REDMOND, Sept. 23 -- Ninja Theory has made two of the most artistically ambitious games in Microsoft's catalog. Hellblade: Senua's Sacrifice won awards, earned a sequel, and produced exactly the kind of prestige gaming that Xbox spent years saying it wanted to be known for. On Tuesday, Microsoft announced it had failed twice to sell the studio and will now begin consultations with employees on a proposed closure.

The Ninja Theory situation is the sharpest edge of the announcement Xbox COO Matt Booty sent to staff Tuesday morning under the heading "Continuing Our Reset." The company is cutting 268 more positions across Asha Sharma's restructured first-party studio network, transferring three studios (Halo Studios' franchise responsibiliti...