Compulsion Games Seeks Partnerships After Regaining Independence From Xbox and Keeping Its Major IPs

Just days after Compulsion Games regained its independence from Microsoft’s Xbox division, the BAFTA-winning developer is actively seeking collaborations and external work while retaining exclusive rights to its own game franchises.

Compulsion Games, known for South of Midnight, We Happy Few, and Contrast, announced in July 2026 that it had successfully bought back its independence following Xbox’s division-wide layoffs and restructuring. The studio confirmed it retains the complete intellectual property rights to all its previously released games, including South of Midnight, We Happy Few, and Contrast. The team made this announcement via LinkedIn, signalling an immediate shift in strategy as it seeks new development opportunities and contracts to sustain operations as an independent entity.

“With Compulsion Games returning to its roots as an independent developer, we are expanding opportunities to collaborate with studios across the games and entertainment industry,” the company stated. “We invite partners to leverage the talent and creativity of the award-winning team behind South of Midnight, a game that was honoured with a BAFTA Award, seven Canadian Game Awards, and recognised on multiple ‘Best Games of 2025’ lists.”

Compulsion Games’ Studio Assets and Recent Output

Key Assets:

• South of Midnight (2025): Winner of a BAFTA Award, seven Canadian Game Awards, and featured on several ‘Best Games of 2025’ lists.
• We Happy Few: Retained IP rights.
• Contrast: Retained IP rights.

Team Size: Approximately 112 staff members as of its July 2026 independence.
Last Major Title: South of Midnight (2025), released without any add-ons or post-launch expansion packs.

After completing work on South of Midnight in 2025, Compulsion Games has not announced any internal game development projects. The approximately 112-person team’s post-launch activities remain undisclosed, leading to speculation about whether they have been supporting other Xbox studios or preparing internal pitches for new games to present to publishers and investors.

The studio emphasised its strengths by stating, “With deep experience in creating acclaimed original IP, we bring our artistry, technical expertise and collaborative approach to every project. We are excited to support the development of memorable experiences that engage and entertain players around the world.” This open call positions Compulsion as a service provider as well as a creative force for hire, underlining its readiness for work outside of original IP generation.

Wider Context: Xbox Layoffs and Studio Departures

Compulsion’s transition follows a period of significant upheaval within Microsoft’s Xbox business. The company confirmed layoffs affecting 1,600 people immediately, with an additional 1,600 set to lose their jobs by mid-2027, impacting all areas—including flagship properties like The Elder Scrolls.

Other major studios affected by the Xbox downsizing include:

• Double Fine: Recently regained independence. The creators of Psychonauts released Keeper in October and a smaller project, Kiln, in the spring of 2026. Double Fine has also retained its core IP assets, but has not announced what’s next for the now-independent studio.
• Arkane: The acclaimed maker of Dishonored and Deathloop is reportedly negotiating its own exit from Xbox at the time of this writing.
• Ninja Theory and Undead Labs: The developers of Hellblade and State of Decay are under undisclosed new ownership, with their internal futures presently unclear.

Summary:

• Compulsion Games regained independence from Xbox in July 2026 and retained all rights to its franchises.
• The studio is seeking external collaborations and opportunities, shifting away from immediately developing its own original game.
• South of Midnight won a BAFTA Award, seven Canadian Game Awards, and was nominated for multiple ‘Best of 2025’ lists.
• Microsoft’s Xbox division has enacted 3,200 layoffs, affecting major franchises and studios.
• Compulsion and Double Fine are now independent, while Arkane, Ninja Theory, and Undead Labs are facing major structural changes.

The reshaping of the Xbox ecosystem is forcing even award-winning creative teams like Compulsion Games to pitch for contract work, partnerships, and co-development deals in a cautious and consolidating market. As of July 2026, Compulsion’s next proprietary project remains undisclosed, and the focus is on leveraging its 112-strong team’s experience in collaboration and technical artistry, as supported by its recent BAFTA and Canadian Game Award wins.