South of Midnight Dev The first Xbox Studio hit with layoffs

South of midnight Developer Compulsion Games has laid off a number of its employees, seemingly starting a potentially much larger round of Xbox-wide layoffs and even studio closures. South of midnight Released in April 2025 to critical acclaim, it doesn't seem to have moved the needle as much as it needed to, leading to the team behind it being affected by Xbox's latest restructuring efforts.

While the recent Xbox Games Showcase featured a number of exciting titles, it didn't take long for the mood to turn sour. One of the more prominent exhibits was a novelty Senua game by Ninja Theory, only for Microsoft to announce the studio's closure just days after the event. However, Ninja Theory's closure crystallized very quickly, with subsequent sources claiming that Double Fine and Compulsion Games are in “active discussions” about a possible spin-off. Since Compulsion hasn't announced anything about going their own way, it seems likely that those talks have fallen through.

Compulsion Games Dev Talks Research and Representation in South of Midnight

Game Rant talks to Compulsion Games head of studio Guillaume Provost about South of Midnight's origins, design, and player response.

South of Midnight Developer Compulsion Games Hit by Layoffs

As Rebs Gaming reported on Twitter, Compulsion Games has been hit with mass layoffs, leaving many employees out of work. It is noteworthy that while many ex-employees have published their work experiences South of midnightthere was no specific mention of the Compulsion Games themselves being discontinued. That said, rumors of the studio closing have not been confirmed or denied, although the Rebs believe that is definitely the case. Developers now out of work include writers, narrative designers, 3D and concept artists, and at least dialogue designers, with more likely to appear in the coming days.

Although South of midnight found its audience early on, it doesn't seem like enough to sustain the studio in its current configuration. The previous release of Compulsion Games was from 2018 We are happy littlewhich suggests South of midnight production took a very long time. It also means that it was a big financial investment for the Xbox that doesn't seem to have paid off in the end, although without hard sales numbers it's hard to tell. All that is known is that it gave over a million players South of midnight shot within a month of its release, an impressive statistic by any metric.

What kind of weapon is that?

Identify the silhouettes before time runs out.

What kind of weapon is that?

Identify the silhouettes before time runs out.

Easy (7.5s) Medium (5.0s) Hard (2.5s) Permadeath (2.5s)

It's already clear that Microsoft isn't happy with how its gaming division and its subsidiaries have performed over the past few years. There have been claims that Microsoft is considering selling the Xbox as a whole, meaning the problems and shake-ups won't stop with Ninja Theory, Compulsion Games and Double Fine. A systematic overhaul of the entire Xbox ecosystem may be necessary, and the new CEO, Asha Sharma, seems intent on seeing it through. Dozens of developers must be affected in the process, with the true effects on the industry likely not being seen for many years.

Double Fine's response to the closure allegations remains unclear at this time. Over the years, the studio has released a number of popular games such as Psychonauts 2though more recent versions of it seem to have flown under the radar. Multiplayer brawler Furnace is a prime example, although the game generally enjoys very positive reviews. Notably, Double Fine has been quite productive lately, with the release of its eccentric puzzle-adventure 2025. Keeperso Xbox might be more interested in keeping the team around for a while longer.