When Xbox Game Studios acquired Compulsion Games, the goal was to broaden Microsoft’s first-party catalog with unique, non-traditional titles. While the studio’s previous release, We Happy Few, drew mixed reviews, South of Midnight was intended to be a major step forward. Ultimately, the project failed to achieve commercial success, culminating in Compulsion’s departure from Microsoft.

In a candid look back at the project, the game’s creative director admitted that funding the swamp-landed action-adventure was a high-risk venture for Xbox, adding that had he been in executive leadership, he wouldn’t have approved the budget either.

South of Midnight Director Recognizes that XBOX Shouldn’t Have Bet on Them

Now operating as an independent entity attempting to navigate life without Xbox’s financial safety net, Compulsion Games is opening up about what went wrong.

Speaking in an interview with MinnMax, South of Midnight Creative Director David Sears reflected on the game’s commercial failure and the miscalculations that ultimately led to the studio leaving Xbox Game Studios.

Sears explained that South of Midnight suffered from excessively high development costs, noting that he had warned colleagues early on how precarious their position would become if Microsoft ever pulled the plug.

Despite his personal passion for the concept, Sears admitted that, from a business standpoint, the project’s scale was unjustifiable.

“I mean, I wanted to make it. No doubt, and obviously, because we made it. Would I have turned off someone else’s money flow before South of Midnight? Yeah, ‘cause I’m not completely selfless. But it just seems like, in hindsight at least, it was unsustainable. So, of course it was going to have a shocking outcome,” he explained.

South of Midnight XBOX

What Is South of Midnight and What Happened with Compulsion Games?

South of Midnight is a story-driven action-adventure starring Hazel, a young woman who discovers supernatural abilities to combat creatures rooted in Deep South folklore.

Combining Southern Gothic atmosphere with stylized visuals, the game explored themes of family ties, historical secrets, and generational trauma. It launched on April 8, 2025, across Xbox Series X|S, PC, and Xbox Game Pass.

The studio’s trajectory shifted dramatically in 2026 amid broad restructuring across Microsoft’s gaming division. Following eight years under the Xbox umbrella, the Canadian developer re-established its independence, avoiding a full closure while negotiating the rights back to its intellectual property portfolio including Contrast, We Happy Few, and South of Midnight.

Now operating outside the Xbox ecosystem, Compulsion Games is actively pitching new projects to secure its future as an indie developer.

For more news on the gaming and entertainment industries, click here.

Stay tuned to LEVEL UP for continuing updates.