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Microsoft is reportedly planning to shut down South of Midnight and We Happy Few developer Compulsion Games.
Kotaku reports that the layoffs may total more than 90 staff, just months after the Canadian studio was advertising jobs for a new IP. Microsoft has yet to comment. Compulsion Games also developed 2013’s Contrast.
In an update, Kotaku said one source indicated Compulsion leadership is in “negotiations” with Microsoft over the studio’s fate. It is not known where these negotiations may lead. IGN has asked Microsoft for comment.
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.
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.
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
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