Insider Gaming’s Mike Straw has revealed two studios that could be at risk during the expected round of Xbox layoffs. According to Straw, both Arkane and Compulsion Games could be at risk as Asham Sharma seeks to “reset” the brand.
CONTENTS 2: Kotaku has updated its story to say that Force Games is now negotiating with Microsoft about the studio’s future.
UPDATE: Kotaku has also reported that it has been rumored that Forced Games will be shutting down.
Straw says he’s been getting messages from studio employees who are “nervous.” Despite the public messages from Xbox, Straw says “many at the studios have expressed real concerns and heard conversations about the future of the studios.”
Straw’s claims are linked to previous reports from Bloomberg’s Jason Schreier, who previously said that internal Xbox memos show layoffs are expected to happen in July. Schreier’s report also suggested that one or more Xbox studios could be at risk as part of the cuts.
Compulsion Games’ most recent project was South of Midnight, a Southern Gothic mystery adventure blessed with beautiful visuals and amazing music, but saddled with lackluster gameplay. It failed to make much of an impact on Xbox and PC, despite getting a second chance on PS5 and Switch 2 in 2026.
There’s an odd wrinkle to Compulsion that might be at stake, though: South of Midnight was recently awarded a Peabody in the Interactive category, with the Peabody Awards lauding it for its portrayal of Southern Gothic, Afro-Southern folklore, a hand-drawn stop-motion art style and its focus on grief, healing and cultural memory.
It’s an achievement that Xbox leadership itself has been quick to celebrate. Speaking to Game File, Xbox CEO Asha Sharma said, “The biggest thing we think about is we want to make great games,” while pointing to Midnight’s Peabody win as an example. Matt Booty, meanwhile, wrote on LinkedIn that it’s “inspiring to see the team at Compulsion Games honored with a Peabody Award,” adding that the award reflects “the care and creativity behind their work, and the power of games as a way to tell important stories that last.”
It makes sense to be forced to be vulnerable to everyone you don’t know. Xbox leadership has been publicly praising the studio’s work for the past few weeks, and now employees are said to be worried about the future of the studio. It’s eerily reminiscent of the Tango Gameworks scene.
As for Arkane Lyon, he is currently working on Marvel’s Blade, a game that was announced back in December 2023 and hasn’t been heard from since. Recently, one member of the game’s creative team appeared to confirm to X that the game is alive and still in the works. There was speculation that Blade would finally be properly released at the Xbox Showcase, which just happened, but that apparently didn’t happen.
Arkane Austin had already closed in 2024 following the release of Redfall, leaving Arkane Lyon as the remaining Arkane studio.
And Arkane Lyon is no small outfit. This is the team behind iconic games like Dishonored 2 and Deathloop. Its closure would be a great loss.
With two Xbox players also announcing their departures today, the coming weeks and months are starting to look like a potential bloodbath for Xbox as Asha Sharma looks to rebuild the brand, and pull from it a 3% “accountability” margin.
