Microsoft Reportedly Set to Close Compulsion Games as Part of Xbox Reset

*Microsoft acquired the studio behind We Happy Few and South of Midnight in 2018, and fresh reports indicate it may now be shut down amid broader cuts.*

Microsoft is preparing to close Compulsion Games, the Canadian studio responsible for Contrast, We Happy Few, and the recently released South of Midnight. The move would affect more than 90 employees and marks an early step in what internal sources describe as an Xbox “reset.”

The reports surfaced on June 15 from Kotaku and Insider Gaming. Kotaku stated that Microsoft and Compulsion leadership remain in negotiations, though the outcome is unclear. A separate account from Mike Straw at Insider Gaming added that Arkane Lyon’s sibling studio, Arkane Austin, faces similar closure as part of the same restructuring. Arkane Austin was already shuttered in May 2024.

Microsoft bought Compulsion outright in 2018. It later gained Arkane through the 2021 ZeniMax acquisition. Arkane Lyon continues work on the upcoming Marvel’s Blade game and is not mentioned in the closure reports.

Limited Details on Negotiations

Both outlets note the absence of an official Microsoft statement. GameSpot contacted the company for comment; none had been issued at the time of publication. Thurrott framed the potential closure as the first visible casualty of the reset despite South of Midnight receiving multiple awards.

Why It Matters

The pattern is straightforward: Microsoft is trimming first-party studios that have not delivered sustained commercial scale. Developers acquired for creative output now face the same efficiency tests applied to the rest of the Xbox hardware and services business. Employees at remaining studios will read the signal clearly—awards alone no longer guarantee continuity.

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Sources:

• GameSpot
• Thurrott

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