Compulsion Games and Double Fine – two formerly Xbox-owned developers now spun out from the Xbox family of studios as Microsoft enacts a deep round of cuts and divestitures – have released statements about the changes.
Reports that Xbox was allegedly shuttering We Happy Few and South of Midnight developer, Compulsion Games, first began to circulate last month, with Tim Schafer's Double Fine and Hellblade developer Ninja Theory also reportedly at risk of closure.
Compulsion Games has now confirmed the studio will "return to independent management," and retain the rights to Contrast, We Happy Few, and South of Midnight.
Here's Compulsion Games' statement in full:
When Compulsion Games was founded in 2009 as an independent studio, we were just a few dreamers in a leaky old gramophone factory devoted to creating rich storylines and experiences that felt handcrafted. We care about the craft of making games, the stories we tell, the players who experience them, and the assembled creators who put their heart and soul into doing something different.
Today, we're sharing that Compulsion Games will return to independent management following our time as part of Xbox. As part of this transition, we will retain the rights to Contrast, We Happy Few, and our award-winning South of Midnight. We're grateful for the years we spent with Xbox, for the support they provided our team, and for the opportunity to bring these games to players around the world. As an independent studio, we're excited to continue building the distinctive games that define Compulsion while taking the next steps in our journey.
Our immediate priority is to support our team throughout this transition period. We are confident in the future of Compulsion Games and look forward to this next chapter where one thing will remain constant: we will create unique games that tell important stories, all with the goal of touching the hearts and minds of our players.
Double Fine marked the changes with a blog post entitled "Independence Day," writing:
Once again, Double Fine Productions will be an independent studio.
We're thankful to everyone at Xbox for seven great years together, and for working with us to reach an outcome which preserves our history and culture, and returns ownership of our games to us.
To everyone who has reached out to us these past few weeks: Thank you so much for all your kind words, we've been deeply touched by all your messages. We will share more news soon on what comes next.
Your continued support is greatly appreciated, Tim & All at Double Fine.
After weeks of speculation, the sweeping job cuts announced at Xbox earlier today (July 6) have been formally announced. The loss of 3,200 staff, around 20% of the organisation, was announced this morning via an internal memo that was also posted to X. CEO Asha Sharma confirmed that five studios were to be divested, with Double Fine and Compulsion Games becoming independent, and Ninja Theory and Undead Labs in the process of being acquired. Arkane Lyon has entered a consultation process in line with French employment law.
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Epic Games has settled a legal case against a former contractor accused of leaking confidential information about Fortnite's then unannounced collaborations with IPs like Minecraft, Ben 10, and Game of Thrones.
In a settlement with Epic's lawyers, Hayden Cohen has agreed to terms that prohibit them from "possessing, accessing, using, or disclosing any of Epic's confidential or trade secret information." This includes passing any of that information onto a third party.
As noted by Game File, the proposed settlement – which has yet to be approved by a judge – does not mention compensation or damages, but Epic’s lawsuit had sought damages covering “actual loss and unjust enrichment."
"We took legal action against the former contractor who repeatedly leaked confidential partner IP and trade secrets that they received while working with Epic," Epic spokesperson Natalie Munoz confirmed to Game File.
"We've asked the court to approve the stipulated injunction to ensure they cannot publish or share Epic's confidential information again."
It's the latest in a string of game makers and publishers pursuing prolific leakers in court, including Tencent, Nintendo, and Microsoft.
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Update July 6, 10pm UK: Posts on BlueSky and Linkedin indicated layoffs taking place at Obsidian, developer of The Outer Worlds and Pentiment. Those impacted include Daniel Alpert, an Art Director who'd been with the company for 21 years, and writer AK Fedeau.
Other posts on LinkedIn support previous Kotaku reporting of widespread layoffs at Zenimax Online Studios, including those focused on UX and usability, along with other roles lost at Id Software and Call of Duty developer Sledgehammer Games.
As PC Gamer points out, Obsidian is obliged to provide advance notice of layoffs if more than 50 employees are impacted. However, there is no reference to Obsidian on the California WARN Act Tracker at the time of writing, suggesting the cuts fall short of that threshold.
Update July 6 6pm UK: a report in Kotaku describes "brutal" cuts at Zenimax Online Studios, which operates Elder Scrolls Online, suggesting that up to half the development team could be impacted. A post on the game's forums stated that the studio was committed to the game, but “the roadmaps we previously shared will be shifting.”
