Netflix’s ambitious push into the video game industry has hit another significant roadblock as the streaming giant announced the closure of two gaming studios this week. The company is shutting down Moonloot, a Helsinki-based developer that never released a title, and Night School Studio, the critically acclaimed team behind the beloved supernatural adventure game Oxenfree. The closures mark a notable retreat from Netflix’s aggressive gaming expansion strategy that began approximately five years ago, raising questions about the future direction of the company’s interactive entertainment division.
According to Game File, which first reported the news, Netflix is also implementing staff reductions within its internal gaming team, though the company declined to specify the exact number of positions being eliminated. This move represents a significant scaling back of Netflix’s gaming ambitions, particularly given that the Night School acquisition in 2021 was among the streaming service’s earliest and most high-profile investments in the video game space.
Night School Studio’s Legacy and Netflix Era
Night School Studio had established itself as a respected independent developer long before Netflix entered the picture. Founded in 2014, the studio made waves with its debut title Oxenfree in 2016, a supernatural thriller that combined atmospheric storytelling with innovative dialogue mechanics. The game earned widespread critical acclaim for its naturalistic conversation system and compelling narrative about teenagers encountering mysterious phenomena on an abandoned island. The studio followed this success with Afterparty in 2019, a darkly comedic adventure about two friends attempting to outdrink Satan to escape from Hell.
Under Netflix’s ownership, Night School continued to produce content, releasing Oxenfree II: Lost Signals in 2023, which expanded upon the original game’s universe and received positive reviews. More recently, the studio launched Thronglets in 2025 and Unhinged, which debuted just days ago on June 30. In a somewhat ironic twist, Netflix co-CEO Greg Peters reportedly praised Unhinged during a recent investor call, making the studio’s closure seem particularly abrupt. Despite these releases and executive praise, Netflix apparently determined that Night School’s output did not align with its evolving gaming strategy.
Netflix’s Shifting Gaming Strategy
The streaming giant’s approach to gaming has undergone considerable evolution since it first began offering mobile games to subscribers in 2021. Initially positioned as a value-added feature to combat subscriber churn and justify price increases, Netflix’s gaming division has struggled to gain significant traction among the platform’s hundreds of millions of users. Industry analysts have noted that despite offering dozens of games at no additional cost, player engagement has remained relatively modest compared to dedicated gaming platforms.
According to Game File’s reporting, Netflix plans to refocus its gaming efforts on specific categories: children’s games, party games, story-driven experiences, and titles with mainstream appeal, such as a recently released FIFA-branded game. This pivot suggests Netflix is moving away from the more artistically ambitious projects that defined Night School’s portfolio toward content that might attract a broader, more casual gaming audience. The company appears to be betting that licensed properties and family-friendly content will prove more effective at driving engagement than original intellectual properties.
A Troubled Industry Landscape
Netflix’s studio closures arrive against a backdrop of unprecedented turmoil within the broader video game industry. The past two years have witnessed wave after wave of layoffs and studio shutdowns across virtually every major publisher. Just this week, Supermassive Games, developer of the upcoming Directive 8020, announced its third round of layoffs since 2024. Earlier in the year, the studios behind the Battlefield franchise implemented cuts despite having released what became the best-selling game of 2025.
Perhaps most notably, Bungie, the legendary studio behind Halo and Destiny, suffered devastating layoffs that culminated in Destiny 2 releasing what the company described as its final content update. Microsoft’s Xbox division also parted ways with several development studios, resulting in thousands of job losses across the gaming industry. The situation has become so dire that when Xbox’s newly appointed CEO recently visited Bethesda’s offices, employees greeted him with a giant inflatable rat, a traditional symbol of labor protest. These widespread cuts reflect broader economic pressures, rising development costs, and changing player habits that have forced even successful companies to dramatically restructure their operations.
The Future of Netflix Gaming
For Netflix, the studio closures represent both an acknowledgment of past missteps and an attempt to chart a more sustainable path forward in gaming. The company’s original strategy of acquiring established studios and giving them creative freedom has not delivered the subscriber growth or engagement metrics that executives apparently hoped for. Moonloot, which was founded in September 2022 under the leadership of Marko Lastikka, a veteran of Zynga and Electronic Arts, never even got the opportunity to release a game before being shuttered.
The streaming giant’s gaming division now faces a critical juncture. While Netflix has repeatedly affirmed its commitment to gaming as a strategic priority, the closures suggest a more pragmatic approach that prioritizes commercial viability over artistic prestige. Whether this recalibration will ultimately succeed in making gaming a meaningful part of Netflix’s value proposition remains to be seen. For now, the legacy of Night School Studio lives on through its completed games, including the Oxenfree series, Afterparty, and its final releases under the Netflix banner. Fans of the studio’s distinctive storytelling approach can only hope that the talented developers affected by these closures will find new opportunities to continue creating innovative gaming experiences elsewhere in the industry.
Expert Opinion: Netflix’s retreat from ambitious game development signals a broader industry reckoning with the true costs of creating quality interactive content. The streaming giant’s pivot toward casual and licensed games suggests that subscription-based gaming models may struggle to support the kind of creative risk-taking that produces critically acclaimed titles like Oxenfree. As the gaming industry continues its painful consolidation, we may see more entertainment companies adopt similarly conservative approaches, potentially stifling innovation in favor of safer, more commercially predictable products.
