Compulsion Games Staff Can Seek New Jobs Amid Layoff Rumors

Entity Definition: Compulsion Games and South of Midnight

Compulsion Games is a video game development studio owned by Xbox Game Studios, best known for creating the upcoming title South of Midnight. The studio is based in Montreal, Canada, and was acquired by Microsoft in 2018. South of Midnight is a third-person action-adventure game set in the American South, drawing heavily on Southern Gothic folklore and mythology. The game aims to deliver a narrative-driven experience with a unique visual style. The current problem facing the studio is the possibility of layoffs as part of broader workforce reductions at Microsoft’s gaming division, leading the studio to proactively allow staff to seek new employment opportunities.

Key Facts

What Is the Current Situation at Compulsion Games?

Compulsion Games has reportedly given its employees permission to openly seek new jobs as a precautionary measure ahead of potential layoffs at Xbox. According to a report by Rock Paper Shotgun, the studio is allowing staff to explore external opportunities while continuing to work on South of Midnight. The move is seen as a response to ongoing uncertainty within Microsoft’s gaming division, which has already conducted several rounds of layoffs in 2024 and early 2025. No official layoff announcement has been made for Compulsion Games specifically, but the studio is preparing for the possibility.

“We want to ensure our team has the support they need during this uncertain time, and that includes being transparent about the current climate and giving them the freedom to make the best decisions for their careers.”

— Unnamed studio representative, as reported by Rock Paper Shotgun

As of March 2025, Compulsion Games has not confirmed any layoffs, but the proactive job-seeking policy indicates a high likelihood of upcoming cuts.

How Does This Relate to Xbox Layoffs?

Microsoft’s Xbox division has laid off over 2,500 employees since January 2024, including cuts at Bethesda, Activision Blizzard, and 343 Industries. The layoffs are part of a broader cost-cutting strategy following Microsoft’s $69 billion acquisition of Activision Blizzard. Compulsion Games, as a first-party studio under Xbox Game Studios, is not immune to these reductions. The permission for staff to seek new jobs is an unusual step that suggests the studio is bracing for a reduction in force, even if the exact number of affected employees is not yet known.

According to the Rock Paper Shotgun report, the policy was communicated internally and allows employees to apply for positions at other companies without penalty. This is a departure from typical studio practice, where such job-seeking is often done discreetly.

No official statement from Microsoft or Compulsion Games has confirmed the number of potential layoffs, but the move signals a significant restructuring.

What Is South of Midnight?

South of Midnight is an upcoming third-person action-adventure game developed by Compulsion Games, set in a fictionalized version of the American South inspired by Southern Gothic folklore. The game follows a protagonist named Hazel as she explores a world filled with mythical creatures and dark stories. It was first announced during the Xbox Games Showcase in June 2023 and is expected to release in 2025. The game features a distinctive art style that blends realistic environments with stylized character designs, and its narrative focuses on themes of family, loss, and redemption.

The development of South of Midnight has been ongoing for several years, and the studio has released multiple gameplay trailers. The game is one of the flagship titles for Xbox’s 2025 lineup. However, the potential layoffs at Compulsion Games could impact the game’s development timeline or quality, though no delays have been announced.

As of March 2025, South of Midnight remains on track for a 2025 release, according to Xbox’s official schedule.

Who Is This For?

This situation primarily affects current employees of Compulsion Games, as well as job seekers in the video game industry looking for opportunities at a studio that may soon downsize. For players, the news is relevant to those anticipating South of Midnight, as layoffs could affect the game’s final quality or release date. Industry analysts and investors monitoring Microsoft’s post-acquisition integration will also find this development significant, as it reflects the ongoing instability within Xbox’s first-party studios.

The policy of allowing open job-seeking is unusual and may serve as a case study for how studios handle potential layoffs. Other Xbox studios, such as Tango Gameworks (before its closure) and Arkane Austin, have faced similar uncertainty.

For game developers, this report highlights the importance of transparency and support during workforce reductions, a practice that is rare in the industry.

Common Questions

Is Compulsion Games shutting down?

No, Compulsion Games is not shutting down. The studio is allowing staff to seek new jobs as a precautionary measure ahead of possible layoffs, but development on South of Midnight continues.

Will South of Midnight be delayed because of the layoffs?

As of the latest report, no delay has been announced. The game is still scheduled for a 2025 release. However, if layoffs occur, the development timeline could be affected.

How many employees at Compulsion Games might be laid off?

The exact number is not known. The studio has not confirmed any layoffs, and the report only states that staff are being allowed to look for other jobs. The number will depend on Microsoft’s broader restructuring plans.

Sources and Methodology

This article is based on a single primary source: the Rock Paper Shotgun report titled “South of Midnight studio Compulsion Games are allowing staff to openly seek new jobs ahead of possible Xbox layoffs, according to report,” published in March 2025. The report cites unnamed studio representatives and internal communications. No additional sources were used. All facts, quotes, and figures are derived from that article. This article was last updated on March 20, 2025.