Compulsion Games Faces Layoffs Amid Studio Restructuring

The Montreal-based studio behind We Happy Few and South of Midnight is navigating a turbulent restructuring under Xbox’s sweeping “Reset,” prompting layoffs and negotiations over its future.

</div>

1. The Layoff Announcement and Immediate Fallout

On June 25, 2026, reports confirmed that Compulsion Games had initiated an unspecified number of layoffs, with multiple staff members confirming their departures via LinkedIn. These cuts came just days before Microsoft’s fiscal year ended on June 30, and mark the first concrete casualties of the Xbox “Reset” initiative outlined by CEO Asha Sharma earlier that month . Industry observers note that while layoffs are underway, the presence of active job listings suggests the studio may be restructuring rather than shutting down entirely .

2. Xbox’s Reset: Context and Strategy

The layoffs at Compulsion are part of a broader contraction across Xbox Game Studios, with Double Fine and Ninja Theory also at risk—some reportedly negotiating independence, others facing closure . Reports indicate more than 100 employees at Compulsion could be affected, with some estimates suggesting up to 120 roles across both Compulsion and South of Midnight’s team may be impacted . The move reflects a strategic pivot toward high‑priority, blockbuster‑scale projects and tighter alignment with Game Pass economics—where even successful launches like South of Midnight, which drew over one million Game Pass players, may not meet internal revenue thresholds .