Compulsion Games is a Canadian video game developer founded in 2009 and based in Montreal, Quebec, best known for the dystopian adventure We Happy Few and the folklore action-adventure South of Midnight. The studio was acquired by Microsoft as part of Xbox Game Studios in 2018 and employs approximately 90 to 100 developers. As of June 15, 2026, reports from Kotaku, Bloomberg, and The Verge indicate Microsoft is planning to close the studio, with Compulsion leadership currently in negotiations with Microsoft over the studio’s future. South of Midnight won a Peabody Award in the Immersive and Interactive category in April 2026 and the BAFTA 22nd Game Awards Best New Intellectual Property award, with Asha Sharma publicly congratulating the team weeks before the closure reports emerged.
Contrast was Compulsion Games’ debut release, launching November 15, 2013, as a PlayStation 4 launch title and releasing simultaneously on PC, PlayStation 3, and Xbox 360, published by Focus Home Interactive. The game followed Dawn, a woman who could shift into a two-dimensional shadow form and traverse the game’s Art Deco noir world by moving across shadows projected on walls and floors. The story was told through the perspective of Didi, a young girl in a 1920s fantastical city whose parents’ tumultuous relationship played out in the shadows around her. Contrast established Compulsion’s interest in distinctive visual worlds with emotional cores and a willingness to pursue unconventional mechanics in service of atmosphere over conventional game design.
We Happy Few began as a procedurally generated survival game that entered Steam Early Access on July 26, 2016, before Compulsion rebuilt it into a hand-crafted narrative adventure for its full release on August 10, 2018, for PC, Xbox One, and PlayStation 4, published by Gearbox Publishing. The game is set in a retrofuturistic 1960s English city-state called Wellington Wells, where the population takes a drug called Joy that suppresses bad memories and enforces compulsory happiness. Citizens who refuse Joy are called Downers and are violently rejected by the society around them. Arthur Hastings, the game’s first protagonist, stops taking Joy and sees Wellington Wells’ cheerful façade collapse into something far darker as he tries to escape the city. Two additional playable characters, Sally Boyle and Ollie Starkey, told parallel stories across the same setting. The game’s shift from the original Early Access survival format to a story-driven adventure generated some audience confusion but the finished release received moderate critical reception for its world-building and tonal commitment.
South of Midnight released April 8, 2025, for Xbox Series X and Series S and Windows, published by Xbox Game Studios, with PlayStation 5 and Nintendo Switch 2 versions releasing March 31, 2026. Directed by David Sears and Jasmin Roy, written by Zaire Lanier, and scored by Olivier Derivière, the game follows Hazel Flood, a nineteen-year-old living in the American Deep South whose home is destroyed by a hurricane, pulling her into a parallel world built from the folklore and mythology of the region. The game’s visual style incorporated claymation-influenced character design alongside Southern Gothic environments, with Hazel weaving reality together through combat built around thread-based magic. The game was composed around genuine engagement with Southern folklore traditions including Haint Blue, Two-Toed Tom, and Boo Hag mythology.
South of Midnight received positive critical reception and won the Games for Impact award at The Game Awards 2025, the Peabody Award in the Immersive and Interactive category in April 2026, and the Best New Intellectual Property award at the 22nd BAFTA Game Awards. Despite the critical recognition, the game failed to meet Microsoft’s internal commercial expectations, a factor cited in the closure reports. Xbox CEO Asha Sharma publicly congratulated the Compulsion team on their Peabody Award weeks before the closure reports emerged.
Microsoft acquired Compulsion Games in 2018 as part of the same wave of studio acquisitions that brought in Ninja Theory, Obsidian Entertainment, and inXile Entertainment. The acquisition followed Compulsion’s independent development of We Happy Few and gave the studio the resources to develop South of Midnight over approximately five years. Reports from Kotaku, later confirmed by Bloomberg and The Verge, emerged June 15, 2026, indicating Microsoft planned to close the studio as part of a broader reorganization of Xbox Game Studios. Xbox CEO Asha Sharma had sent a letter to Xbox employees acknowledging the division was over-extended and would undergo a reset, with the closure of Compulsion representing part of a shift toward prioritizing commercially massive franchises over mid-tier single-player studios. Arkane Austin, Tango Gameworks, and Alpha Dog Games were all closed by Microsoft in 2024, with Compulsion following that pattern. The studio’s leadership is in negotiations with Microsoft over its future as of mid-June 2026. Multiple Compulsion employees began posting on LinkedIn that they were open to new opportunities following the reports. A new intellectual property that the studio had begun hiring to develop will not proceed if the closure is confirmed.