Microsoft Reportedly Closing South of Midnight Developer Compulsion Games

Microsoft is reportedly planning to shut down Compulsion Games, the studio behind South of Midnight and We Happy Few. According to Kotaku, the layoffs could affect over 90 staff members, coming just months after the Canadian studio was hiring for a new IP. Microsoft has not yet commented. Compulsion Games also developed 2013's Contrast. The news follows reports that head of Xbox Game Studios Craig Duncan and chief of staff Louise O'Connor left Microsoft after decades with the company. South of Midnight, an action-adventure game set in a fictionalized American Deep South, launched in April 2025 to critical acclaim but failed to attract a large audience. It also launched on PlayStation 5 and Nintendo Switch 2 in March. Just last week, new Xbox boss Asha Sharma warned of a company "reset," which many interpreted as a sign of major layoffs and studio closures. One analyst told IGN, "The studios most exposed are brilliant for prestige and rotten for the spreadsheet."