The video game industry is no stranger to heartbreaking news, and the latest round of cuts at Microsoft-owned studios is yet another continuation of that. They say people begin to become numb to certain sensations, and it seems we’ve reached a point where my own emotions are beginning to gloss over from this repeated news cycle.
On June 25, 2026, gaming reporter Rebs Gaming shared the latest update on X, stating that layoffs had started at Compulsion Games, the team responsible for developing South of Midnight. We knew this was coming, and in effect, many hoped for potential buyouts of these studios so they could continue their work and livelihood under the direction of another publisher.
Compulsions Games were known for their distinctive flavor, with titles such as We Happy Few, South of Midnight, and a personal favorite of mine, Contrast. A film noir-inspired platform puzzle game, Contrast was a perfect encapsulation of the work you could expect from Compulsion Games.
These reductions form a larger shift within Microsoft’s gaming division, as Asha Sharma looks to “right the ship” of the declining Xbox brand. As both budgets and studios within the group have ballooned beyond a reasonable amount, measures are being taken to reduce the issues before an even greater collapse were to occur.
Don’t get me wrong, I’m not defending this whatsoever. Quite a while back, I remember writing another article about the closure of Hi-Fi Rush developer Tango Gameworks, where I mentioned that Microsoft shouldn’t be buying companies it couldn’t afford.
One can hope that these layoffs don’t lead to the total closure of Compulsion Games. One can hope their uniqueness is better directed toward games like their earlier entries, such as Contrast, rather than more extensive, less budget-friendly ventures.
Responses to the news have varied. Some fans lament the loss of potential sequels or new ideas from a studio known for taking creative risks. Others argue that such adjustments are essential for long-term viability, especially when resources need reallocating toward projects with broader appeal.
What saddens me is that, regardless of the current need to do so, it seems to me these decisions are still a reflection of the direction Xbox had previously taken. Sure, Phil Spencer is no longer at the helm, but folks like Matt Booty are still present who oversaw previous operations.
To make matters worse, more are still to come, with discussions ongoing amongst a group of studios at Xbox. Ninja Theory, Double Fine, and more are all under the strain of potential closure or layoffs within their walls. We previously heard that Ninja Theory is completely done, with Senua’s reveal being a last-ditch effort to give the studio a fighting chance to be purchased.
Regardless, here’s to hoping the future of these studios is met with a gentle hand, one that will guide them into the light rather than shuttering them forever.
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