After weeks of rumours, Xbox has officially confirmed severe layoffs and the separation of multiple studios. The Bethesda Game Studios union has strongly criticised Microsoft, while Compulsion Games, Double Fine, and Undead Labs have addressed what comes next in their own statements. Together, the reactions reveal uncertainty, solidarity with laid-off colleagues, and cautious hope for a new start outside Xbox.

Xbox’s broad restructuring is no longer just an industry rumour, but a reality confirmed by Microsoft itself. The company has laid off 1,600 employees and plans to divest itself of up to five studios as it pursues a new operating model for its gaming business. Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs are no longer set to remain under Microsoft ownership, while Arkane is facing a longer process because of French labour law, although the eventual outcome is expected to be similar.

Official reactions began arriving quickly after the announcement. Some of those affected have directly criticised Microsoft’s leadership, while others have explained their own plans and the status of the games they retain or continue to develop. The statements also show that, for several studios, life after Xbox may not mean closure, but a continuation in a different and more independent form.

Bethesda Workers Protest the Cuts

As expected, unions have voiced some of the strongest criticism of Microsoft’s actions. One BGS, the union representing Bethesda Game Studios workers, said in a Bluesky post that mass layoffs at Microsoft are becoming a recurring annual problem. The organisation argued that employees are being forced to pay the price for decisions made by those at the top of the company.

“In what is becoming a stressful annual routine, Microsoft has decided to lay off thousands of workers, including MANY of us who are part of Bethesda Game Studios. With more than 10,000 developers already laid off in previous rounds of dismissals, those in charge have considered that this was not enough to rectify their mistakes. Today we say goodbye to many of our friends and colleagues, as well as hundreds of other people across the Xbox departments. Among them are people who have worked at Bethesda for decades. When will this cycle of cuts in pursuit of ever-increasing profits end? Thanks to our union, One BGS, we have the right to negotiate the impact of these layoffs, which allows us to secure more generous compensation and support for those leaving the company. We will do everything in our power to ensure that our colleagues receive the care they deserve.”

One BGS also highlighted the practical value of union representation for employees who lose their jobs. The organisation can negotiate the consequences of layoffs, including severance and support for departing workers, which could be especially important in the current situation. Its statement is therefore not only about uncertainty inside Bethesda, but also about the growing tension across Microsoft’s entire gaming operation.

Compulsion Games Becomes Independent Again

The developer of South of Midnight, We Happy Few, and Contrast looked back to its roots in its statement. Compulsion Games was founded as an independent studio in 2009, and after its time with Xbox, it is now returning to that structure. The team is not only regaining independence, but also retaining the rights to its earlier games, meaning the futures of Contrast, We Happy Few, and the award-winning South of Midnight remain with the studio.

“When Compulsion Games was founded in 2009 as an independent studio, we were just a few dreamers in a leaky old gramophone factory dedicated to creating fantastic, handcrafted stories and experiences. We were passionate about the art of making video games, the stories we told, the players who experienced them, and the group of people who poured their heart and soul into making something different. Today, we’re sharing the news that we’ll be returning to independent management of Compulsion Games following our time with Xbox. As part of this transition, we’ll retain the rights to Contrast, We Happy Few, and our award-winning South of Midnight. We’re grateful for the years we spent with Microsoft, for the support they gave our team, and for the opportunity to bring our games to the world. As an independent studio, we’ll continue to create the distinctive games that define us as we take the next steps on this journey.”

Compulsion says its immediate priority is supporting the team during the transition. The studio believes in its future and hopes that one thing will remain unchanged in this new chapter: creating distinctive games that tell important stories and aim to touch players’ hearts and minds. The wording suggests that Compulsion is not merely trying to survive beyond Xbox, but to preserve the creative identity that has defined the studio from the beginning.

Double Fine Returns to Square One

Double Fine Productions is also set to continue as an independent studio. The team has released two games in recent months, so it has a foundation to build on despite the new situation, and it has already indicated that work is underway on plans for the future. In its short statement, the studio thanked Xbox for the seven years it spent there and for reaching an outcome that protects both its history and its internal culture.

“Once again, Double Fine Productions will be an independent studio. We are grateful to everyone at Xbox for the seven years we spent together and for working with us to achieve an outcome that preserves our history and culture, returning ownership of our games to us. To everyone who has contacted us in recent weeks: thank you so much for your kind words, your messages have filled our hearts. We’ll soon share news about what’s next. We greatly appreciate your continued support.”

The tone of the message is more hopeful than many might have expected in the wake of the wider Xbox cuts. Double Fine has not yet revealed which projects it is working on, but it made clear that more information about its future will arrive soon. For the studio, retaining not only independence but also ownership of the games connected to its history could prove especially important.

Undead Labs Moves Forward With a New Partner

The developer of State of Decay 3 is not yet ready to reveal details about its business future, but it confirmed through Discord that development of the game is continuing. Undead Labs has neither confirmed nor denied rumours that the upcoming zombie game may not launch through Game Pass. For now, the team is focused on stressing that the project remains on track.

“Today, Undead Labs begins a new path: we are going to separate from Xbox. Although we can’t reveal all the details for now, we can assure you that State of Decay 3 is still on track. The team works hard and has never been more committed to the community. More news soon. Survivors, unite.”

The studio’s statement does not clarify what kind of new business partner or ownership structure will sit behind Undead Labs, nor does it reveal what release model State of Decay 3 may ultimately use. What it does confirm is that development has not been halted and that the community should wait for further details. For this team, too, Xbox’s major restructuring appears to mark not the end of a game, but the beginning of an unfamiliar next stage.

Source: 3DJuegos