Microsoft plans to shut down Compulsion Games, the Xbox studio behind South of Midnight and We Happy Few, as part of broader cuts to its gaming business, Kotaku reported on June 15, a closure also reported by VGC. The studio lists about 90 employees on LinkedIn, though the actual number is understood to be higher.
The closure would end a studio whose most recent game drew wide praise. South of Midnight, released in 2025 and set in a folklore-steeped American South, won a Peabody Award, and Xbox gaming chief Asha Sharma singled it out in April, saying “the Peabody Award for South of Midnight … I just feel like every day there’s something wonderful there.”
Compulsion Games, based in Montreal, was founded in 2009 and acquired by Microsoft in 2018, according to The Gamer. Before South of Midnight it made the dystopian survival game We Happy Few in 2018 and the puzzle-platformer Contrast in 2013.
The move is tied to a larger round of cuts. Xbox is preparing significant layoffs across its gaming division, expected next month after the close of Microsoft’s fiscal year, Bloomberg reported. In a staff note, Sharma said the company’s studio system had become “overextended” and that Xbox needed to “reassess the balance” of its investments, as VGC reported. The head of Xbox Game Studios, Craig Duncan, resigned the same day, according to The Game Business.
Reports suggest the cuts may reach beyond Compulsion. The Verge said the changes could include a further studio closure or alterations to the Xbox studio lineup, as Pure Xbox noted, without naming a second studio.
Microsoft did not respond to a request for comment from Kotaku. The layoffs are expected to be announced in the coming weeks.
Comments