Microsoft has announced it will be selling off four Xbox game studios as part of significant layoffs affecting nearly 5,000 employees. Double Fine and Compulsion Games are returning to their founders' control while Ninja Theory and Undead Labs will operate independently from the tech giant.

The cuts come after an internal restructuring aimed at reducing costs and focusing on key franchises, with Microsoft planning a total of around 20% job losses by July 2027. This move signals a shift in strategy as the company looks to align its portfolio with bigger titles rather than smaller indie efforts.

Other studios will be impacted; Arkane Studios is currently under review for possible sale, while Mojang and King are set to report directly to Xbox CEO Asha Sharma. The changes aim to help independent creators succeed by providing them with open development tools and audiences.

This restructuring reflects a broader trend in the gaming industry where smaller studios face challenges as larger companies streamline their operations. It remains to be seen how these cuts will affect innovation and diversity in game development.