Push Square · 5d ago