Netflix has made a significant move in scaling back its ambitious video game expansion by shutting down two development studios: Moonloot, a Helsinki-based team that never released a game, and Night School Studio, the critically acclaimed developer behind indie hits Oxenfree and Afterparty. The streaming giant is also cutting staff from its internal gaming team, though the company declined to specify the number of jobs affected. This decision marks a notable retreat for Netflix, which has spent the past five years attempting to leverage its dominance in film and television into the competitive video game market.
The closures represent a significant turning point in Netflix’s gaming ambitions. Night School Studio’s acquisition in 2021 was one of the company’s earliest and most high-profile investments in the gaming sector, signaling serious intent to become a major player in interactive entertainment. The studio had built a devoted following through its narrative-driven adventure games, with Oxenfree in 2016 earning widespread critical acclaim for its innovative dialogue system and supernatural coming-of-age story. Under Netflix’s ownership, Night School continued to produce content, releasing Oxenfree II: Lost Signals in 2023, followed by Thronglets and most recently Unhinged, which launched on June 30, 2025.
A History of Critical Success Cut Short
Night School Studio’s journey began in 2014 when it was founded by former Telltale Games and Disney employees Sean Krankel and Adam Hines. The studio quickly established itself as a pioneer in narrative-focused gaming, with Oxenfree becoming a touchstone for how video games could handle realistic, overlapping dialogue and create atmospheric horror experiences. Afterparty, released in 2019, continued this tradition with a darkly comedic adventure set in Hell. The acquisition by Netflix seemed like a perfect match, given the streaming service’s expertise in storytelling and its vast global audience of over 260 million subscribers who could access these games through their existing subscriptions.
What makes the closure particularly surprising is that Netflix co-CEO Greg Peters reportedly praised Unhinged during a recent investor call. However, the company appears to be recalibrating its gaming strategy toward more mainstream-friendly content. According to reports, Netflix will now focus its gaming efforts on children’s games, party games, story-driven content, and titles with broader commercial appeal, including a recently released FIFA mobile game developed in partnership with Electronic Arts. This pivot suggests that despite critical acclaim, Night School’s more niche, artistically ambitious projects may not have delivered the engagement numbers Netflix hoped for.
Industry-Wide Turbulence Continues
The Netflix studio closures arrive amid an unprecedented wave of layoffs and shutdowns across the video game industry that has persisted since late 2022. This week alone, Supermassive Games, the developer working on the ambitious space horror title Directive 8020, announced its third round of layoffs since 2024. Earlier this year, Electronic Arts cut staff at its Battlefield Studios despite releasing what became the best-selling game of 2025. Perhaps most dramatically, Bungie—once the crown jewel of Sony’s gaming acquisitions—was effectively absorbed into Sony Interactive Entertainment after releasing what the studio confirmed would be the final major update for Destiny 2. Microsoft’s Xbox division has also conducted sweeping layoffs affecting thousands of workers and closing multiple development studios, a decision that recently prompted visible employee protests, including a giant inflatable rat greeting the new Xbox CEO during a visit to Bethesda Game Studios.
The persistent downturn has prompted industry analysts to question the sustainability of current business models in gaming. During the pandemic, many companies expanded rapidly to meet surging demand for entertainment, but as consumer habits normalized and inflation affected discretionary spending, the industry has experienced a painful contraction. For Netflix specifically, the gaming venture was always something of an experiment—an attempt to find new value propositions for subscribers in an increasingly competitive streaming landscape where Disney+, Amazon Prime Video, and Apple TV+ continue to chip away at market share.
What This Means for Netflix Gaming’s Future
Despite these closures, Netflix has indicated it remains committed to gaming as part of its broader entertainment ecosystem. The company currently offers dozens of mobile games to subscribers at no additional cost, ranging from casual puzzle games to more substantial titles like the mobile version of Grand Theft Auto: San Andreas. The shift toward children’s content and party games suggests Netflix is looking for titles that can engage family audiences and drive repeated, social play sessions rather than one-time narrative experiences. Whether this strategy will prove more successful remains to be seen, but the loss of Night School Studio—a team that represented the artistic potential of gaming—leaves a noticeable gap in Netflix’s creative portfolio. For fans of Night School’s distinctive work, Oxenfree, Afterparty, and their sequels remain available as a testament to the studio’s innovative approach to interactive storytelling.
Expert Opinion: Netflix’s retreat from indie-focused gaming development signals a broader industry recognition that artistic merit alone cannot justify studio operations in the current economic climate. The pivot toward family-friendly and casual gaming content mirrors successful mobile gaming strategies employed by Apple Arcade and suggests Netflix is prioritizing engagement metrics over critical acclaim. Expect more consolidation in the gaming sector throughout 2025 as companies continue right-sizing their portfolios to match post-pandemic market realities.
