The gaming world is reeling from major news out of Microsoft. As part of extensive company-wide reductions impacting thousands of employees, the tech giant has confirmed the cancellation of two highly anticipated Xbox titles: the reboot of the stealth classic Perfect Dark and Rare’s mysterious new fantasy game, Everwild. Adding to the significant impact, Microsoft is also shutting down The Initiative, the studio specifically created to develop the Perfect Dark project.
these drastic measures are part of a larger restructuring effort at Microsoft, coinciding with widespread layoffs affecting roughly 9,000 employees across the company. The gaming division is experiencing a substantial impact from these cuts. While The Initiative studio faces complete closure, numerous other teams within Xbox Game Studios are also reportedly experiencing reductions in staff.
Major Xbox Games Canceled Amid Broad Layoffs
Microsoft’s President of Game Content and Studios, Matt Booty, communicated these significant changes in an internal memo to Xbox staff. He confirmed the decision to halt development on both the Perfect Dark and Everwild projects. This move represents the termination of years of work invested in these ambitious titles. Alongside these specific cancellations, Booty stated that Microsoft is also winding down “several unannounced projects” from their portfolio.
The closure of The Initiative is a direct consequence of the Perfect Dark cancellation. The studio, established in 2018 with a mandate to create ‘AAAA’ experiences and specifically tasked with reviving the Perfect Dark franchise, will now cease operations. This means The Initiative closes without having released a single game since its formation. This also signals the end of the collaboration with Crystal Dynamics, who had partnered with The Initiative on the Perfect Dark reboot.
Perfect Dark’s Unfulfilled Return and Studio Closure
The Perfect Dark reboot had been in development for approximately seven years. Initially announced with significant fanfare, the game aimed to bring the beloved spy-thriller series into the modern era. Gameplay footage was even showcased publicly in 2024, building anticipation among fans. However, reports had surfaced over time suggesting the project faced development challenges, common with large-scale productions. The cancellation and subsequent closure of The Initiative underscore the difficulties the project may have encountered, culminating in this final decision. The studio’s closure is a stark outcome, leaving many talented developers seeking new opportunities.
Everwild’s Difficult Journey Ends for Rare
Rare’s Everwild is the other high-profile game confirmed to be canceled. This original IP from the celebrated UK developer had been in development for an extensive period, reportedly spanning around a decade, including its early prototype phases. Despite its lengthy development, public updates on Everwild were scarce after its initial announcement in 2019 and a subsequent trailer in 2020. Xbox leadership had previously offered reassurances about the game’s progress, but sources indicated the project struggled significantly with establishing a clear creative direction. It reportedly underwent a complete “reboot from scratch” in 2021.
While Everwild‘s cancellation is a major blow for Rare and fans of the studio, Rare itself is not being closed down. The studio continues to operate and support its successful pirate adventure game, Sea of Thieves, and is expected to pursue other projects. However, reports suggest that key personnel at Rare are also departing following the Everwild cancellation, including long-time veterans Gregg Mayles and executive producer Louise O’Connor. These departures highlight the restructuring and potential downsizing impact within Rare as a result of the decision.
Broader Impact Across Xbox and Unannounced Projects
The cancellations of Perfect Dark and Everwild are just the most visible aspects of the sweeping changes occurring within Microsoft Gaming. Matt Booty’s memo explicitly mentioned winding down “several unannounced projects.” Windows Central reported that one of these terminated unannounced titles was a new massively multiplayer online role-playing game (MMORPG) being developed by ZeniMax Online, known for The Elder Scrolls Online. This project was reportedly codenamed ‘Blackbird’ and aimed to be a potential successor or companion to ZeniMax Online’s flagship title.
Beyond project cancellations, the layoffs are affecting numerous teams and roles across the Xbox ecosystem. Sources indicate significant cuts hitting quality assurance (QA) teams at Activision and Blizzard, segments of marketing and sales departments, and reductions in production and game management layers across various studios. Turn 10 Studios, the developer behind the Forza Motorsport series, was also described as being “hit hard” by this wave of layoffs, following the latest title’s mixed reception. Undead Labs, the studio behind the State of Decay series, also experienced layoffs, although development on their upcoming title, State of Decay 3, is reportedly continuing.
