Xbox Reportedly Shutting Down South of Midnight Dev Compulsion Games - News
by William D'Angelo , posted on 15 June 2026 / 3,390 Views
Xbox is reportedly shutting down the developer of South of Midnight and We Happy Few, Compulsion Games, according to Kotaku.
The number of people that will be impacted by the closure isn't known, however, the the studio's LinkedIn page says around 90 employees work there. Though, the actual number is believed to be higher.
Microsoft did not respond when asked for a comment by Kotaku.
The original story has since been updated that claims one source has stated Compulsion leadership is in "negotiations" with Microsoft over the fate of the studio. Details of this have not been disclosed.
Compulsion Games was founded in 2009 and has since released three games. This includes 2013's Contrast, 2018's We Happy Few, and 2025's South of Midnight.
This report follows the announcement of the head of Xbox Game Studios Craig Duncan and Xbox Game Studios chief of staff Louise O’Connor are leaving the company this week.
Xbox CEO Asha Sharma in a recent message sent to employees stated, "It is important to have both optimism and realism as we work to reset the business."
There was a report from Bloomberg's Jason Schreier that Xbox is reportedly planning major layoffs. If it turns out to be true the closure Compulsion Games will be apart of this.
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can follow the author on Bluesky.
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Here we go.
Yep, Double Fine and Ninja Theory are also potentially on the chopping block. So pretty much everybody except Activision, Blizzard; Bethesda, Mojang. Turn 10. And Halo and Gears E-Day had better sell really well.
Turn 10 already been gutted last round of layoffs they been turned into a skeleton crew and just supporting. Do you mean Playground games?
Yeah, that's what I meant. D'oh. For some reason I got the Forza studios mixed up.
Not surprising to me, off all their studios, this would be the most likely to close. South of Midnight just didn't do well, while no official player counts were released since 1 million players in the first month, it's possible that the reason 2 million was never announced is because it still hasn't hit it. And that is players, not sales.
The budget meanwhile will have been fairly substantial. The game took 5 years and 5 months to make, the dev team started with around 40 people but quickly grew to 70+ and by release they had over 90 on it. Factor in average pay of probably $95k a year over the course of development per person with 75 devs on average over the course of development, and the budget was already at around $37m just from internal developer salaries. Factor in other development expenses, such as paying the voice actors, paying the London Contemporary Orchestra to record the music at Abbey Road, paying outside studios who assisted on it (15+ outside studios assisted with various aspects of development, including story, animation, art, mocap, quality assurance, and localization, some of those 15+ were quite large assistance teams at that).
We're looking at a budget in excess of $50 mil for a game that possibly still hasn't hit 2 mil players, and alot less than that in sales. With that budget it would have needed like 1.2m sales at it's launch price of $40 just to break even, or to drive a substantial number of new gamepass subs that stayed subbed. Neither happened.
Edit: Apparently someone involved with the production of South of Midnight revealed it's budget was $100m including marketing, so even well above my rough estimate above.
Microsoft has no love for the artform. Only a love for return on investment.
Just like Nintendo and Sony
Yep, none of the 3 of them will keep a studio that is losing money afloat for very long. Sony has closed 7 studios in less than the last 4 years, including Pixelopus, which you could call an art game studio just like Compulsion. Nintendo once closed down Sakurai's Project Sora, the studio that made Kid Icarus: Uprising, because the game flopped.
The difference is that no one lost their jobs with the closing of Project Sora.
Sony has had a bad run, you're right. Nintendo is much more responsible, in comparison, though.
Surprisingly Media Molecule still exist. But yes Sony is current management doesn't look beyond short term ROI. Games like ICO etc. will no longer be made by them.
Project Sora was always gonna be closed, the company was created specifically to make Kid Icarus : Uprising
That's what happens when the arts & entertainment are commodities whose only value to the publisher is how much profit it generates. Every big publisher is a publicly-traded corporation and will axe an IP or even an entire studio if they feel it doesn't benefit their bottom line. It's an industry-wide problem, not just an MS problem. This is a problem that's only gotten worse over time as the technology has improved and the scope and scale of games has increased, which has resulted in ever-growing budgets and thus publishers having an increasing aversion to risk and a growing incentive to cut anything that isn't immediately profitable. We're at a point where some games can take 5M copies or more to generate as much revenue as it took to make them. Not exactly a wide room for error there. Big publishers are going to be increasingly reluctant to drop a nine-figure development budget on an unproven IP.
It's similar to why movie studios have been using established IPs for their biggest-budget films, and why major record labels rely more on accessible pop, pop-rap, and pop-country acts. They're safer bets than dropping $200M+ on an original film when original films rarely become huge blockbusters anymore (the last original live-action non-biopic film to gross over $300M domestically was Avatar, which was almost 17 years ago), or putting tons of money behind a rock band that writes their own music and can come with clashing egos resulting in break-ups or other chaos (older establishment acts that managed to stick around still get support because nostalgia).
TL;DR: Capitalism and the arts don't exactly mesh well.
Well said!
Ehhh...
They made some interesting stuff but they took a long time to get out games that didn't get a lot of attention
critics loved them... didn't sell much, I think is the issue.
Exactly...
E33, TMNT, Palworld, High on Life, Persona 3, Plague Tale: Requiem, Outriders
If anything, all these games got more attention because they were on gamepass
more shutdowns coming,
add ninja theory
And that is when all the talk that Asha Sharma talks (and yes, it often sounds very good) meets the realities of the Microsoft environment she has to work with.
They have been Mediocre for awhile. Lets see if someone picks them up, doubt it though.
There was that resetera user that claimed he had a friend, that got laid off at Compulsion Games resently, before editing their post to (a microsoft studio or something else) (it it had compulsion games named before edit). Someone here said Schreier wrote something too? yeah this could be the end for Compulsion games.
Shame. I think south of midnight is a really good game.
South of Midnight was good but took way too long to make. If they close Obsidian or Double Fine then I am out on Xbox.
facepalm
