Compulsion Games and Double Fine go independent as Xbox cuts 3,200 jobs

Xbox has announced what it calls the most significant restructure in its history, cutting 1,600 roles immediately as part of a broader Microsoft downsizing of 4,800 employees, with the division targeting a total reduction of 3,200 Xbox jobs by the end of the 2027 financial year. As part of that reorganization, four studios are leaving Microsoft ownership — among them Compulsion Games and Double Fine, both returning to independent status rather than facing closure.

Compulsion Games, the Montreal-based studio behind Contrast, We Happy Few, and South of Midnight, confirmed on Bluesky that it retains the rights to all three games. "Our immediate priority is to support our team throughout this transition period," the studio said, adding that it remains "confident in the future of Compulsion Games." Double Fine — Tim Schafer's studio, known for Psychonauts, Brütal Legend, and Broken Age — posted a joint statement on X confirming it too is independent again after seven years with Xbox, and that ownership of its games catalog has been returned to the studio. Xbox CEO Asha Sharma confirmed both studios have "runway for their next games," though neither has announced what they'll work on next. The status of staff at both studios remains unclear, as Sharma's address made no mention of how the move to independence would affect their individual headcounts.

Both Compulsion and Double Fine were acquired during Microsoft's aggressive studio-buying spree, largely aimed at stocking Xbox Game Pass with exclusive content. That strategy is now visibly unwinding: the same week saw Bungie lay off most of its Destiny team, reports of further Xbox studio closures, and a broader Microsoft workforce reduction. Compulsion had been widely reported as facing imminent shutdown — employees had been posting on LinkedIn signaling they were job-hunting — so the independent-studio outcome is a better result than many expected, even if the financial pressures of that transition remain unresolved.

Community reaction has been cautiously relieved, particularly for Compulsion given how close it appeared to outright closure. Both studios say they'll share more news soon on what comes next, but for now the immediate focus is on their teams navigating the transition.