Why These Changes Are Happening
Microsoft frames these extensive cancellations and workforce reductions as necessary adjustments. Matt Booty’s memo stated that these decisions “reflect a broader effort to adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape.” He acknowledged the inherent difficulty and emotional toll of these choices, noting that each canceled project represented “years of effort, imagination, and commitment” from the affected teams. The move is also seen by some as an effort to streamline operations and potentially remove layers of management to increase agility.
Despite the significant cuts to projects and personnel, Booty affirmed that Microsoft’s overall portfolio strategy for Xbox remains consistent. This strategy centers on developing games that resonate with players, expanding its established and successful franchises (like Forza, Halo, Gears of War, and titles from recent acquisitions like Activision Blizzard and Bethesda), and cultivating new intellectual property. Booty highlighted that Xbox currently has a robust pipeline, with “more than 40 projects in active development,” continued momentum on titles scheduled for release later this year, and a “strong slate headed into 2026.”
Looking Ahead: Support and Strategy
For the thousands of employees directly impacted by the studio closure and project cancellations, Microsoft is working closely with HR and studio leadership to provide support. This assistance includes severance packages, career transition services, and exploring potential opportunities for affected staff to transition into available roles on other internal teams where possible.
These actions by Microsoft are not occurring in isolation. The gaming industry has experienced a wave of significant layoffs across many major companies over the past year, including other platform holders like Sony’s PlayStation. This trend reflects evolving market conditions, rising development costs, and strategic shifts within large corporations.
Crucially, sources indicate that games prominently featured during the recent Xbox Games Showcase presentation in June are reportedly safe and continuing development. Additionally, Microsoft’s plans concerning next-generation console hardware are said to remain unaffected by these workforce reductions and project changes. The company appears to be consolidating its efforts and focusing its substantial resources on a core set of projects and established franchises while scaling back on others that may have faced prolonged development challenges or were deemed lower priority in the current climate.
Frequently Asked Questions
Why did Microsoft cancel Perfect Dark and Everwild and close The Initiative studio?
Microsoft stated these decisions are part of a broader effort to “adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape.” The cancellation of the Perfect Dark project directly led to the closure of The Initiative, the studio dedicated to developing it. Everwild had reportedly faced significant development challenges over its roughly 10-year production cycle, making its cancellation part of this resource reallocation.
Which other Xbox games and studios were impacted by Microsoft’s recent layoffs?
In addition to Perfect Dark and Everwild, Microsoft canceled several unannounced projects, including a rumored ZeniMax Online MMORPG codenamed ‘Blackbird’. Layoffs also affected various teams across Xbox, including Turn 10 (Forza Motorsport), Undead Labs (though State of Decay 3 development continues), QA at Activision and Blizzard, marketing and sales departments, and production/management roles across multiple studios. The Initiative is the only studio confirmed to be fully closed in this wave.
Is Xbox still developing new games, and are previously announced titles like those from the Showcase safe?
Yes, despite the cancellations and layoffs, Microsoft affirms its overall Xbox portfolio strategy is unchanged, focusing on building exciting games and growing franchises. According to Matt Booty, Xbox has “more than 40 projects in active development” and momentum on titles releasing soon and into 2026. Sources indicate that games shown at the recent Xbox Games Showcase in June are reportedly continuing development and are safe from cancellation.
Conclusion
The cancellation of Perfect Dark and Everwild, coupled with the closure of The Initiative studio, marks a significant moment for Microsoft’s Xbox division. These moves, part of wider company layoffs, signal a strategic shift to refocus resources amidst a challenging industry environment. While the loss of these anticipated titles and a dedicated studio is a blow to fans and the affected developers, Microsoft maintains that its core strategy remains sound, with a substantial pipeline of games still in production. The coming years will reveal how these adjustments impact the Xbox ecosystem and its ability to deliver on its promises of exciting new experiences for players.
