Compulsion Games, the Canadian game developer behind South of Midnight and We Happy Few, has officially parted ways with Microsoft. After Microsoft confirmed that Compulsion was one of five Xbox studios it was divesting of, Compulsion boss Guillaume Provost has now confirmed it’s a done deal.
This was hinted at recently when the Steam page for South of Midnight listed Compulsion as the developer and publisher. Now, it’s official, with Provost confirming to Games Beat that its management team acquired the studio and staff, while Microsoft transferred the developer’s IP back to the studio.
What this means in practice is that if you buy a Steam copy of South of Midnight–one of 2025’s best games–the money goes to Compulsion, not Xbox. Provost said it will take some time before the change gets implemented on other storefronts.
Provost did not disclose the specific terms of the deal, but he said staffers at Compulsion really wanted to stick together.
“I did this deal for the team first and foremost. I asked the team, ‘Do you want to stay together?’ The team told me we would rather eat rocks and drink gasoline rather than be split up,” Provost said.
Some Compulsion developers opted to leave the studio after Provost warned staff that the company was at risk of closure. However, Provost said the majority of senior staff stayed on.
Provost went on to say that part of Compulsion’s team is now working on an unannounced game that was already in the works before it split off from Xbox. Microsoft was the financial backer of Compulsion and its projects, so Provost is now taking meetings with various, unnamed parties to secure its financial future.
“I just want to make sure that we’re setting the team up for success,” Provost said. “We’re going to take things slow. We’re going to meet with everyone. Everything is relative. Compared to all of us losing our jobs on July 6, this is a pretty good deal. I would say the exit was gracious on Microsoft’s part.”
The other four studios that Microsoft divested from included Double Fine, Ninja Theory, Undead Labs, and Arkane. Double Fine, led by Tim Schafer, regained its independence like Compulsion did, and Schafer will discuss the company’s future outlook during a livestream today, April 21. Ninja Theory and Undead Labs, meanwhile, were sold to unnamed buyers. Arkane is entering a period of consultation with respect to its home country of France’s local laws.
This all happened as part of a “reset” of the Xbox business under new CEO Asha Sharma. She also laid off 1,600 people in July, with another 1,600 set to lose their jobs this fiscal year.