Compulsion Games is now listed as the publisher of its musical action-adventure title, South of Midnight, on Steam. This change indicates the studio's full separation from the Xbox division, a development that follows a period of significant restructuring within Microsoft's gaming division.
Compulsion Games was among the studios that regained their independence as part of this broader Xbox restructuring. Alongside Compulsion, indie studio Double Fine also achieved independence. Other studios, such as Ninja Theory and Undead Labs, also departed the Xbox division under new, undisclosed ownership. Arkane Lyon was reportedly in discussions to exit as well, though its current status remains unclear.
As part of this transition, Compulsion Games secured ownership of its intellectual property. The studio confirmed in a statement that it would retain the rights to its existing franchises: Contrast, We Happy Few, and South of Midnight. "We're grateful for the years we spent with Xbox," the studio stated, "for the support they provided our team, and for the opportunity to bring these games to players around the world. As an independent studio, we're excited to continue building the distinctive games that define Compulsion while taking the next steps in our journey."
Shortly after the announcement of its independence, Compulsion Games began seeking new partnerships. The Steam listing for South of Midnight now exclusively credits Compulsion Games, a detail noted by the user Michael on Bluesky. However, the game is still attributed to Microsoft/Xbox on the PlayStation and Xbox digital storefronts. The reason for this discrepancy, whether a delayed update or an indication of ongoing arrangements, is not yet clear. Compulsion Games has been contacted for clarification on this matter.
This restructuring, spearheaded by Asha Sharma, has had a broad impact across Xbox, affecting even core franchise development teams. Reports suggest a decline in morale among staff as they await further decisions regarding potential layoffs. South of Midnight itself was released in spring 2025 to mixed reception. While its visual presentation, stop-motion-inspired animation, and integration of music with gameplay were praised, the game's core mechanics were found to be lacking depth in reviews.