Just seven days after splitting from Microsoft, Canadian development studio Compulsion Games is publicly seeking co-development projects and industry partners.
Following the massive wave of layoffs at Xbox in early July 2026, in which around 3.200 jobs were cut and five studios were spun off, the team behind “South of Midnight” is thus taking the hard road back to the economic reality of independence.
The rapid fall from the Microsoft nest
Compulsion Games was acquired by Microsoft in 2018 to strengthen the Xbox Game Studios portfolio with unconventional, narrative titles. With the release of the visually striking action-adventure "South of Midnight" (our review) the Montreal-based studio celebrated considerable critical success, including awards at the BAFTAs and the Game Awards.
But the grace period is over. As part of the sweeping restructuring under Xbox CEO Asha Sharma, the management of Compulsion Games did indeed negotiate the own independence and the retention of the rights to the Contrast, We Happy Few, and South of Midnight brands. But without the financial backing of a tech giant, the studio is now facing a desperate fight for survival. It has to pay salaries for around 112 employees without a new, fully funded project in the pipeline.
Looking for commissioned work
Today, Tuesday, Compulsion Games issued a clear call for proposals. They are now offering their expertise in art design, technical implementation, and creative storytelling for co-development or support work to other studios in the games and entertainment industry.
"With Compulsion Games' return to its roots as an independent developer, we are expanding opportunities to collaborate with studios across the gaming and entertainment industry."
This wording sounds elegant in PR jargon, but in reality, it describes a classic case of cold calling. Instead of working directly on a successor, the highly praised team has to offer its services to cover its running costs. A fate they share with Double Fine, who were simultaneously dropped by Xbox and are now also on their own.
Hopes for a swift sequel to "South of Midnight" or a major new original project from Compulsion Games are on hold for now. Independence sounds romantic, but in the current consolidation phase of the gaming industry, it primarily means securing survival through contract work for other publishers.
A positive side effect: Since the IP rights remain with the studio, future releases on all platforms, including the PlayStation 5 or the successor to the Nintendo Switch, are extremely likely. Exclusivity is now a luxury that Compulsion can no longer afford.
