Independent again: Double Fine and Compulsion react to leaving Xbox and taking all their games with them

Microsoft announced a major Xbox restructuring resulting in approximately 3,200 job losses throughout the 2027 financial year, with 1,600 positions being eliminated immediately. As part of this overhaul, four game development studios are transitioning to new ownership structures.

Most notably, Psychonauts developer Double Fine Productions and We Happy Few/South of Midnight creator Compulsion Games will return to independent status. Both studios, acquired by Microsoft seven years ago, will retain complete ownership of their intellectual property and game catalogs as they transition away from Xbox Game Studios.

Double Fine retains franchises including Psychonauts, Keeper, and Kiln. Compulsion Games maintains ownership of Contrast, We Happy Few, and South of Midnight. Both studios publicly thanked Xbox for negotiating terms that preserved their creative ownership. “We’re thankful to Xbox for working with us to reach an outcome which returns ownership of our games to us,” Compulsion Games stated.

The restructuring also affects Ninja Theory (Hellblade developer) and Undead Labs (State of Decay developer), which are being divested under undisclosed new ownership. The extent of workforce impacts at the four divested studios remains unclear.

Independent again: Double Fine and Compulsion react to leaving Xbox and taking all their games with them

Sources