According to Kotaku, Microsoft is shutting down Compulsion Games, the Canadian developer behind South of Midnight and We Happy Few. The closure affects more than 90 employees. The news comes just months after South of Midnight's April 2025 launch, a game that won a BAFTA award for best new IP, a Peabody Award for writing, and animation honors at D.I.C.E.
The studio closure unfolds amid broader turbulence at Xbox Game Studios. Craig Duncan, head of the division, and Louise O'Connor, his chief of staff, departed Microsoft this week after decades at the company. Their exits arrive days after Asha Sharma, the new Xbox CEO, announced a "reset" of the division and Microsoft CEO Satya Nadella stated that Xbox must become a more profitable business.
During a panel at the New York Times Hard Fork event, Nadella said Xbox has been "subsidizing" entertainment rather than monetizing it properly. "There's more monetization of Xbox games happening on YouTube than at Microsoft," he said. Compulsion Games was acquired by Microsoft in 2018. Microsoft has not yet issued an official comment on the shutdown.
