Gaming News
South of Midnight Director Says Xbox Funding Was Unsustainable
Developing
Key art: South of Midnight, via Steam All clips and posts below are embedded from their original sources.
By the numbers: this timeline documents 3 events from Nov 2, 2026 to Nov 3, 2026, drawn from 6 sources.
“Somebody is going to say, one day, ‘The money tap, we’re closing those floodgates.’ And that’s going to have really traumatic results downstream.”
via kotaku.com
Our take
Sears's admission that the funding was unsustainable highlights the tension between creative prestige and financial viability in the current gaming market. His comments underscore the fragility of the 'golden era' of Xbox acquisitions, which has now resulted in the divestiture of four major studios and significant layoffs.
Background
Compulsion Games, the developer of South of Midnight, was acquired by Microsoft in mid-2018 to bolster the Game Pass subscription service. The studio previously developed We Happy Few in 2018. South of Midnight launched in April 2025 on PC and Xbox Series X/S, followed by PS5 and Nintendo Switch 2 releases earlier in 2026. Although the game received critical acclaim and won a BAFTA, it failed commercially.
In July 2026, Xbox CEO Asha Sharma announced a restructuring of the video game business, resulting in the divestiture of Compulsion Games, Double Fine Productions, Undead Labs, and Ninja Theory. This 'reset' also led to approximately 1,600 job cuts and the cancellation of multiple projects. Compulsion Games retained the rights to South of Midnight and is now seeking new partners.
The timeline
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David Sears discusses Xbox funding strategy in MinnMax interview
In an interview with MinnMax, David Sears reportedly stated that he was concerned during development that Xbox's generous funding would eventually end. He reportedly admitted that if he were in charge, he would have turned off the funding earlier, describing the situation as unsustainable in hindsight. Sears reportedly noted that while he wanted to make the game, he was not completely selfless and recognized the financial risks.[1]
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Xbox announces 3,200 job cuts in games division
Microsoft's games division is letting go of a total of 3,200 jobs after years of declining financial returns, according to GamesRadar.[5]
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Xbox reset under CEO Asha Sharma includes layoffs and studio closures
New CEO Asha Sharma's reset of Xbox reportedly involves mass layoffs, studio closures, and other cuts, as reported by WCCFTech.[6]
Our read of the evidence
Mostly unverified. The claim rests solely on a Kotaku report summarizing a MinnMax interview with David Sears, with no primary-source confirmation from Compulsion Games, Xbox, or Sears directly. No on-record statements from Xbox or other parties are documented in the evidence. A separate pending item regarding Arkane Lyon from GamingBolt appears unrelated to the Compulsion Games narrative.
Our rating counts evidence, not opinions about anyone: events confirmed by a primary source (the person's own post, their official site, a court or government record) weigh most, then how many independent outlets report the story.
Frequently asked
What did David Sears say about Xbox funding?
David Sears said he would have turned off Xbox's funding for South of Midnight earlier if he were in charge. He described the funding model as unsustainable in hindsight, stating, 'Yeah, probably,' when asked if he would have cut the money flow before the game's development.
What is the latest on Xbox's restructuring and Compulsion Games?
As of November 3, 2026, per gamesradar.com, Xbox announced 3,200 job cuts in a division-wide reset under CEO Asha Sharma; Compulsion Games remains independent after its July 2026 spin-out.
Did South of Midnight make money?
According to David Sears, the game did not make lots of money. He stated that he and Xbox knew the game would probably not be a financial success, but it served to increase Xbox's prestige.
What is the current status of Compulsion Games?
Compulsion Games is currently independent and looking for new projects. It retained the rights to South of Midnight, opening the door for potential sequels or spin-offs, though it is unknown if a new project has been signed yet.
More related drama (4)
Sources (6)
- kotaku.com, South Of Midnight Director Says He Doesn't Think Xbox Should Have Funded It, Nov 2, 2026.
- ign.com, South of Midnight Creative Director Discusses Xbox Funding, Nov 3, 2026.
- Youtube (original post).
- gamingbolt.com, South of Midnight Creative Director Would Have Cut Funding Earlier if He Were in Charge, Nov 3, 2026.
- gamesradar.com, Xbox's "money tap" was "unsustainable," South of Midnight co-director says, admitting he wouldn't have funded his own game if he were in charge at Microsoft, Nov 3, 2026.
- wccftech.com, South of Midnight's Director David Sears Admits He Probably Wouldn't Have Funded the Game If He Were Xbox: "In Hindsight, Xbox's Limitless Funding Was Unsustainable", Nov 3, 2026.
Cite this timeline
This timeline compiles 3 dated events from 6 sources. If it helped your reporting, cite it:
GenZHype. “South of Midnight Director Says Xbox Funding Was Unsustainable.”
GenZHype, 4 November 2026,
https://genzhype.com/gaming/south-of-midnight-director-says-xbox-funding-was-unsustainable/.