Compulsion Games Seeks Co-Development Partners One Week After Xbox Split

Marcus Vale14/07/20265 min read

Compulsion Games Seeks Co-Development Partners One Week After Xbox Split

Compulsion Games, the Montreal studio behind South of Midnight and We Happy Few, is publicly pitching itself as a co-development and support partner for other developers and entertainment companies, just seven days after formally splitting from Xbox. The move, posted on LinkedIn, marks the studio’s first major step since regaining independent status amid Microsoft’s sweeping “reset” of its gaming division.

PC Gamer reported that just a week after South of Midnight developer Compulsion Games returned to independence amidst the latest round of sweeping layoffs at Xbox, the studio is looking for work, with a message posted on LinkedIn saying it is “expanding opportunities to collaborate with studios across the games and entertainment industry.” The studio’s statement, also carried by Windows Central, added: “We invite partners to leverage the talent and creativity of the award-winning team behind South of Midnight, a game that was honored with a BAFTA Award, a Peabody Award,” among other accolades.

From “Most Significant Restructure in Xbox History” to an Independent Pitch

The announcement follows a turbulent month for Xbox’s internal studio roster. According to Game Informer, Xbox announced it is splitting from five of its development studios – Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arkane Studios – while announcing plans to reduce headcount by over 3,000 employees over the next several months, as CEO Asha Sharma detailed in what she called “the most significant restructure in Xbox history.”

Sharma laid out the financial rationale bluntly in her memo to staff, stating that “our business today is not healthy,” and that Xbox was “operating at margins that are 3-10x lower than comparable platform and publishing businesses.” Video Games Chronicle further reported that as part of the agreement, both companies will retain their IPs and game catalogs and receive investment, giving Compulsion a financial cushion but no guarantee of future work.

Compulsion’s own statement on the divestment, quoted by Video Games Chronicle, struck a note of cautious optimism: the studio said it was “excited to continue building the distinctive games that define Compulsion while taking the next steps in our journey,” adding that it cared “about the craft of making games, the stories we tell, the players who experience them, and the assembled creators who put their heart and soul into doing something different.”

South of Midnight’s Awards Haul Becomes the Sales Pitch

Compulsion is leaning heavily on the critical reputation of South of Midnight, its 2025 Southern Gothic action-adventure starring a young “Weaver” named Hazel Flood, to attract prospective partners. Windows Central reported that the studio’s pitch highlighted its action-adventure games We Happy Few and 2025’s award-winning Xbox title South of Midnight, framing its in-house talent as the draw for outside collaborators.

The game’s trophy case is substantial: PC Gamer noted South of Midnight did indeed win all those awards and more—one high-profile win that went unmentioned is the Games for Impact crown at the 2025 Game Awards. CBC Arts separately reported that the Montreal-based video game developer won seven Canadian Game Awards this year, including best narrative, game of the year and studio of the year.

Despite the accolades, commercial performance told a different story. PC Gamer noted that it wasn’t a huge seller, though, and all that critical praise wasn’t enough to secure Compulsion a future as an Xbox-owned studio, much less ensure it a follow-up release. Farah Brixi of Compulsion Games told CBC Arts that the team’s reaction to its award wins had become a rare bright spot inside the company, saying: “We have a moment where we celebrate together. In the industry right now, good news is rare.”

A Return to Compulsion’s Roots as a Services Studio

Seeking outside contract work is not unfamiliar territory for the 2009-founded studio. PC Gamer pointed out that Compulsion launched as a support studio—its website says it got its start in 2009 “as a home office providing services to other game studios,” including THQ and Atari—so this isn’t entirely unfamiliar territory. Before releasing its debut title Contrast, the studio reportedly contributed work to other companies’ projects, according to Windows Central, which noted in the past, Compulsion contributed to the development of games like Darksiders and Dungeons & Dragons: Daggerdale in the leadup to its debut puzzle-platform title Contrast.

PC Gamer cautioned, however, that the industry backdrop is far harsher than it was in 2009, observing that the environment then was very different than it is today: Sweeping layoffs and studio closures over the past several years have left countless developers without work in an increasingly constrained industry. The outlet also reported that internal uncertainty had already been visible before the independence announcement, noting a couple weeks before the independence announcement, numerous people at the studio began actively looking for new jobs, reportedly with the blessing of studio leadership.

What Compulsion’s LinkedIn Statement Signals

Compulsion’s public messaging framed its pitch around versatility rather than a single new project. Windows Central quoted the studio’s statement in full, in which it said: “With deep experience in creating acclaimed original IP, we bring our artistry, technical expertise and collaborative approach to every project.”

Its closing line, cited across multiple outlets, positioned the studio as available for work-for-hire, co-development, or entertainment-industry crossover projects: “We are excited to support the development of memorable experiences that engage and entertain players around the world.”

Compulsion joins Double Fine as one of only two studios Xbox allowed to exit as fully independent operations rather than being sold outright, with Ninja Theory and Undead Labs instead heading toward new ownership. Video Games Chronicle reported that Sharma confirmed that Xbox will let go of five of its development studios, either via sales or divestment, and that Compulsion and Double Fine were the two granted independence rather than a buyer-led sale.

For Australian and New Zealand players who picked up South of Midnight via Xbox Game Pass or bought it outright last year, the studio’s future direction now hinges on whether a co-development deal or a fresh publishing partner materialises before its retained investment runs dry. Whether that means new original work under the Compulsion name, or the team quietly supporting someone else’s release, remains to be seen.