Microsoft’s Xbox division is reportedly considering the closure of Compulsion Games, the studio behind the upcoming title ‘South of Midnight.’ Sources suggest that leadership at Compulsion Games is in discussions with Microsoft regarding the studio’s future, though the specifics of these negotiations remain undisclosed. The number of potentially impacted positions is also not yet clear.
Other Studios Reportedly at Risk
The potential closure of Compulsion Games is part of a broader alleged restructuring within Xbox. Reports indicate that other studios, including Tim Schafer’s Double Fine and the developer of ‘Hellblade,’ Ninja Theory, are also facing similar crisis talks. Management at these studios are reportedly fighting to spin them off to avoid closure.
These developments come as Xbox’s games division faces financial pressures. According to a blog post by CEO Asha Sharma, which excluded Activision Blizzard, Microsoft has invested over $20 billion in Xbox over the past five years. However, the division’s revenue has reportedly seen a decrease of approximately $500 million per year. Microsoft is also rumored to be planning further layoffs and is allegedly considering spinning off Xbox as a separate entity or restructuring the games division into a wholly owned subsidiary.
Departures and Studio Acclaim
Earlier this week, it was announced that Craig Duncan, the head of Xbox Games Studios, departed the company after eighteen months in the role. His chief of staff, Louise O’Connor, is also leaving, having joined less than a year prior.
‘South of Midnight,’ developed by Compulsion Games, recently received critical acclaim, securing the Game of the Year Award at the Gayming Awards and the Best New Intellectual Property award at the BAFTA Games Awards 2026. The studio also announced in April that the game had won a Peabody Award, recognized for its impactful storytelling.
Both Double Fine, known for the ‘Psychonauts’ series, and Ninja Theory have also developed critically acclaimed and award-winning games, highlighting the potential impact of any studio closures on the broader gaming landscape.
Mitchell Landsberg is the senior reporter for News Raise and focuses on Technology. Mitchell regularly writes about social media platforms and how influencers, industry and general people use them to communicate and make money.
