One week after Microsoft and Xbox began a large series of "reset" 3,200 layoffs across the gaming brand that saw 1,600 devs let go immediately and four studios split from the company, Compulsion Games — one of the teams divested — has now signaled how it intends to move forward.
In a new post on LinkedIn, the studio behind the action-adventure games We Happy Few and 2025's award-winning Xbox title South of Midnight reaffirmed that it will continue on as an independent developer, while also announcing that it's "expanding opportunities to collaborate with studios across the games and entertainment industry."
"With Compulsion Games returning to its roots as an independent developer, we are expanding opportunities to collaborate with studios across the games and entertainment industry," reads Compulsion's statement.
"We invite partners to leverage the talent and creativity of the award-winning team behind South of Midnight, a game that was honored with a BAFTA Award, a Peabody Award, seven Canadian Game Awards, and recognized on multiple ‘Best Games of 2025’ lists," it continued.
Though it wasn't a massive success for Microsoft and Xbox commercially, South of Midnight reviewed quite well with critics and players, and took home several major awards as Compulsion highlights here. We gave it a 4/5 score in our own review, stating that it "delivers a story filled with trauma and beauty, with a gorgeous world that doesn't overstay its welcome."
Notably, in the past, Compulsion contributed to the development of games like Darksiders and Dungeons & Dragons: Daggerdale in the leadup to its debut puzzle-platform title Contrast. Now, the developer hopes to work with other studios once again.
"With deep experience in creating acclaimed original IP, we bring our artistry, technical expertise and collaborative approach to every project," the announcement adds. "We are excited to support the development of memorable experiences that engage and entertain players around the world."
The layoffs and divestment of Compulsion Games from Xbox came as part of a wider effort from Microsoft to reorganize its gaming business after it "overextended," with Xbox's new CEO Asha Sharma pushing for the brand to "move faster" with and focus on its largest properties such as Fallout, The Elder Scrolls, and Halo.
Games like South of Midnight that have less selling power than huge established franchises aren't going to mesh well with that strategy, which is ultimately why Microsoft and Xbox cut Compulsion loose. That departure is frustrating to see for many — myself included — as we know it came with layoffs...but, at the very least, I'm glad that the studio will live on.
As for what its developers will end up working on, either on their own or with other teams across the industry? Only time will tell. Whatever's next for Compulsion Games, though, I hope that it will be a project its workers are passionate about, and that it will succeed well enough to give the studio stability in what's become an extremely volatile time for game development.
What kind of game would you like to see Compulsion Games make next? What studio(s) should is partner and collaborate with? Let me know what you think in the comments.
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