Xbox is reportedly considering closing South of Midnight studio, Compulsion Games, with Double Fine and Ninja Theory also allegedly at risk

Microsoft is reportedly planning to shut down Compulsion Games, the Montreal-based studio behind the Peabody Award-winning action-adventure game South of Midnight and the acclaimed stealth game We Happy Few. According to Kotaku, the shutdown will impact over 90 developers at the studio, which Microsoft acquired in 2018.

The closure is part of a broader restructuring under new Xbox leadership. CEO Asha Sharma recently sent an internal memo warning of an Xbox “reset” ahead of significant layoffs, citing that the division has “over-extended” itself with its studio portfolio. While Compulsion leadership is currently in negotiations with Microsoft over the studio’s fate, the outcome remains unclear.

The shutdown comes just months after Compulsion was actively recruiting for new positions, advertising for programmers to work on an unannounced new IP. The studio’s most recent release, South of Midnight, received widespread critical acclaim, including a Peabody Award for writing and multiple D.I.C.E. awards for animation.

Reporting indicates that other Xbox-owned studios also face similar risk, including Double Fine Productions and Ninja Theory. These developments follow the recent departure of Craig Duncan, head of Xbox Game Studios, and chief of staff Louise O’Connor after decades at the company.

Sources