Original story, July 6, 2026: Details have emerged on the sweeping job cuts announced today by Xbox CEO Asha Sharma, with workers reporting job losses within the firm's studios and publishing teams.
The loss of 3,200 staff, around 20% of the organisation, was announced this morning via an internal memo that was also posted to X. Sharma confirmed that five studios were to be divested, with Double Fine and Compulsion Games becoming independent and Ninja Theory and Undead Labs in the process of being acquired. Arkane Lyon has entered a consultation process in line with French employment law.
Subsequently, job losses have been confirmed at Bethesda by staff posting to LinkedIn. Those affected include Piers Duplock, a producer at its Montreal studio, Jean Paul Salman, a systems designer in Austin working on Fallout 76, and Jessica Clark, a community manager in its Maryland home base.
Bloomberg reporter Jason Schreier said in a Bluesky post that Zenimax Online Studios and Id Software were also cutting "a significant number of staff".
The layoffs follow the company's first ever round of voluntary redundancies, most of which took effect last week. The cuts are timed to coincide with the beginning of Microsoft's financial year, meaning that today's news arrives almost exactly a year after cutbacks closed The Initative and cancelled projects at Rare and Blizzard.
This is a developing story and will be updated.
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Xbox has announced sweeping cuts as part of its previously announced reset. 3,200 staff are to be laid off - 20% of the Xbox organisation - with 1,600 roles being eliminated today, according to an internal email from Xbox CEO Asha Sharma that was also posted to X.
The announcement also included the divestment of five internal studios: Compulsion Games, Double Fine, Ninja Theory, Undead Labs, and Arkane.
The layoffs are the lion's share of a wider Microsoft staff reduction of 4,800 people, around 2.2% of its total workforce.
Compulsion Games and Double Fine are being spun out as independent studios under their original ownership, along with their IP, catalog, and "runway for their next games." Ninja Theory and Undead Labs have entered terms for new ownership and funding to continue development on Senua and State of Decay 3.
Arkane has begun consultation proceedings in France to "review potential strategic options," in keeping with French employment legislation.
Reductions will be made in other units, including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, in line with Sharma's previously-announced strategy of "shifting investment to focus on higher priority projects." A series of staffers across Bethesda, Zenimax and Obsidian subsequently revealed they had been made redundant.
Sharma clarified that no publicly announced first-party games are being cancelled as a result of the reset.
The changes come alongside structural changes inside the Xbox organization, with Mojang and King - the most consistently successful arms of the Xbox games empire - now reporting directly to Sharma. Xbox corporate VP of Product Services Dave McCarthey, who had been in the role for eight years, has left the business and Helen Chiang, who previously oversaw Minecraft, has been put into the newly created role of Xbox COO. Sharma said that Chiang's role "for the first time" would include "end-to-end P&L responsibility across content, hardware, platform, and services."
The COO position marks a change from the company's previous structure, which saw many teams, studios and functions operating independently of one another.
Significant changes will be made to the company's platform organisation, which Sharma described as overly complex, saying that "in some parts of the company, work passes through as many as 14 layers of management." The organisation will be simplified to reduce management layers to no more than five, with further efficiencies to be delivered by a streamlined codebase, greater use of shared services, and a 50% reduction in spend on external vendors.
"Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now outpaces the last ten years combined," Sharma wrote.
"We now find ourselves competing not only with the largest publishers, but also with smaller independent studios. It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested.
"As we reset Xbox, we will help independent creators succeed by providing open development tools and audiences to realize their vision.
Layoffs had been widely telegraphed as taking place this week, to coincide with Microsoft's financial year which runs from July 1st. Last week saw dozens of departures from across the organisation as a result of a voluntary redundancy program, the first in the company's history.
This is a developing story and will be updated.
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The United Videogame Workers union (UVW-CWA) has created a hardship fund for industry workers affected by layoffs in the United States and Canada.
Funded by UVW-CWA membership fees, two funding tiers are available for eligible applicants: the Small Fund Tier provides up to $1,000 and the Major Expenses Tier offers $1,000 to $5,000.
Funds may be used for work-related and life expenses such as groceries, rent, and medical costs. Applicants must provide a basic estimated budget for itemised expenses.
Applicants do not need to be UVW-CWA members or belong to any union.
Workers who have experienced related hardships, even if not laid off, are encouraged to apply. Applications will be prioritised based on need and urgency.
The union has also announced that an Itch.io charity bundle organised by Necrosoft Games will launch later this month, with 100% of the money raised supporting the fund.
The UVW-CWA launched in partnership with the Communication Workers of America last year, and is the first direct-join union for developers in the US and Canada that does not represent a single workplace.
