Microsoft Weighs Shutting Arkane Down and Canceling Marvel’s Blade
Microsoft is reportedly weighing the shutdown of Arkane and the cancellation of Marvel’s Blade, a high-profile Xbox project from the studio behind Deathloop.
Reports indicate Arkane is among five game studios the Xbox parent company is considering closing. The decision is tied to Blade slipping from its planned late 2026 window to late 2027 internally, along with the project going over budget. Blade was originally announced in December 2023, complete with a reveal trailer, but it has been largely quiet since then.
Instead of a full closure, Arkane could be sold, not shut down. The same general approach has been described for other studios, including Compulsion Games, Double Fine, Ninja Theory, and, more recently, Undead Labs. Even if studios are spun off or purchased, layoffs may still happen during or after the process, depending on how the transitions are handled.
While questions are being raised about potential layoffs, Microsoft has not responded to requests for comment. IGN says it reached out to the company for clarification about the reported studio actions, but it has yet to hear back. The publication also contacted Marvel Games about the current status of Blade, and that request also went unanswered.
The situation around Blade arrives only days after Bethesda Game Studios boss Todd Howard was quoted talking about Arkane Lyon’s work. Howard said he had recently seen what the Deathloop team at Arkane Lyon is working on and that he was impressed. He added that he can’t say when more will be shown, but noted that he saw new material on May 21 and that Arkane is doing “a really, really great job.”
Meanwhile, fans started getting nervous earlier than this latest reporting: Blade reportedly failed to appear at the 2026 Xbox Games Showcase, leading to speculation that the game’s situation may not be healthy.
Other Xbox studio risks: what’s being reported beyond Blade
Blade isn’t the only Xbox project and studio now facing cancelation concerns. New worries are centered on State of Decay 3 and its developer, Undead Labs, after overnight reports suggested both could be targeted as part of upcoming layoffs across Xbox.
Additional studios said to be in the mix include Double Fine (the Psychonauts developer), Compulsion (behind South of Midnight), and Ninja Theory (responsible for Hellblade). In these reports, the possibility of Microsoft allowing studios to “buy themselves out” is also mentioned. Regardless of the route taken, the reports say hundreds of jobs could be affected—spanning not only these specific teams but also broader parts of Microsoft’s gaming operation, including Bethesda, Activision Blizzard studios, and publishing teams.
What happened at the Xbox showcase: Ninja Theory and State of Decay 3
State of Decay 3 was shown at Microsoft’s Xbox Games Showcase earlier this month, and Ninja Theory’s Senua was also part of that same event. One report claims Microsoft’s internal thinking may have involved using newly announced games as a way to generate investor interest in the studio.
That same reporting, via Game File, alleges Microsoft planned to close or spin off Ninja Theory when it revealed Senua. The logic described is that a “promise of a newly announced game” would help draw attention from investors. Game File’s Stephen Totilo also suggests Ninja Theory leadership may not have known about Microsoft’s plans.
Impact and next questions for players
- Blade is reportedly facing cancelation, with Arkane potentially being closed or sold.
- State of Decay 3 and Undead Labs are also being linked to broader Xbox closure and layoff concerns.
- Double Fine, Compulsion, and Ninja Theory are reportedly part of discussions that could involve buying out from Microsoft.
- Even if studios are spun off, layoffs may still occur.
Microsoft and Marvel Games have not provided responses to requests for clarification about these claims, leaving the community waiting for official updates on timelines, studio futures, and what happens next for the affected games.
