Xbox is shutting down Compulsion Games, the developer behind the anticipated title South of Midnight, according to reporting from Kotaku. The closure marks the latest upheaval at Microsoft's gaming division under new leadership.
Asha Sharma, who took over as Xbox boss in February, signaled the turbulence last week with an internal memo warning of an Xbox "reset" and anticipated layoffs. Today's studio closure confirms those warnings were literal. Sharma has already made aggressive moves since her appointment, including cutting Xbox Game Pass pricing to shore up subscription revenue.
Compulsion Games, known for titles like Contrast and We Happy Few, has been working on South of Midnight, a supernatural adventure game that was positioned as a significant exclusive for Xbox platforms. The studio's closure raises questions about the game's future, though Microsoft has not immediately clarified whether the project will be canceled, transferred to another developer, or shelved indefinitely.
The turmoil reflects broader uncertainty at Xbox. The division has faced pressure to justify its investments and demonstrate growth. Game Pass subscriber numbers have plateaued, and several high-profile releases have underperformed or faced delays. Rather than sustain existing commitments, Sharma's strategy appears focused on consolidation and cost reduction.
Executive departures have accompanied the layoffs and closures. Multiple Xbox leaders have departed or faced reshuffling as Sharma restructures the organization. This churn raises concerns about institutional knowledge loss and project continuity.
For game developers, Xbox's instability creates real risk. Studios building exclusive titles for Xbox now face uncertainty about whether their projects will survive leadership transitions or budget pressures. For players, the closure of Compulsion Games and the status of South of Midnight represent lost content and extended development droughts.
Sharma's reset may ultimately strengthen Xbox by cutting underperforming projects and refocusing resources. But in the near term,