Full-time and freelance workers across various disciplines can join, as well as those affected by layoffs and workers who want to or are organising unions in their workplace.
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Sony has clarified to developers and publishers that they will be able to re-order existing PlayStation discs beyond the January 2028 end-of-production date.
After last week's announcement, Sony provided more details in a separate post on a digital platform for partners, as reported by Game File.
Sony also stated the process for ordering discs will change and publishers will have the opportunity to release new games at retail using digital codes.
In a consumer update, Sony confirmed the shift from physical to digital will not affect games released or scheduled for release on disc before January 2028.
As reported last week, Sony's decision to end disc production was "in response to shifting trends in consumer preference and the broader entertainment industry."
"This is a natural direction for Sony Interactive Entertainment to adapt to consumer trends as the general preference for digital media significantly outpaces physical discs," it said.
"This transition will enable us to align more closely with how most of our community prefers to access and play games today."
Alongside this news, Sony announced it will close the PlayStation Store on PS3 and PS Vita by July 2027.
Sony has reportedly started repurposing its last physical disc factory in Austria, indicating the transition to all-digital is well underway.
Several game companies expressed disappointment with Sony's decision. Iam8bit emphasized that "physical games are vital to game preservation, ownership, and consumer choice."
Atari told GamesIndustry.biz it "remains committed to game preservation and creating products for fans for whom collecting physical editions is an important part of their gaming experience."
UK-based publisher Silver Lining Interactive said "there is still a large community of customers who prefer and cherish their physical game collections."
Our contributing editor Rob Fahey explored the ramifications of Sony's all-digital future, including a potential $1,000 price tag for the PlayStation 6 due to rising component costs.
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Robert Bowling, former creative strategist at Infinity Ward, has launched a new Los Angeles-based studio called //18.bravo.
"We're building a studio that ties leadership compensation to employee success," Bowling shared on LinkedIn.
"We have an employee royalty plan, and [will] share profits with external talents (voice actors, mocap actors, and contractors)."
Speaking to IGN, Bowling described the industry as "over commercialised" and stated that "it's time for a radically different approach."
"As an industry, we've neglected our players and abused our staff to focus on ever-increasing profit projections," he said.
"Live service is killing development teams, unending content treadmills of [free-to-play] gaming are draining players, and the AAA studio system has failed."
Bowling also emphasized that although the studio's debut game will include an online component, it will not follow a live service model.
"The foundation of the game is focused around supporting 'forever play' which means optimised P2P architecture that allows the community to play together even if the company moves on."
He noted that if the studio closes, "[its] assets, code, and everything required to extend the game (except third party integrations and licensed music) will become open source by default."
"Most importantly, we will be releasing all the legal paperwork and processes that make this possible publicly so the model can be replicated easily and at low cost to those who decide to mimic the model."
Bowling previously co-founded and served as studio head at Midnight Society, which closed in February 2025 following layoffs the previous year.
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Earlier this week, Sony announced plans to discontinue production of physical discs for new PlayStation games launching from January 2028.
After that, games will be sold only in digital format, while titles released on disc before January 2028 will not be affected.
Sony has reportedly begun repurposing its last physical disc factory. Workers at the Austrian plant are being retrained to manufacture optical microlenses for power-consumption applications.
The platform holder also revealed it would be closing down the PlayStation Store on PS3 and PS Vita by July 2027, meaning that new content purchases will no longer be possible once these stores close.
Sony's shift to an all-digital model has raised concerns among developers and publishers who consider physical media essential to the gaming ecosystem and its consumers.
To understand the impact of ending physical disc production, we collected responses from game companies about the implications for creators, collectors, and game preservation.
Iam8bit
Iam8bit produces premium collector's editions of physical games, including the recent Blue Prince Commissary Bundle for PS5 and an exclusive PS5 edition of Fear the Spotlight with unique cover and disc art.
In a statement sent to GamesIndustry.biz, Iam8bit co-owners and co-creative directors Jon Gibson and Amanda White said:
"We are profoundly disappointed by Sony's decision to suspend physical games production in 2028. Physical games are vital to games preservation, ownership, and consumer choice, values that have guided iam8bit since our first physical release in 2016. Our commitment to these values remains unchanged. Long live physical media."
Deluxe physical edition of Barbie Rewind comes with an Atari Barbie doll | Image credit: Atari
Atari
Atari is known for its physical game releases. Its subsidiary, Digital Eclipse, recently announced a deluxe physical version of Barbie Rewind for PS5 and Nintendo Switch 2 that comes with a Barbie doll.
