South of Midnight Director Says He'd Have Cut Xbox's 'Money Tap' Sooner, Calls Funding 'Unsustainable'

David Sears, creative director of South of Midnight, recently admitted he was always uneasy about Xbox's infamous development funding "money tap" and would likely have shut it off earlier if given the chance. The game, published by Xbox Game Studios, launched in 2025—seven years after Compulsion Games' previous title. Despite critical praise, it flopped commercially. Compulsion parted ways with Xbox this year amid CEO Asha Sharma's "reset" of Microsoft's gaming business, which has led to thousands of layoffs, multiple studios going independent, and several projects being canceled.

In an interview with MinnMax, Sears recalled his persistent worry that Microsoft's generous funding for South of Midnight would eventually dry up. "I literally told people, I was like, 'Wow, this could be terrible,'" he said. "Because somebody is going to say one day, 'You know the money tap? We're closing those floodgates.' And that's going to have really traumatic results downstream."

When asked if he would have turned off the tap earlier himself if he were in charge of Xbox, Sears replied: "Yeah, probably." He continued: "I wanted to make [South of Midnight], no doubt. Obviously, because we made it. Would I have turned off someone else's money flow before South of Midnight? Yeah, because I'm not completely selfless. But in hindsight at least, it was unsustainable. So, of course it was going to have a shocking outcome."

Microsoft acquired Compulsion in mid-2018 as part of a buying spree aimed at boosting Game Pass' day-one offerings under then-gaming boss Phil Spencer. That summer, Xbox added Forza Horizon developer Playground, State of Decay creator Undead Labs, Hellblade studio Ninja Theory, and Compulsion Games, followed later that year by inXile and Obsidian. Microsoft also formed The Initiative in Santa Monica, which worked on the canceled Perfect Dark reboot. Double Fine joined in June 2019.

"It's easy to dissect it now, but at the time I would talk to other directors who would be like, 'How is this happening? How did we get so lucky? Is this a golden era?' And I would always be like, 'For now.' There's always a night when Rome burns. I didn't know exactly when it would be but I was always worried about it," Sears said. "But to their credit — amazing. I think there's definitely a corporate Microsoft DNA, but they are vastly different from the Microsoft I knew back in the '90s and early 2000s — much more humane, actually. It's remarkable and commendable."

Sears praised Microsoft for allowing studios to spin off rather than shutting them down, contrasting with the fate of Ensemble Studios, which Microsoft closed after a couple of games. Like Double Fine and Undead Labs, Compulsion secured its independence instead of being closed. However, Arkane Lyon (Deathloop, Dishonored 2) is still seeking a buyer as Xbox explores splitting from the studio, while Ninja Theory went through the same process but failed to find a buyer and closed.

Earlier this year, Microsoft announced that the next mainline Halo game will be developed by Call of Duty maker Activision, with mass layoffs hitting Halo Studios. Xbox has moved Age of Empires developer World's Edge and Sea of Thieves developer Rare under the Activision umbrella. Microsoft is doubling down on its biggest franchises to improve revenue and profit margins at Xbox.

South of Midnight was Compulsion's third game, following Contrast in 2013 and We Happy Few in 2018. The studio retains ownership of its games and publishing rights despite leaving Xbox.