Microsoft is reportedly planning to shut down South of Midnight and We Happy Few developer Compulsion Games.<\/p>\n
The Canadian studio was founded in 2009 by former Arkane developer Guillaume Provost as a work-for-hire unit. Its first game, puzzle-platformer Contrast, came out in 2013. Survival horror game We Happy Few followed in 2018, published by Borderlands company Gearbox. By then Microsoft had bought the company, bringing it under the Microsoft Studios (now known as Xbox Game Studios) umbrella.<\/p>\n
Kotaku reports that the Compulsion layoffs may total more than 90 staff, just months after the studio advertised jobs for a new IP. In an update, Kotaku said one source indicated Compulsion leadership is in “negotiations” with Microsoft over the studio\u2019s fate. It is not known where these negotiations may lead. IGN has asked Microsoft for comment.<\/p>\n
The news comes just hours after it emerged that head of Xbox Game Studios Craig Duncan and chief of staff Louise O’Connor had left Microsoft after decades at the company.<\/p>\n
South of Midnight, an action adventure game set in a fictionalized American Deep South, launched in April 2025 and while it was well-received by critics, it failed to find a significant audience. It launched on PlayStation 5 and Nintendo Switch 2 in March.<\/p>\n
Just last week, new Xbox boss Asha Sharma warned of a company “reset” that most took as a signal that Microsoft planned big layoffs and studio closures. One analyst told IGN “the studios most exposed are brilliant for prestige and rotten for the spreadsheet.” Microsoft was then said to be speeding up development on new The Elder Scrolls, Fallout, and Halo games as it considered restructuring or even spinning off its gaming branch.<\/p>\n
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