Compulsion Games, the studio behind South of Midnight and We Happy Few, is reportedly facing potential closure by its parent company, Microsoft. While initial reports from Kotaku indicated the studio was set to be shuttered, subsequent updates reveal that leadership is currently in active negotiations with Microsoft regarding the studio’s future. Xbox has not commented on the status of the developer.
What is the current status of Compulsion Games?
As of mid-June 2026, the future of the Montreal-based developer remains in flux. Although early reports suggested a definitive closure, Kotaku updated its coverage to clarify that Compulsion Games is in ongoing discussions with Microsoft. The specific terms of these negotiations remain undisclosed, leaving the fate of the studio’s workforce—which consists of over 100 employees—uncertain.
Why is there speculation about studio closures?
The report concerning Compulsion Games follows broader industry rumors suggesting that Microsoft is evaluating the viability of multiple Xbox studios throughout 2026. According to reporting from Pure Xbox, these rumors have created significant concern regarding the stability of internal development teams. The speculation centers on whether specific titles are meeting internal performance expectations, despite critical reception.
How does project performance impact studio stability?
Market performance is often a primary factor in corporate restructuring. While South of Midnight received a 9/10 score from Pure Xbox and earned industry recognition, including a Peabody Award, reports suggest the title may have underperformed against Microsoft’s financial targets. This creates a disconnect between critical acclaim and commercial viability, a common tension in the modern gaming industry where high production costs require significant player engagement to justify continued operations.
Pro Tip: Tracking Studio Health
To keep up with the stability of your favorite developers, monitor official press releases from parent companies like Microsoft. Industry news outlets often provide updates on studio restructuring, but official statements remain the only way to confirm changes in employment status or studio closures.
Frequently Asked Questions
Is Compulsion Games officially closed?
No. While reports indicate the studio is at risk, Kotaku confirmed that the studio leadership is currently in negotiations with Microsoft regarding its future.
How many people work at Compulsion Games?
The studio is estimated to employ over 100 workers, according to reports from Kotaku.
Has Microsoft issued a statement?
As of June 2026, Microsoft has not responded to requests for comment regarding the status of Compulsion Games.
What are your thoughts on the future of Xbox internal studios? Join the conversation in the comments below or subscribe to our newsletter for the latest updates on industry developments.