Why Microsoft Announced Ninja Theory's New Game Despite Plans to Shut the Studio Down

At the Xbox Games Showcase earlier this month, Microsoft unveiled 'Senua,' the next installment in Ninja Theory's Hellblade series. At the time, there was little concern about the game's release, and publicly, little concern about Ninja Theory itself. But a lot can change in a week, and for Xbox, almost everything did.

It started with new Xbox CEO Asha Sharma's 'reset' memo, widely interpreted as a signal of major layoffs and studio closures. The memo came just days after the Xbox Games Showcase, which had been well-received by core Xbox fans. In it, Sharma revealed that Microsoft's gaming business has a 3% accountability margin (presumed to mean profit margin), down year-over-year. 'Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue,' Sharma said.

One analyst told IGN that 'the studios most exposed are brilliant for prestige and rotten for the spreadsheet.' Concern grew for studios like Compulsion (South of Midnight), Double Fine (Psychonauts), and Ninja Theory (Hellblade), none of which had seen significant commercial success in recent years.

Then this week, reports emerged that Microsoft had started taking action. The Game Business reported that Xbox Game Studios boss Craig Duncan had stepped down. News of various Microsoft studios potentially closing down followed. IGN has asked Microsoft for comment but has yet to receive a response.

Amid the reports, fans expressed confusion over how Microsoft could announce 'Senua' from Ninja Theory and then, just days later, tell the studio's staff it planned to shut the company down. According to Game File, Microsoft allegedly planned to close or spin off Ninja Theory when it revealed 'Senua,' thinking that 'the promise of a newly announced game would help draw investor interest in the studio.' Game File's Stephen Totilo suggests that Ninja Theory management may not have even been aware of Microsoft's plan.

Ninja Theory, Double Fine, and Compulsion are all said to be in negotiations with Microsoft over a potential buyout to avoid closure. Investment would be needed to help these studios go independent, should Microsoft allow it. But even if spun off, they would likely suffer significant layoffs. And what would they work on then?

Will 'Senua' ever come out? IGN has asked Microsoft for comment. Could Ninja Theory bring the Hellblade franchise with it if it goes independent? That's not something we've seen Microsoft do before. When Microsoft closed UK studio Lionhead, potential investors were interested but deals failed because Microsoft wouldn't part with the Fable IP. Would Microsoft hand over the keys to Psychonauts to Double Fine if it goes alone? Would it give Compulsion the We Happy Few IP?

Under Asha Sharma, Microsoft seems more interested in blockbuster franchises than smaller-scale games. Microsoft is reportedly speeding up development on new The Elder Scrolls, Fallout, and Halo games as it considers restructuring or even spinning off its gaming branch.

The future is uncertain for Microsoft's gaming business and its employees, as it is for much of the video game industry. Microsoft's financial year ends on June 30, when Xbox layoffs are expected to be accounted for. Clearly, the Xbox that Microsoft is working toward for the next financial year and beyond will look very different from the Xbox of the last decade.