The Electronic Entertainment Expo is, for the most part, a showcase of the biggest budgets and flashiest trailers of the video game industry.

But this year, a small 22-person studio based in Montreal unveiled the surprise hit of Microsoft's press conference.

Guillaume Provost, head of Compulsion Games, showed off for the first time the opening of We Happy Few, a creepy psychological horror game with whiffs of gaming classic Bioshock and dystopian novel Brave New World.

We Happy Few takes place in an alternate-history version of Britain in 1964, in a town named Wellington Wells. Everyone in town is hooked on a drug called Joy that makes them perpetually happy, and helps them forget something (simply called "A Very Bad Thing" on the game's website) that happened in the past.

The player's character Arthur Hastings has a job censoring depressing stories in past issues of the newspaper. But it turns out he's stopped taking the pills, making him a social pariah, or a "downer."

It turns out that the denizens of Wellington Wells don't look favourably upon downers: anyone caught skipping their pills is likely to get beaten to death. It's up to the player to escape the city, while uncovering the past that its population is trying so desperately to forget.

In the demo, Arthur walks around his office, showing the audience several eerie scenes: a man jabbing a syringe into another man's neck; motivational posters that read "It's never too late to have a happy past;" and a group of people using sticks to beat a pinata that makes oddly fleshy noises on impact.

Compulsion Games' moment in spotlight

We Happy Few made a big splash at the Microsoft press conference as one of the few genuine surprises in a show dominated by sequels and long-rumoured console announcements.

Provost called it "a great honour" to be given a spotlight at E3, as the only indie studio to get that chance at Microsoft's event.

"It was one of the most exciting moments of my career," Provost told CBC News minutes after the press conference. "To put it simply, it's the biggest chance of us getting exposure to the fans and the people who love playing and buying games. So you really can't get bigger than this."

Anyone who goes off their happy pills is known as a downer, and quickly becomes the target of everyone else's aggression. (Compulsion Games)

Compulsion made good use of its time in the spotlight. We Happy Few made several outlets' lists of the most impressive games of the show. The company website crashed temporarily due to the volume of interest.

One analytics firm listed it as the fifth-most searched game that appeared at a press conference this year, putting it ahead of games with much larger budgets like Horizon Zero Dawn and The Last Guardian.

"It's all a bit elating, but also a bit terrifying at the same time," he said.

Montreal a major city for games development

For the Montreal-born Provost, We Happy Few's big coming out party has been the culmination of decades of interest in video games, back to when the idea of a career making them was eccentric at best.

"We always had a computer at home," says Provost, whose father was in programming. Since school programs focusing on making video games were a long way off, he couldn't study it formally, but started working as a programmer at age 17 in 1994.

Provost spent time in France working at a games studio called Arkane (makers of Dishonored), and spent years in the Toronto independent gaming scene before ultimately returning to Montreal to found Compulsion Games. The company's first title, Contrast, launched with the PlayStation 4 in 2013.

Downers who aren't immediately killed are instead exiled into slums outside the city. (Compulsion Games)

"It's a pretty big irony that I left Montreal because I didn't think we were ever going to make games here, when I look at it in retrospect," he said.

Quebec is now home to the biggest concentration of games studios in the country. According to the Entertainment Software Association of Canada, 139 studios make their home in the province. That includes 57 indie studios similar in size to Compulsion, but also 14 triple-A giants like Ubisoft and Eidos.

Art style draws from British Mod culture

Since it was first announced at the PAX gaming expo in 2015, We Happy Few turned heads with its depiction of a dystopian society desperate to paint a coat of optimism over its ruinous past.

People hopped up on Joy wear white masks that forcibly contort their faces into an unnerving smile. If the player pops a pill of Joy, the landscape changes, masking dilapidated architecture in luminescent rainbows.

We Happy Few made a strong early impression with its Mod-inspired fashion and art direction. (Compulsion Games)

Art director Whitney Clayton tells CBC News she looked at British Mod culture from the 1960s, including furniture from designers like Robin Day and Arne Jacobsen, and fashion designers like Pierre Cardin and Mary Quant to craft We Happy Few's look.

"The early '60s was a time of optimism for the future and rejection of the gloomy, war-torn past and tradition," she explained.

"Visually, when you get '60s design budding next to old world elements – for example a retro television or Mod dress next to some sooty, 17th century Tudor buildings – you have very strong visual symbolism."

This symbolism "reflects the values and priorities of our society – to think to the future, reject the past that's right in front of them, all while trying to enjoy themselves."

Concept art for the fashion in We Happy Few. (Compulsion Games)

Preview version launches July 26

Players will get to enjoy a first taste of Wellington Wells' contradictory world on July 26, when an early version of the game will be available on PC and Xbox One.

They'll join the roughly 2,500 people who backed Compulsion's Kickstarter campaign in 2015 providing feedback and testing ahead of its final release date, currently targeted for 2017.