Xbox is reportedly shutting down South of Midnight studio Compulsion Games

June 15, 2026 - 22:17

Microsoft is reportedly planning to shut down Compulsion Games, the studio behind the upcoming fantasy action game South of Midnight and the cult hit We Happy Few. According to sources familiar with the matter, the closure is part of a broader restructuring within Xbox's first-party development teams, though no official announcement has been made yet.

Compulsion Games, based in Montreal, was acquired by Microsoft in 2018. The studio previously developed the surreal survival game We Happy Few and the atmospheric puzzle platformer Contrast. Their latest project, South of Midnight, is a third-person action-adventure set in the American Deep South, drawing heavily on Southern Gothic folklore. The game was revealed during an Xbox showcase in 2023 and has been in development for several years.

The reported shutdown comes as Xbox continues to reassess its portfolio following the high-profile closure of Tango Gameworks and Arkane Austin earlier this year. While South of Midnight has not yet been released, sources suggest the project may be completed and shipped before the studio closes, or its assets could be transferred to another team within Xbox Game Studios.

Neither Microsoft nor Compulsion Games have commented on the reports. The news has sparked concern among fans and industry observers, who note that Compulsion was one of the few studios focused on single-player narrative experiences within the Xbox ecosystem. If confirmed, the closure would mark another significant loss for Microsoft's internal development lineup.