In a significant shake-up for the VR and gaming industries, Netflix has announced that it is closing down two of its internal game development studios, Night School Studio and Moonloot Games. The move comes as part of a broader effort by the streaming giant to streamline its games business and focus on specific areas of growth.
Night School Studio was perhaps the most notable casualty, having developed the award-winning horror game Oxenfree in 2016. The studio’s sequel, Oxenfree 2: Lost Signals, was published by Netflix in 2021 as part of its foray into cloud gaming. Unhinged, a browser-based horror game released just weeks ago, is also attributed to Night School Studio. Moonloot Games, on the other hand, had been working on an unannounced project that bore similarities to Animal Crossing.
The closures are a blow to VR enthusiasts who had been eagerly awaiting new content from these studios. Unhinged, in particular, offered a unique gaming experience that leveraged the player’s smartphone as a controller. Its closure means that fans of immersive gaming will have to wait even longer for innovative titles like this one.
Netflix’s decision to axe these two studios is part of its broader strategy to focus on specific areas of growth within its games business. In a statement, the company emphasized its commitment to kids’ games, party games, narrative games, and mainstream games – with Unhinged serving as an example of its efforts in the narrative game space. This shift towards more casual or party games that can be played together on a television is a clear indication that Netflix is reorienting itself towards a more accessible gaming experience.
It’s worth noting that this isn’t the first time Netflix has closed down one of its internal studios. In 2024, Team Blue was shut down, reportedly working on a first-person game. Boss Fight Entertainment, which developed Squid Game: Unleashed, was shuttered in October 2025. Cozy Grove developer Spry Fox even split from Netflix in December after being acquired by the company.
The closure of these studios comes amidst a broader trend of layoffs and studio closures across the gaming industry. At least five other studios have laid off workers in recent weeks, including CD Projekt Red, That’s No Moon, Supermassive Games, Lightspeed, and Refactor Games. The VR and gaming industries are constantly evolving, and it remains to be seen how these changes will affect the type of content we see in the future.
As Netflix continues to shape its games business, one thing is clear: the company is prioritizing specific areas of growth that align with its existing strengths. While this may mean fewer opportunities for VR enthusiasts who were eagerly awaiting new content from Night School Studio and Moonloot Games, it also signals a renewed focus on developing innovative experiences that cater to a wider audience. As we look to the future of gaming and VR, one thing is certain – Netflix will be at the forefront of shaping the industry’s trajectory.
Source: Game Developer XR — 2026-08-13