Key facts
- Compulsion Games ended its relationship with former owner Xbox as part of Microsoft's multi-round mass cuts during 2026.
- South of Midnight creative director David Sears described the Xbox funding arrangement as unsustainable when looking back.
- Rather than shutting Compulsion down, Microsoft agreed a deal to let the studio go independent again, and Compulsion took all its intellectual property and an unknown amount of financial runway.
- During South of Midnight's development, David Sears told people that somebody would one day say the money tap was closing the floodgates, leading to traumatic results downstream.
Microsoft ended its relationship with Compulsion Games in July 2026 as part of multi-round mass cuts, then let the South of Midnight developer become independent again rather than closing it. In July 2026, Microsoft announced it was cutting five studios and thousands of jobs as part of a planned business reset, and Compulsion Games was one of the studios cut. The split took place in July instead of a shutdown.
Compulsion took all its intellectual property and an unknown amount of financial runway in the split, and it remains unclear whether the studio has signed new work. Video Games Chronicle dates the split to July rather than a shutdown, while Kotaku adds Compulsion retained its intellectual property and an unknown amount of financial runway. In July, Compulsion announced it was seeking partners to develop new projects after becoming independent, and the studio is looking for co-development or support work.
Video Games Chronicle reports the July announcement of partnership-seeking followed Microsoft’s decision to let Compulsion go independent.
Xbox Game Studios published South of Midnight for Xbox consoles and PC on April 8, 2025, with Compulsion Games as the developer. Explosion gives the exact launch date and identifies Compulsion as the developer and Xbox Game Studios as the publisher. Video Games Chronicle also places the Xbox and PC release in April 2025. The game came to PlayStation 5 and Switch 2 in March 2026 after its initial Xbox and PC launch.
Video Games Chronicle provides the release sequence, noting PS5 and Switch 2 versions arrived after the initial Xbox and PC launch in April 2025. South of Midnight attracted more than one million players in its first three weeks, counting both sales and Game Pass players. Video Games Chronicle gives the figure as evidence of audience reach following the April 2025 release, specifying it combines sales and Game Pass users. Game Pass is a subscription service that provides access to a library of games.
David Sears, the game’s creative director, described the Xbox funding arrangement as unsustainable when looking back. He made the point in a MinnMax interview. Sears left Compulsion Games in March 2025 and was not at the studio when Microsoft subsequently decided to end its relationship with the developer. Rock Paper Shotgun, Kotaku and Video Games Chronicle all note Sears departed in March 2025, before Microsoft’s decision to cut ties with Compulsion later that year.
Sears said he would probably not have funded the game if he had been in charge of Xbox. He wanted to make the game but was not completely selfless, and said he would have shut off another company’s money flow before South of Midnight. These comments came from MinnMax interviews summarized by Rock Paper Shotgun, Kotaku and Video Games Chronicle. “Yeah, probably,” he said.
During South of Midnight’s development, David Sears told people that somebody would one day say the money tap was closing the floodgates, leading to traumatic results downstream. He made the warning while the game was in development, fearing Xbox funding might eventually end. “There’s always a night when Rome burns, and I didn’t know exactly when it would be, but I was always worried about it,” he said. Rock Paper Shotgun, Kotaku and Video Games Chronicle report the remark from his MinnMax interview.
“It just seems like, in hindsight at least, it was unsustainable,” David Sears said. Rock Paper Shotgun reports that Sears made this point in a MinnMax interview. Explosion says Sears described earlier Xbox funding as unsustainable, and Kotaku quotes the same verdict.
Sears also said “modern Microsoft showed a “more humane” side than the version of the company that existed in the 90s and early 2000s.” He made the comparison in the same MinnMax interview where he discussed the funding arrangement.
Compulsion Games was formerly owned by Xbox before the split. Guillaume Provost, Compulsion’s chief executive, said the studio’s job under Xbox was to add games that stand out and widen the lineup, rather than blockbusters such as Call of Duty. Video Games Chronicle quotes Provost describing Compulsion’s place in Xbox Game Studios before the July 2026 cuts, contrasting it with blockbuster development. The studio developed South of Midnight under Xbox Game Studios before the relationship ended.
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