South of Midnight director calls Xbox's funding model 'unsustainable', as Compulsion goes independent

David Sears, creative director of South of Midnight, calls Xbox's former studio funding model unsustainable. He says he would have cut financing to other Xbox studios before his own project. Microsoft's 2026 "reset" under CEO Asha Sharma cut five studios and thousands of jobs, including Compulsion's. Compulsion went independent rather than closing, unlike Ninja Theory, which shut down after finding no buyer.

Microsoft bought Compulsion in 2018 alongside Playground, Undead Labs and Ninja Theory.
Obsidian and inXile followed later that year, then Double Fine in 2019.
The buying spree aimed to stock Game Pass with day-one exclusive content.
"There's always a night when Rome burns, and I didn't know exactly when it would be, but I was always worried about it." - David Sears, Creative Director, South of Midnight

"They were also funding a lot of studios that... I guess you have infinite money, you do you. I want less." - David Sears, Creative Director, South of Midnight
Xbox's non-mainstream bets needed the portfolio's hits to cover their costs, Sears said.
He questioned whether every studio in a "corporate ecosystem" could reliably deliver prestige or profit.
Sears said he would have turned off funding to other studios before South of Midnight.

South of Midnight drew more than 1 million players in its first three weeks, counting sales and Game Pass.
The game won a BAFTA, a Peabody Award and three other honors despite failing commercially, per GameSpot.
Double Fine's Tim Schafer raised a similar warning but added that profitability alone would not have saved mid-tier games.
Microsoft's latest quarter posted $92.3 billion in revenue, up 19% YoY, and $36.6 billion profit, up 32% YoY.

Compulsion went independent, retaining ownership of its games and publishing rights.
Ninja Theory closed after failing to find a buyer during the same divestiture process.
Arkane Lyon remains unsold as Xbox continues exploring a split from the studio.
Microsoft moved Halo development, World's Edge and Rare's output under the Activision umbrella instead.

"Game Pass is unsustainable and increasingly damaging to the industry." - Raphael Colantonio, Co-founder, Arkane
Colantonio said Game Pass has been propped up by Microsoft's "infinite money."
Raccoon Logic's Alex Hutchinson said Game Pass devalued his studio's day-one launch of Revenge of the Savage Planet.
Rebellion, by contrast, called its Game Pass launch of Atomfall a major success for the studio.

For Publishers & Developers: Scout divested first-party studios as co-dev partners while they seek new publishing deals.
For Investors & VC: Add parent-company funding-cut exposure to diligence on studios reliant on subscription-service deals.
For Service Vendors: Pitch multiplatform porting to newly independent studios holding their own back-catalog publishing rights.