At Xbox Games Showcase earlier this month Microsoft announced Senua, the next game in Ninja Theory’s Hellblade series. At the time, there was little concern about the game’s release. Indeed, there was little concern, publicly at least, about Ninja Theory itself.
But a lot can change in a week, and in the case of Xbox, almost everything did.
It started with new Xbox CEO Asha Sharma’s “reset” memo, which most took as a signal that Microsoft planned big layoffs and studio closures. Microsoft published the memo just days after Xbox Games Showcase — which had gone down well with core Xbox fans — was held. In it Sharma revealed that Microsoft’s gaming business has a 3% accountability margin (assumed to mean profit margin), which is down year-on-year. “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue,” Sharma said.
One analyst told IGN “the studios most exposed are brilliant for prestige and rotten for the spreadsheet.” Concern started to grow for the likes of South of Midnight developer Compulsion, Psychonauts studio Double Fine, and yes, Hellblade developer Ninja Theory, neither of which had seen significant commercial success in recent years.
And then this week, reports emerged that Microsoft had started to take action. The Game Business reported that Xbox Game Studios boss Craig Duncan had stepped down. News of various Microsoft studios potentially closing down was not far behind. IGN has asked Microsoft for comment but it is yet to respond.
Amid the reports, fans expressed confusion at how Microsoft could announce Senua from Ninja Theory and then just days later tell the studio’s staff it planned to shut the company down. According to Game File, Microsoft allegedly planned to close or spin off Ninja Theory when it revealed Senua, and it did so thinking that “the promise of a newly announced game would help draw investor interest in the studio.” Game File’s Stephen Totilo suggests Ninja Theory management may not have even been aware of Microsoft’s plan.
Ninja Theory, Double Fine, and Compulsion are all said to be in negotiations with Microsoft over a potential buyout in a bid to avoid closure. Investment would be needed to help these studios go independent, should Microsoft allow such a thing to happen. But even if the studios were spun off, it’s likely they would suffer significant layoffs in the process. And what would they then work on?
Will Senua ever come out? IGN has asked Microsoft for comment. Could Ninja Theory bring the Hellblade franchise with it if it does manage to go independent? That’s not something we’ve seen Microsoft do before. When Microsoft closed UK studio Lionhead down, a number of potential investors were interested in taking the studio on, but deals failed because Microsoft would not part ways with the Fable IP. Would Microsoft hand over the keys to Psychonauts to Double Fine, should it go alone? Would it give Compulsion the We Happy Few IP?
Microsoft under Asha Sharma seems more interested in a handful of blockbuster franchises than smaller scale games. Microsoft is reportedly speeding up development on new The Elder Scrolls, Fallout, and Halo games as it considered restructuring or even spinning off its gaming branch.
The future is uncertain for Microsoft’s gaming business and the people who work for it, as it is for pretty much the entire video game industry. Microsoft’s financial year comes to an end on June 30, when we’re expecting the Xbox layoffs to be accounted for. Clearly, the Xbox that Microsoft is working towards for the next financial year and beyond will look very different than the Xbox of the last decade.
Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at wesley_yinpoole@ign.com or confidentially at wyp100@proton.me.
