Microsoft has been reshaping its Xbox division in recent months, appointing a new chief executive, overhauling senior leadership, and redefining its strategic direction. Yet, the tech giant appears poised to trigger a significant wave of layoffs within Xbox, and may even shutter one of its first‑party studios.
According to a fresh report from Kotaku, Compulsion Games—a studio that has delivered titles such as Contrast (2013), We Happy Few (2018), and the upcoming South of Midnight (2025)—will soon be shut down by Microsoft. The studio’s most recent project earned critical acclaim, securing a Peabody Award for its narrative excellence and achieving a 9/10 score in Neowin’s review, praised for its compelling storyline, stunning environments, and intriguing characters.
Compulsion joined the Xbox Game Studios family in 2018, the same year Microsoft announced its acquisitions of Playground Games, Undead Labs, and Ninja Theory.
Despite recent job postings for new positions, the Kotaku piece confirms that Compulsion Games is being closed entirely, with more than 90 employees slated for termination. The studio’s leadership is reportedly in talks with Microsoft regarding the decision, though no official confirmation has yet been released.
The latest report arrives at a pivotal moment, coinciding with the departure of two long‑time Xbox executives from Microsoft Gaming. Craig Duncan, who has steered titles such as Kinect Sports and Sea of Thieves, and Louise O’Connor, formerly leading Rare’s ambitious Everwild project, both announced their exits after more than twenty years of service.
If the studio shutdown rumor proves true, it could herald the beginning of a significant wave of layoffs at Xbox Game Studios. Speculation is also mounting that Arkane Studios might face substantial cuts. As always, readers should treat these reports with caution until Microsoft or the affected studios issue an official statement.
❓ Frequently Asked Questions (FAQ)
Why is Microsoft shutting down Compulsion Games?
Microsoft is consolidating its first‑party studio portfolio to focus resources on high‑profile franchises and streamline operations, leading to the closure of studios that are not aligned with its strategic priorities, including Compulsion Games.
How many employees will be affected by the closure of Compulsion Games?
More than 90 employees are slated for termination as the studio is shut down entirely.
What impact will the closure have on the upcoming title South of Midnight?
South of Midnight, which was in development at Compulsion, will likely be transferred to another studio or cancelled, depending on Microsoft’s decision to either continue the project under a different team or discontinue it altogether.
News Source: Neowin
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