South of Midnight creative director David Sears says that, in hindsight, Xbox’s spending on games like his was “unsustainable”, and that if he had been the one running Xbox he would probably have stopped funding someone else’s game before South of Midnight’s. He made the comments in a video interview with MinnMax, hosted by MinnMax’s Ben Hanson, four months after Microsoft cut Sears’s former studio, Compulsion Games, loose as part of its Xbox reset.
The line is blunt, but context matters: Sears did not say South of Midnight was a mistake or that he regretted making it. He was describing how a corporate funding model works, and why he says he spent development “always worried” that the money would stop.
South of Midnight combat: Hazel fights a root-covered creature in a foggy bayou clearing. Image: Compulsion Games
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What David Sears said about Xbox funding
According to the transcripts published by Kotaku, VGC, Rock Paper Shotgun and Pure Xbox, Sears first set out his view of what a big publisher’s games are for. They either have real commercial appeal, or they are “generational” games, made at a sensible cost, that build a studio’s prestige and the brand. If every team delivers one or the other, he said, “it’s going to work. But when does that ever happen?”
He said Xbox at the time was “funding a lot of games” and “a lot of studios”, and that he personally wanted a smaller footprint: no giant budget and no “army of 600” to be responsible for, and something that “isn’t going to bankrupt Microsoft”. He said he warned people during development that someone would eventually turn off “the money tap” and close “those floodgates”, and that “that’s going to have really traumatic results downstream.”
Hanson then asked whether he meant that he was thankful for Microsoft’s support but would not have funded the game himself. Sears answered “Yeah, probably,” and went on:
“I wanted to make it. No doubt. Obviously, because we made it. Would I have turned off someone else’s money flow before South of Midnight? Yeah, because I’m not completely selfless. It just seems like, in hindsight at least, it was unsustainable.”
He added that other directors used to ask him whether this was “a golden era”, and that his answer was always “for now”. In his words: “There’s always a night when Rome burns. I didn’t know exactly when it would be, but I was always worried about it.”
He also praised how Microsoft handled the exit
Sears was not only critical. He called today’s Microsoft “much more humane” than the company he knew in the 1990s and early 2000s, because it let studios such as Compulsion spin off with their games instead of closing them. VGC notes that he contrasted this with Ensemble Studios, the Age of Empires developer that Microsoft bought and later shut down. Both VGC and Rock Paper Shotgun report that Sears left Compulsion in March 2025, so he was no longer at the studio when the split happened.
South of Midnight's Deep South swamps; the game is now self-published by Compulsion on Steam. Image: Compulsion Games
What Xbox said when it let the South of Midnight studio go
Sears’s “unsustainable” matches the language Xbox itself used. In her July 6 “Resetting XBOX” memo on Xbox Wire, Asha Sharma wrote that the business is “not healthy”, runs at margins “3-10x lower than comparable platform and publishing businesses”, and that “in a typical year, we lost 64 cents for every dollar we invested.” The same memo said Compulsion Games and Double Fine would “transition to independent studios with their IP, catalog, and runway for their next games”, while Ninja Theory and Undead Labs agreed terms to join new owners and Arkane Lyon began a consultation over its future (Arkane Lyon’s buyer deadline has since been extended).
South of Midnight launched on Xbox and PC on April 8, 2025, and later reached PS5 and Nintendo Switch 2. Its Steam page now lists Compulsion Games as both developer and publisher.
Why it matters
It is unusual to hear a director say on the record that the deal that funded his own game made little business sense. It also gives a creator’s view of the reset we have tracked through Xbox’s latest quarterly earnings, the departure of COO Helen Chiang and reports that Xbox staff were included in Microsoft’s buyout offer: Sears’s argument is that mid-budget, prestige-first games depend on a patron willing to keep paying, and that patrons eventually stop.
What’s next
Compulsion is now independent and, according to Kotaku and VGC, has been looking for partners for new projects; Kotaku says it is not yet known whether the studio has signed one. Sears’s comments look back at how South of Midnight was made; they do not speak for Compulsion’s plans.
Sources: MinnMax interview (YouTube), Xbox Wire, Kotaku, VGC, Rock Paper Shotgun, Pure Xbox, Steam.
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Featured image: Compulsion Games
