Look, let's be honest: the restructuring hinted at by the new CEO on June 10 is finally showing its teeth. Multiple overseas outlets, citing reliable sources, report that several Xbox-owned developers—including Ninja Theory—are teetering on the brink of closure, while the head of Xbox Game Studios is stepping down after just 18 months. It seems the bedrock of the Western gaming industry is, frankly, wobbling.

Bloomberg reported on the 15th (local time) that, according to insiders, Ninja Theory, Double Fine, and Compulsion Games are in frantic talks with MS to spin off and avoid total shutdown. Staff at these studios have been given the heads-up to start updating their CVs, though whether the studios themselves will survive remains anyone's guess.

The Verge has gone a step further, claiming MS has already decided to pull the plug on Ninja Theory. This is particularly jarring given that the studio just showcased the new 'Senua' entry in the Hellblade series during the Xbox showcase on the 8th. Furthermore, The Information reported on the 12th, citing three sources, that MS is considering spinning off the Xbox division or operating it as a completely independent subsidiary.

Craig Duncan, who took the helm as head of Xbox Game Studios in November 2024, is leaving MS alongside his Chief of Staff, Lewis O'Connor. Duncan has been overseeing a massive portfolio including Halo Studios, Playground Games, Rare, Obsidian, Ninja Theory, Compulsion Games, Double Fine, inXile, and Undead Labs. Following his departure, these studios will fall under the direct management of Matt Booty, Head of Xbox Game Studios.

The writing was on the wall as early as June. Xbox CEO Asha Sharma and Matt Booty noted that despite pouring over $20 billion into investments—excluding the Activision Blizzard acquisition—annual revenue for the fiscal year ending June 30 is down by $500 million compared to the previous year, with profit margins shrinking to a measly 3%. The leadership is now singing the same tune: the studios have simply grown too bloated to be sustainable.

MS CEO Satya Nadella chimed in during a New York Times Hard Fork panel, lamenting that despite 25 years of investment, the gaming division hasn't been churning out profit. 'There's more revenue being generated from Xbox games on YouTube than on the MS platform itself,' he noted dryly. While Nadella maintains he wants to build great games and hardware, he insists it must be done 'sustainably.' Of course, he stopped short of offering any actual solutions.

The leadership shuffle has sent the company into a tailspin. While there have been glimmers of hope—such as the announcement of the next-gen console 'Project Helix,' cuts to Xbox Game Pass pricing, and a pivot back to Xbox console exclusives—the looming, massive restructuring threatens to sap all that momentum. We’ll be watching closely to see just how deep these cuts go and what they mean for the industry at large.