We at NerdLeaks are following a fast-moving rumour that, if true, could reshuffle parts of Xbox’s first-party lineup. According to Push Square, multiple Xbox-owned studios are reportedly at risk of closure and are allegedly in talks to become independent. Take this with a pinch of salt — the situation remains fluid and nothing has been officially announced.
What Was Reported
Push Square updated its coverage with information drawn from other outlets and sources. Key claims in the report include:
- Compulsion Games — maker of We Happy Few and South of Midnight — is reported as one of the studios facing closure and is allegedly in negotiations over its future.
- Double Fine (known for Psychonauts) and Ninja Theory (known for Hellblade) are named alongside Compulsion as studios at risk.
- Sources speaking to Bloomberg are quoted as saying these teams are "in active negotiations to spin off as they try to thwart closure."
- A Kotaku update, relayed by Push Square, reportedly quotes an internal source saying Compulsion leadership is in "negotiations" with Microsoft, though the details of those talks "have not been disclosed."
- Total job losses are unknown, but LinkedIn lists about 90 employees at the Montreal-based studio identified as Compulsion.
- Compulsion was reportedly acquired by Microsoft in 2018, months prior to the release of We Happy Few.
- Various staff, including South of Midnight writer Zaire Lanier, have reportedly indicated on social media that they are looking for work.
- Push Square notes that nothing has been officially announced at the time of publication.
- Other industry updates relayed include a report that Xbox Game Studios boss Craig Duncan resigned and that Chief of Staff Louise O’Connor is also said to have left, per The Game Business as cited by Push Square.
- Microsoft CEO Satya Nadella is quoted as saying Xbox needs to become a "sustainable business" after "25 years of subsidies" and that "there's more monetisation of Xbox games happening on YouTube than at Microsoft," per Push Square’s reporting.
- Push Square also highlights that South of Midnight won multiple awards including the Games for Impact award at last year’s The Game Awards and that it released on PS5 earlier this year, where Push Square called it "the most beautiful simple game."
The Source & Credibility
We’re relying on a chain of reporting here. Push Square itself is aggregating updates and cites two primary journalistic sources: a Bloomberg report involving journalist Jason Schreier, and a Kotaku update quoting a studio source. The Bloomberg-linked claim includes the quoted phrase that studios are "in active negotiations to spin off," while Kotaku reportedly says Compulsion is in "negotiations" with Microsoft but gives no further detail.
This is a multi-outlet relay and includes quotes from unnamed sources. That structure means we should be cautious: anonymous sourcing and rapid updates can be accurate, but they can also change as more information emerges. Again, nothing official has been announced, so treat these claims as unconfirmed until Microsoft or the studios comment publicly.
What It Could Mean
If these reports are accurate, the immediate practical implications could include studios regaining independence through a spin-off or, alternatively, outright closure. Per the reporting, the studios named are allegedly pursuing a spin-off "to thwart
