Xbox lays off Compulsion Games as spin-out talks unwind the 2018 acquisition wave
Summary
Mass layoffs hit Compulsion Games (South of Midnight) on June 25, 2026, confirmed via developer LinkedIn posts
New Xbox CEO Asha Sharma is pursuing spin-outs over closures for at least three 2018-era studios
Compulsion, Double Fine, and Ninja Theory are all in active negotiations to exit Microsoft ownership
Bloomberg ties the broader layoff wave to the post-June 30 fiscal year close, making next week the trigger window
01
Compulsion cuts land five days before Microsoft's fiscal year close
Developers posted LinkedIn departure notices on June 25, compiled by reporter Mr. Rebs
Bloomberg had forecast layoffs would follow the June 30 fiscal year end - Compulsion moved early
Studio shipped South of Midnight in April 2025, eight months before the cuts
Compulsion was acquired by Microsoft in 2018 as part of the same flurry that brought in Double Fine and Ninja Theory
02
Spin-outs replace closures as Xbox's preferred exit mechanism
Xbox is negotiating independence deals with Compulsion, Double Fine, and Ninja Theory rather than shuttering them
The model returns studios to private ownership, creating fresh M&A inventory for publishers and PE
Compulsion leadership was in active spin-out talks even as layoffs hit rank-and-file staff
Double Fine's only public signal is an ambiguous emoji on its X account, suggesting talks have stalled
03
Compulsion's outcome sets the template for Double Fine and Ninja Theory
Microsoft's fiscal year closes June 30 - Bloomberg ties the bulk of layoff activity to the days immediately after
Whether Compulsion lands as a spin-out or closure will signal terms available to the other two studios
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