Compulsion Games is no longer an Xbox Game Studio. The Montreal team behind We Happy Few and South of Midnight completed a management buyout, and the part that should make everyone sit up is what they took with them: the rights to all of their original IP. Buy South of Midnight now and Microsoft doesn’t see a cent of it.
That second half is the unusual bit. Plenty of studios have separated from their corporate owners over the past two years. Almost none of them left with their catalogue. When a publisher acquires a developer, the back catalogue is typically the whole point of the deal, and it stays behind when the people go. Compulsion walked out with theirs intact.
Why this is rarer than it sounds
Microsoft acquired Compulsion in 2018 during the studio buying spree that eventually produced ZeniMax and Activision Blizzard. South of Midnight shipped in 2025 to good reviews and a lot of admiration for its stop-motion aesthetic and Southern Gothic setting. It was not a Call of Duty. In the arithmetic of a company managing thousands of game developers and a Game Pass catalogue, a mid-size studio making a distinctive single-player folklore game is a line item that can be cut without moving the needle.
That arithmetic is also why the IP came free. A publisher hands back rights when holding onto them costs more attention than they’re worth. Nobody at Microsoft was going to greenlight We Happy Few 2. Letting the studio take Contrast, We Happy Few, and South of Midnight out the door is cheaper than maintaining them as dormant assets.
So it’s a good outcome that happened for unsentimental reasons. Both things are true.
”Slow” is a strategy now
The studio says it’s going to take things slow on whatever comes next. Read that as a budget statement. An independent Compulsion is working without Microsoft’s balance sheet and without a guaranteed Game Pass day-one payment, which for a studio at this size was probably the single largest revenue certainty they had. Replacing that means either external funding, self-funding from catalogue sales, or a smaller game.
Catalogue sales matter more than they used to under those conditions. Three shipped games generating revenue that flows entirely to the studio is a real runway, not a rounding error, when your headcount is measured in dozens rather than hundreds.
The open question is whether the next game looks like South of Midnight. That was an expensive-looking production with hand-crafted animation and a substantial voice cast, made on a platform holder’s dime. Independent Compulsion making the same kind of game requires someone else’s money, and the funding market for mid-budget narrative single-player games is not generous right now.
We Happy Few came out in 2018. South of Midnight came out in 2025. On that cadence, the answer arrives around 2032.