South of Midnight is one of Xbox Game Pass’ best games, yet that’s not enough to save its developer
Microsoft is undertaking a major organizational shift at Xbox, with significant consequences for its owned studios. Following Bloomberg’s June 10 report of planned layoffs for July, Xbox leadership issued a memo about an “Xbox Reset” that signals substantial restructuring. The reset is expected to result in the closure of at least three Xbox-owned studios.
Among those at risk is Compulsion Games, acquired by Microsoft in 2018. The developer has produced limited output since acquisition, releasing only South of Midnight in 2025, which has become one of Xbox Game Pass’s standout titles. Despite critical acclaim and its success as an example of how Game Pass helps players discover overlooked games, South of Midnight has not been enough to protect its developer from the impending restructuring.
Prior to the Microsoft acquisition, Compulsion Games developed the stylish platformer Contrast and dystopian RPG We Happy Few, establishing itself as a developer of distinctive, well-regarded experiences. The threatened closure represents a significant loss of creative talent within Xbox’s portfolio.