Atari also released collector's editions of Mighty Morphin Power Rangers: Rita's Rewind and The Thing: Remastered, featuring steelbooks and additional physical items.
"We remain committed to game preservation and creating products for fans for whom collecting physical editions is an important part of their gaming experience, along with physical items that allow them to celebrate their favourite games," the firm told GamesIndustry.biz.
"We strive to make the games we develop and publish as accessible as possible, which includes distributing physical editions whenever feasible. As the market evolves, we'll continue to explore new and compelling ways to satisfy collector demand."
Silver Lining Interactive
Manchester-based Silver Lining Interactive often issues physical versions of its games after digital release. Founder Luke Keighran describes this as a highly profitable part of the business.
"We do not only have a very, very strong retail market, but a wholesale market as well," he told us earlier this year. "Day-one purchases are becoming more difficult for retail, but the catalogue business is still extremely strong. If a game does well on digital, it will normally do well at retail."
In a statement shared to LinkedIn, the company said it was "obviously disappointed by the news" and highlighted that "there is still a large community of customers who prefer and cherish their physical game collections."
Physical collector's edition of Spirit of the North 2 for PS5 comes with a disc and other items related to the game | Image credit: Silver Lining Interactive
"We are working with PlayStation to understand exactly how this transition will be implemented and what it means for independent publishers. While we seek clarity on the future, we want to offer absolute certainty about the present: this policy will not impact our existing library.
"The industry landscape is still settling after this announcement, but whatever form the future takes, Silver Lining Interactive is committed to both our developer partners and our players. We will keep physical media available for as long as players want it.
It concluded: "We firmly believe in giving our community a choice wherever viable, and will continue working hard to deliver games in both digital formats and physical boxes, whether that means a disc, a cartridge, a key card, or a code-in-box release. It is time for us to put our 'creative hats' on to see how we can continue bringing games to physical."
Lost in Cult
Lost in Cult publishes high-quality, art-focused video game books and physical editions of indie games. The company also runs a label for curated indie games that can be played offline on PS5 and Switch.
The company has released physical editions of Paper Trial, The Excavation of Hob's Barrow, Thank Goodness You're Here, and Immortality, among others.
"As a company on a mission to preserve video games, we are deeply saddened by the recent news from PlayStation on ending physical disc production from 2028," it said in a statement.
"We aim to do everything in our power to preserve video games to the best of our ability and will continue to do so for as long as we can."
Definitive physical edition of Tomb Raider includes a soundtrack CD in addition to other items | Image credit: Limited Run Games
Limited Run Games
Limited Run Games works with developers to make physical collector’s editions and merchandise. Its latest release, Tomb Raider: Definitive Edition for Switch 2, comes with physical items, a soundtrack CD, and a steelbook.
"Sony's decision to move fully digital marks the end of an era, and we understand why the math points that way for a platform holder at that scale," it said in a post on its website.
"We have spent a decade, alongside the fans and collectors who kept this flame alive long before us, proving that people still want to hold their games, to own them outright, and to keep them on a shelf for good. We are not slowing down either."
Strictly Limited
Strictly Limited publishes physical standard, deluxe, and collector's editions of digital titles across platforms.
In a statement to GamesIndustry.biz, Strictly Limited's head of business unit Sascha Hoffmann-Nowak said physical editions are "highly relevant when it comes to ensuring players' ownership and preserving video games as part of our cultural heritage."
"We'll continue releasing physical PS5 games for as long as it's possible and will continue publishing physical editions of games regardless of the platform they appear on, even if those platforms evolve. We do have a different approach to physical editions for such releases in place."
Video Game History Foundation
From a preservation perspective, Frank Cifaldi, director of the Video Game History Foundation, said, "museums and archives have been preparing for this future for a while."
"From the perspective of professional preservationists, this doesn't have as much of an impact as you might expect,” said Cifaldi.
"The reality is that the vast majority of video games produced over the last two decades were not made for dedicated home video game consoles, let alone pressed to physical media. And even when they were released on physical media, a day-one digital patch was all but guaranteed, meaning that even though a disc is preserving data in an accessible way, it may not represent the game that people actually played."
"The vast majority of video games produced over the last two decades were not made for dedicated home video game consoles"
Frank Cifaldi
Cifaldi added: "What continues to baffle us is what the industry expects institutions like ours to do about it. If platform owners are deciding to eliminate physical media and older digital storefronts, then we'd also like to see trade groups like the Entertainment Software Association offer meaningful solutions for archives and museums to legally preserve digital-only content and make it accessible for research.
