In a sweeping move impacting its gaming division, Microsoft has officially shut down Xbox studio The Initiative, cancelling the highly anticipated reboot of Perfect Dark, as well as Rare’s Everwild and several unannounced projects, including one from ZeniMax Online.

The decision follows a massive wave of company-wide layoffs that have impacted 9,000 employees in 2025 alone, 4% of Microsoft’s global workforce.

Perfect Dark and Everwild Cancelled

The Initiative was launched in 2018 as a high-profile Xbox Game Studio, led by industry veteran Darrell Gallagher (Tomb Raider). The team partnered with Crystal Dynamics to reboot Rare’s classic stealth IP Perfect Dark.

However, sources confirm that Perfect Dark has now been officially cancelled, along with Everwild and other projects. One of the shelved games includes ZeniMax Online’s new MMORPG, codenamed Blackbird, intended as a successor to The Elder Scrolls Online.

Internal Memo from Xbox Game Studios Head Matt Booty

Xbox Game Studios head Matt Booty shared an internal memo confirming:

“We have made the decision to stop development of Perfect Dark and Everwild… As part of this, we are closing one of our studios, The Initiative.”

The memo emphasized that these decisions reflect a shift in Xbox’s priorities to “set up teams for greater success in a changing industry landscape.”

Despite the closures, Xbox still has over 40 projects in active development, with upcoming releases like State of Decay 3, Clockwork Revolution, and other showcase titles reportedly unaffected.

Layoffs Across Xbox, Activision, and Blizzard

The layoffs have not only hit The Initiative, but have also affected QA teams, marketing, and production roles across other studios, including:

• Undead Labs (State of Decay)
• Turn 10 Studios (Forza Motorsport)
• Activision and Blizzard teams

Even though Microsoft reported record profits, over 15,000 employees have been laid off in 2025, reflecting a broader industry trend driven by economic pressures and the increasing use of AI technologies.

What’s Still Safe?

According to sources, all titles shown during the June Xbox Showcase including Clockwork Revolution, Avowed, and South of Midnight remain in development.

Xbox’s next-gen console hardware plans are also unaffected at this time.

Final Thoughts

The closure of The Initiative and cancellation of Perfect Dark mark a significant turning point in Xbox’s studio strategy. While Microsoft shifts focus to streamline operations, fans and developers alike are left grappling with the loss of projects that once held enormous promise.