Xbox’s FY27 restructuring is still unfolding, but two of the studios marked for independence have now completed their exits. Double Fine and Compulsion Games are independent again, while Xbox still expects roughly 3,200 job cuts across FY27 and other studio ownership changes continue.
The rest of the Xbox plan is much larger. Xbox says it expects to eliminate about 3,200 roles during FY27. Around 1,600 positions were cut when the restructuring was announced on July 6, while four studios were set to leave Xbox for independence or new ownership. Xbox said no publicly announced first-party games or projects were being cancelled as part of the changes.
Double Fine and Compulsion are independent again
Xbox originally said Double Fine and Compulsion Games would return to management and transition into independent studios with their IP and catalogs. Both exits are now complete. Double Fine said in July that it was independent again and that ownership of its games had been returned. Compulsion CEO Guillaume Provost told GamesBeat that the studio’s management buyout closed on August 11 and that Compulsion now owns its IP again.
Compulsion’s publishing rights are still moving back across individual platform stores, so some listings may temporarily continue to show Microsoft during the handover. Provost said sales of Compulsion games now support the independent studio. The returned catalog includes Contrast, We Happy Few and South of Midnight.
The transition has not been painless. Double Fine laid off 23 employees on July 28. Tim Schafer said becoming independent also meant shrinking to a size the studio could sustain, describing the cuts as something it would consider only for the survival of the company.
On August 21, Double Fine announced another part of its post-Xbox plan: Amnesia Fortnight 2026 will return as a Kickstarter campaign beginning August 31. Backers will vote on prototype ideas, four will be developed during the game jam, and one is planned to become a small finished game under the new Double Fine Action Labs label. The studio was unusually direct about the reason for crowdfunding, saying community support would help the newly independent company stay alive.
Xbox plans about 3,200 job cuts through FY27
Xbox describes the restructuring as the largest in its history. About 1,600 roles were eliminated when the plan was announced, with the total expected to reach roughly 3,200 across FY27 rather than arriving in a single round.
The cuts have also drawn organized opposition from Xbox workers. The Communications Workers of America said hundreds of represented game workers and allies rallied across the US and Canada on August 18. CWA says it represents nearly 4,000 video game workers at Xbox.
The company said its core business had weakened while costs and organizational complexity increased. Xbox also said the business was operating at margins three to 10 times lower than comparable platform and publishing businesses, and that it had added teams and investment faster than the underlying business had grown.
Four studios are leaving Xbox’s current structure
Double Fine and Compulsion Games were the two studios slated to return to independence, and both have now completed that process. Ninja Theory and Undead Labs had entered terms to move to new ownership, with funding intended to support Senua and State of Decay 3. In France, Arkane’s management began the required Works Council consultation process to consider strategic options.
Xbox also said reductions would affect other units across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios, although the scale would vary by team. The company drew one clear line around the reset: it said none of its publicly announced first-party games or projects were being cancelled as part of these cuts.
Xbox wants fewer management layers and lower platform costs
The restructuring goes beyond studios. Xbox said work in some parts of the company had been passing through as many as 14 management layers, while platform teams had grown 40% since the start of the current console generation even as player base and playtime declined.
Its target is no more than five management layers, and three where possible. Xbox also plans to reduce vendor spending by 50%, simplify internal tools and shared services, and move toward a flatter structure with clearer ownership of decisions.
Mojang and King now report directly to Xbox leadership
Mojang and King now report directly to Xbox leadership. Xbox described both as increasingly platform-like businesses and among its largest teams by monthly active players. Helen Chiang has also moved into a new chief operating officer role with responsibility across content, hardware, platform and services.
Dave McCarthy is retiring after 17 years with Xbox. The company says the restructuring is intended to restore growth in 2027, but the immediate effects are already concrete: thousands of jobs are being removed, several studios are leaving the existing Xbox structure, and Double Fine is now trying to build a sustainable business outside Microsoft.
Sources: Xbox Wire, Double Fine’s independence announcement, Double Fine’s Amnesia Fortnight announcement, GamesBeat’s interview with Compulsion CEO Guillaume Provost, CWA, and Game Informer for Double Fine’s July layoffs.