Xbox Shuts Down Award-Winning Studio: The Inside Story

Xbox is reportedly moving to shutter Compulsion Games, the studio behind the critically acclaimed titles South of Midnight and We Happy Few, according to a Kotaku investigation.

While the exact number of employees affected remains uncertain, the studio’s LinkedIn profile lists roughly 90 staff members. Kotaku’s research suggests the real figure is higher, as several former employees have taken to social media to announce their job searches. Remarkably, just two months ago, the studio’s talent lead was actively recruiting on LinkedIn, touting a “fascinating, intriguing, brand new IP” as a fresh opportunity.

The announcement follows a recent open letter from Xbox CEO Asha Sharma and Microsoft Game Studios chief Matt Booty, which outlined the company’s ongoing financial and logistical challenges and hinted at imminent mass layoffs.

Adding to the turbulence, The Game Business reported earlier today that Craig Duncan, the head of Xbox Game Studios, has stepped down after serving less than two years in the position.

Earlier this year, Sharma lauded the studio’s vision, stating, “We’re focused on creating outstanding games,” she told Game File in April. “Chief Content Officer Matt Booty can elaborate on that. With the Peabody Award for South of Midnight and the launch of Kiln today, I feel every day brings something remarkable.”

Booty highlighted Compulsion as a testament to Xbox’s commitment to critically acclaimed titles. “South of Midnight clinched a Peabody Award today, underscoring the narrative power of modern games,” he remarked. “It follows their recent BAFTA win for a new IP just a few days ago. That’s exactly where we’re headed. While we manage flagship franchises like Call of Duty and Minecraft, we’re equally devoted to nurturing fresh intellectual properties and telling compelling stories in studios such as Compulsion and Double Fine, which recently earned nominations for Keeper.”