Xbox is reportedly considering closing South of Midnight studio, Compulsion Games, with Double Fine and Ninja Theory also allegedly at risk.
Xbox is reportedly contemplating the closure of Compulsion Games, known for titles like We Happy Few and South of Midnight. Sources indicate that Compulsion's leadership is currently in negotiations regarding the studio's future, with details of these talks remaining undisclosed. Ninja Theory, the studio behind Hellblade, is also said to be at risk of closure, with reports suggesting that several Xbox studios are engaged in crisis discussions to prevent shutdown.
Microsoft's games arm, excluding Activision Blizzard, has invested over $20 billion in Xbox over the past five years, according to CEO Asha Sharma. Despite this, revenue has seen a decline of approximately $500 million annually. Layoffs are reportedly being planned within the games division, with considerations to spin off Xbox as a separate entity or restructure it as a wholly owned subsidiary.
In a recent development, Craig Duncan, the head of Xbox Games Studios, has left the company after eighteen months, along with his chief of staff Louise O'Connor. Compulsion Games' South of Midnight received accolades at the Gayming Awards and the BAFTA Awards 2026. The studio also won a Peabody Award for its impactful storytelling. Double Fine and Ninja Theory, renowned for games like Psychonauts and Hellblade, have also been recognized for their award-winning titles.