"Everyone agrees this is a serious problem, but the ESA has repeatedly opposed the efforts of cultural heritage institutions to reform digital copy protection laws to make it easier to do this work. The industry needs to meaningfully come to the table on this issue, because asking museums to download a copy of Grand Theft Auto 6 and hope that it'll run in 50 years is not a preservation solution."
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It can be difficult keeping track of the various comings and goings in the games industry, which is why we compile them in semi-regular round-ups.
If you have new appointments or transitions in your company that belong here, please send the names of appointees, new role and company, and prior role and company to newhires@gamesindustry.biz .
Robert Henrysson steps down as Supermassive Games CEO
Robert Henrysson has announced he will step down as CEO of Supermassive Games and as a partner at Nordisk Games.
"As CEO, I was honoured to guide the studio through intense industry change, broadening its client base and establishing a culture of consistent quality across all aspects of the game development process," said Henrysson.
"Leading a studio is never a one-man job – it is the entire team's effort. Our commitment to continuous improvement was, and continues to be, central to everything we do. To everyone at Supermassive Games, I am so grateful for everything I've learnt and experienced with all of you."
Christopher Serra joins Paramount Games as VP of business development and licensing
Christopher Serra has been appointed VP of business development and licensing at Paramount Games.
Serra previously served as director of games business development at Oculus VR.
Alexis Bonte departs Stillfront as CEO
Alexis Bonte will leave his role as CEO of Stillfront, a position he assumed in October 2024. He joined the company in 2017 as group COO.
" Alexis stepped into the CEO role at a challenging time and has led the company through a decisive period of strategic and organisational change with great professionalism and commitment, leaving Stillfront stronger and well positioned for its next chapter," said Stillfront chair of the board Lars-Johan Jarnheimer.
"We are grateful that Alexis remains fully dedicated to Stillfront throughout the transition to ensure a smooth and seamless handover."
Jakub Karolczak | Production coordinator, 11 Bit Studios
Jakub Karolczak has been promoted to production coordinator at 11 Bit Studios. He previously served as senior producer at the company.
Hector Parra | Live game producer, Niantic
Hector Parra has been appointed live game producer at Niantic. He previously served as producer at CGBOT and creative project manager at Dracma Studios.
Nicholas Penwarden leaves Epic Games
Nicholas Penwarden has announced his departure from Epic Games, where he served as engineering fellow and VP of engineering for 15 years, holding roles including director of Unreal Engine and development manager of Unreal Engine 4.
"I'm proud of the part I was able to play in Unreal Engine's evolution from UE3 to where it stands today," said Penwarden.
"It's remarkable to see how far the engine has come, how much the community has grown, and all the incredible games and experiences developers have created with it.
"Most of all, I'm proud of the team we built: the most talented, passionate, and extraordinary group of engine and game developers I could have hoped to work alongside."
Raptor PR announces two new appointments
Raptor PR has appointed Ruzbeh Gazdar as account director and Sophia Hollis as senior account executive.
Gazdar was a senior account manager at GingerMay, and Hollis was an account executive at Zeno London.
Joe Kearns | Project manager, Yrs Truly
Joe Kearns has joined Yrs Truly as project manager. He previously served as a producer at ICHI Worldwide.
Jaakko Harlas departs from Supercell
Jaakko Harlas has announced his departure from Supercell, where he served as head of investments for over 12 years.
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OtherSide Entertainment has implemented another round of layoffs, impacting 18 employees on its Thick as Thieves team.
The Boston-based developer told Game Developer "it has become clear that the continuation of the studio in its current shape is no longer a commercially viable path."
This occurred "despite the encouraging response to the launch of Thick as Thieves' introductory campaign" after its May release.
The game was published by Aonic Group's Megabit, following Aonic's acquisition of OtherSide in 2023.
The studio added: "We are deeply grateful to the team for their superb work and regret this outcome, having pursued every alternative to find a preferable solution."
Fewer than ten employees remain at the studio, focusing on performance maintenance for Thick as Thieves.
A spokesperson added that there are "currently no plans for the studio to work on any future games."
Last month, 17 employees were laid off when OtherSide cancelled its in-development project codenamed Argos.
The developer cited a "brutally challenging" industry, rendering Argos "unviable for now."
OtherSide Entertainment was founded in 2014 by Paul Neurath.
In 2020, Tencent acquired the rights to its System Shock IP, after which a round of layoffs occurred.
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