Microsoft Reportedly Shutters South of Midnight Developer

Published Jun 15, 2026, 2:38 PM EDT

James Ratcliff joined Game Rant in 2022 as a Gaming News Writer. In 2023, James was offered a chance to become an occasional feature writer for different games and then a Senior Author in 2025. He is a third-generation Texan who has written professionally for over a decade at local newspapers, addressing various topics for his readers. Since 2024, James has shifted his complete focus to covering gaming news.

Microsoft is reportedly shutting down Xbox subsidiary Compulsion Games, the developers of 2025’s South of Midnight, as part of the company’s plans to restructure the Xbox brand. It is currently unclear exactly how many staff members at the Montreal-based Xbox studio will be affected by the potential closure.

Compulsion Games May Be Shutting Down

Hours after Xbox Game Studios lead Craig Duncan announced his departure from Microsoft, reports stated that the tech giant is considering more cuts. Sources stated that Compulsion Games, the creators of South of Midnight, We Happy Few, and Contrast, may be shuttered as part of Xbox’s “reset” efforts. However, sources with Compulsion Games added that the studio was in negotiations with Microsoft over its potential fate, though the details have not been disclosed. The report came two months after Compulsion Games was looking to hire some programmers for a new, unrevealed IP project. Given the uncertain status of Compulsion Games, it is unknown what will happen to the unannounced IP. As of this writing, neither Microsoft nor Compulsion Games have officially commented on the situation.