Xbox Reportedly Shutting Down Compulsion Games Amidst Company “Reset”

June 15, 2026, 12:56pm

Xbox is reportedly shutting down Compulsion Games, the studio behind We Happy Few and South of Midnight. This past week, Xbox boss Asha Sharma shared a new message with employees stating that it would soon be entering a company-wide “reset”. This move would be accompanied by layoffs across a variety of departments at Xbox that would allow the brand to attempt to become more profitable in the future. Now, in the wake of this announcement, the first sizable decision from those in charge at Xbox has come about.

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Reported by Kotaku, Compulsion Games is expected to be shut down by Xbox. Although the news hasn’t yet been announced by those within Xbox, it will represent a big blow to its Xbox Game Studios division. Compulsion was acquired by Xbox in 2018 and went on to release its first game published by the company, South of Midnight, just last year.

While it’s disappointing to see that Compusion is being shuttered by Xbox, the move doesn’t come as a huge shock. South of Midnight failed to perform very well on a critical level, with the game only amassing a 77/100 aggregate review score on Metacritic. This, combined with its meager sales and lengthy development time, led to South of Midnight more or less being a miss for Compulsion. Even when the game was later ported to PS5 and Nintendo Switch 2 platforms later on, it didn’t end up resonating much on these platforms, either.

Currently, it’s not known if Compulsion will be the only studio shut down by Xbox, or if it will simply be the first. Given Xbox’s previous statements, it sounds as though rather enormous layoffs will be coming about in the days and weeks ahead, which could result in other studio closures. Hopefully, this won’t end up being the case, but Xbox fans sound as though they should prepare for the worst.

For now, Xbox hasn’t publicly commented on this decision to shutter Compulsion Games. If and when we learn more about this move in an official capacity, we’ll be sure to update you here on ComicBook.

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