Microsoft is closing down Xbox studio The Initiative, with Perfect Dark killed as well — joining Everwild and ZeniMax’s IP, and other unannounced projects

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Previously, we broke the news that Perfect Dark might be axed due to Microsoft’s recent cost-cutting measures. Regrettably, it appears those fears were justified.

As an analyst, I’m reporting that Microsoft has announced a significant round of layoffs impacting approximately 4% of its global workforce across all divisions. Regrettably, the Xbox division appears to be bearing a substantial brunt of these cuts, with employees from various departments receiving termination notices today. Among those affected is the Xbox studio The Initiative, which unfortunately is being shut down.

The game Perfect Dark, a well-known stealth series by Rare from the early 2000s, was intended for a comeback. The team at The Initiative, formed in 2018 with industry veterans like leader Darrell Gallagher, who’s known for Tomb Raider, were assigned to this project. Previously, Gallagher’s old team from Crystal Dynamics had been collaborating with Microsoft on Perfect Dark, but now that partnership is coming to an end.

Microsoft is closing down The Initiative due to the game being cancelled. They plan to collaborate with employees to offer severance packages and support, and they’ve invited developers impacted by this decision to apply for open positions at Xbox, where they will receive preference in the hiring process.

As a passionate gaming enthusiast, I received news that sent a ripple of disappointment through the gaming community – an internal email from Xbox Game Studios head, Matt Booty, confirmed the cancellation of several projects, including Rare’s Everwild, Perfect Dark, and some unannounced titles. One of these projects was reportedly ZeniMax Online’s highly anticipated MMORPG, Blackbird, which aimed to follow in the footsteps of The Elder Scrolls Online. This news leaves us all eagerly awaiting updates on potential new ventures from these talented studios.

“Following Phil’s note, I want to share more about the changes to the Studios business units.

We have chosen to cease work on Perfect Dark and Everwild, as well as scale back several unannounced projects across our studios. As part of this restructuring, we will be shutting down The Initiative studio. These decisions, along with other adjustments within our teams, are aimed at reallocating resources to improve our chances of success in a rapidly evolving industry. We did not take these steps lightly, as each project and team represents countless hours, creativity, and dedication.

Our overall game-development approach remains consistent: we’re committed to crafting games that captivate our players, expanding our most successful franchises, and inventing fresh narratives, realms, and personas. Currently, over 40 projects are underway, there’s ongoing progress on titles launching this autumn, and a robust lineup is lined up for 2026.

As an analyst, I’m actively collaborating with HR and studio management to offer aid tailored to those impacted. This support includes severance packages, career transition guidance, and wherever feasible, the chance to delve into roles within different teams, if suitable.

To everyone at our studios: Thank you! Your creativity and determination keep shaping our identity. I have faith in our teams and the course we’re setting for the future.

[Alternatively]

To all our studio members, a big thank you! Your creative spirit and tenacity are key to who we are as a team. I trust in our groups and the direction we’re moving towards in the coming times.

According to our sources, everything demonstrated during the recent Xbox Showcase in June is confirmed, including upcoming games like Clockwork Revolution and State of Decay 3. However, there have been job cuts in various departments such as QA, marketing, sales, and even developers like Undead Labs and Turn 10 Studios. Despite ongoing development, Undead Labs reportedly underwent layoffs, and Turn 10 has seen a significant number of layoffs after Forza Motorsport received less-than-favorable feedback from sim racing enthusiasts. Microsoft has also reduced staff roles in gaming management and production.

Microsoft recently announced a significant reduction of its workforce, affecting approximately 9,000 employees across different departments including Azure and Xbox. However, it appears that the strategy for the next-generation Xbox console hardware remains unchanged.

2025 saw Microsoft report a historic high in profits, yet they still had to let go of more than 15,000 employees. This was a challenging period for those affected and added another mark to Microsoft’s employment history.

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2025-07-02 20:09