Xbox most anticipated 'Perfect Dark' reboot now has been cancelled!

Microsoft also shut down ‘The Initiative’ studio

Microsoft has dropped the saddest news of today, with all the layoffs happening in the company. The gaming department also received the shocking blow and the upcoming ‘Perfect Dark’ reboot is now cancelled.

That’s not all, as the studio The Initiative has been shut down alongside Rare’s Everwild and ZeniMax Online’s MMORPG Blackbird. Let’s find out more details in this article.

Perfect Dark has been canceled and The Initiative studio has been closed down as part of Xbox mass layoffshttps://t.co/1DTWUDsLy8 pic.twitter.com/P9tKLoUnKu

— Genki✨ (@Genki_JPN) July 2, 2025

The Initiative closes, Perfect Dark canceled

These layoffs, announced on July 2, 2025, in an internal email from Xbox Game Studios chief Matt Booty acquired by Windows Central, are part of a large layoff round involving 9,000 people, or 4% of Microsoft’s global workforce.

The Initiative studio was founded in 2018 in Santa Monica and was tasked with the revival of Perfect Dark, a beloved stealth IP from Rare’s N64 era.

Led by Darrell Gallagher (previously of Crystal Dynamics), the firm worked with Crystal Dynamics to create the relaunch, which debuted promising gameplay at the Xbox Games Showcase 2024.

But now, Booty’s email has confirmed that (Windows Central) the project has been cancelled and the studio has been shut down.

This means that 7 years of efforts and money which was spent have now gone to waste without releasing anything.

This is what Phil Spencer has to say, report from Variety:

“We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace,” a Microsoft spokesperson said Wednesday.

“To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness,” Microsoft Gaming chief Phil Spencer said in a memo to staff Wednesday morning. “Out of respect for those impacted today, the specifics of today’s notifications and any organizational shifts will be shared by your team leaders in the coming days.”

Following Phil’s statement, Matt Booty also shared a full memo to staff, which was reported by Variety:

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

We have made the decision to stop development of Perfect Dark and Everwild as well as wind down several unannounced projects across our portfolio. As part of this, we are closing one of our studios, The Initiative. These decisions, along with other changes across our teams, reflect a broader effort to adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape. We did not make these choices lightly, as each project and team represent years of effort, imagination, and commitment.

Our overall portfolio strategy is unchanged: build games that excite our players, continue to grow our biggest franchises, and create new stories, worlds, and characters. We have more than 40 projects in active development, continued momentum on titles shipping this fall, and a strong slate headed into 2026.

For those directly affected, we are working closely with HR and studio leadership to provide support, including severance, career transition assistance, and where possible, opportunities to explore roles on other teams.

To everyone across our studios: thank you. Your creativity and resilience continue to define who we are. I believe in the strength of our teams and the direction we’re taking on the path ahead.

Also Read: What to expect from Xbox at Gamescom 2025?

BREAKING…According to Jason Schreier, Forza Motorsport developer Turn 10 – nearly 50% of developer have been laid off. https://t.co/Y23pGBwaAS pic.twitter.com/ZeiIJP8sni

— VGT Gaming News (@GAMERNEWSonX) July 2, 2025

Broader Layoffs and Project Cancellations

Perfect Dark and The Initiative studio were not the only ones who were hit with a bad impact.

Microsoft’s fourth gaming division cut in 18 months, affecting companies such as ZeniMax Media (Fallout), King (Candy Crush, ~200 job cuts), and Turn 10 (Forza Motorsport, approximately 50% personnel reduction).

Everwild, a long-stalled Rare project, and ZeniMax’s Blackbird MMORPG, which had been in development since 2018, were also cancelled, according to the latest rumors.

State of Decay 3 and Clockwork Revolution have escaped from this and are currently safe.

Microsoft’s statement

“We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace,” a Microsoft spokesperson said Wednesday.

Conclusion

Booty underlined that the selections reflect a “broader effort to adjust priorities” in a changing market, listing over 40 active projects and a promising 2026 slate.

Employees affected will get severance pay, career transition assistance, and preferential consideration for other Xbox positions.

Perfect Dark was one of those Xbox games that I was very excited for. The gameplay trailer last year was amazing and it was giving Dishonored-esque level design, vibe and variety.

What are your thoughts on the ongoing Microsoft layoffs? Do share your thoughts and views in the comments section.

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