Xbox is reportedly closing South of Midnight developer Compulsion Games

Around 90 people may soon be out of work, and a Peabody Award-winning studio might not survive the year.

Multiple sources have told that Xbox is planning to shut down Compulsion Games, the Montreal-based developer behind South of Midnight. The news was first reported by Kotaku and a recent update from them adds that Compulsion leadership is currently in negotiations with Microsoft over the studio’s fate, though no details have been disclosed.

South of Midnight – PS5 and Switch 2 launch trailer

A fear that had been building for months

Staff say the unease didn’t start with the announcement. Long before anything was confirmed, there was “worry” and “fear” circulating inside the studio. When Phil Spencer stepped down earlier this year, that anxiety reportedly sharpened.

“It didn’t matter who took over,” one source said. “We all talked about what it meant for us. No one was confident we’d be ok.”

Another employee described the silence from above as its own kind of message. Nothing was said to put minds at ease, and when the subject of the studio’s future came up, it was met with nothing definitive. Just quiet.

A critical hit that missed commercially

South of Midnight launched in April 2025 and earned strong reviews, going on to win a Peabody Award in the Immersive and Interactive category. Commercially, though, the game reportedly fell short of Xbox’s internal expectations.

Compulsion Games has been part of Xbox since 2018 and currently employs roughly 90 to 100 people, with work already underway on a follow-up project.

---

For more updates like this, check out the gaming news section!