Xbox turmoil continues with a studio closure and executive departures

Last week, Xbox boss Asha Sharma sent a memo warning of an Xbox “reset” ahead of expected layoffs, and today, Kotaku reported that Xbox plans to shut down Compulsion Games, the studio behind South of Midnight.

Since taking over in February, Sharma has made some big decisions, including cutting the price of Xbox Game Pass and making Gears of War: E-Day and Clockwork Revolution Xbox console exclusives. But in their “reset” memo, Sharma and chief content officer Matt Booty discussed many challenges facing the Xbox business, including that it has “over extended” with its studio system:

We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.

Last week, my colleague Tom Warren reported that Xbox’s changes could “involve a studio closure, or changes to the Xbox studio lineup.” Xbox didn’t immediately reply to a request for comment.

The company’s head of Xbox Game Studios, Craig Duncan, and the Xbox Game Studios chief of staff, Louise O’Connor, also announced that they will be leaving, The Game Business reported. Duncan, who formerly headed up Rare, took over the role in October 2024.

In May, Sharma reorganized the Xbox platform team, including bringing in some execs that she had formerly worked with on Microsoft’s CoreAI team.