The Perfect Dark Reboot Has Been Cancelled And Its Studio Closed Amid An Enormous Round Of Microsoft Layoffs [UPDATE]

[UPDATE 04/07]

Microsoft has reached out to WellPlayed with an official statement on the layoffs and cancellations:

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

While this statement doesn’t directly address the human element or the specifics of game cancellations beyond those outlined in Matt Booty’s memo below, other sources have taken it upon themselves to do so.

Jason Schreier of Bloomberg has today published a report on the cancellation of Project Blackbird, the rumoured MMORPG that was in development at ZeniMax Online Studios before allegedly being shown the sword this week.

In this report, Schreir outlines the shock that was felt throughout the studio when the project was cancelled, particularly after receiving positive feedback from higher-ups. “Back in March, they had delivered a demo of Blackbird to executives, including Microsoft Gaming Chief Executive Officer Phil Spencer, and had received rave reviews, according to people familiar with the project,” Schreier’s report claims.

Furthermore, this report details confusion among ZeniMax employees, as access to Slack accounts was allegedly stripped from staff without warning or notice from HR, signifying the end of the project. “The next few hours were marked by chaos and confusion as employees found themselves in a kind of limbo status, waiting to see what was going on. There were no emails and no messages from management or HR. Members of the team believed they had been laid off, but many had not yet received any official word from the company,” Schreier reports.

[ORIGINAL STORY FOLLOWS]

Roughly 9,000 people who, until today, worked for Microsoft are now unemployed.

Stepping into a new fiscal year, the corporate machine that is Microsoft has eliminated approximately 4% of its workforce, totalling approximately 9,100 people with lives, families, and ambitions. As reported by Windows Central, this devastating round of cost-cutting affects every facet of Microsoft’s broad tech empire, and its gaming sector is not exempt. Windows Central was the first to confirm that Xbox is feeling the effects of these layoffs, with projects in various stages of development being axed and entire teams being dissolved. We’ll discuss those first, before examining official statements from Xbox management.

The ill-fated reboot of Perfect Dark has been cancelled, with the Santa Monica-based studio The Initiative closing its doors entirely. Touted as an AAAA studio, the Perfect Dark project was officially revealed to the public in 2020 through a cinematic trailer during The Game Awards. While the radio silence was broken when a ‘gameplay’ trailer was shown during the Xbox Games Showcase last year, the four years between the game’s announcement and the gameplay reveal were dominated by reports of high staff turnover and extensive delays, which would see the release pushed back by years.

The studio itself was formed in 2018 and, at the time, was positioned as one of the key studios under the Xbox umbrella. Led by the former head of Crystal Dynamics, Darrell Gallagher, the studio comprised industry veterans from Riot, Rockstar, Respawn, Activision, and 343 Industries, to name a few.

While it’s the largest piece of this horrific layoff pie, The Initiative is far from the only team affected. Rare has also been hit with layoffs, though the studio as a whole has survived this round of cuts. The studio behind industry-defining games like Banjo-Kazooie, Donkey Kong Country, and GoldenEye 007, and most recently the online pirate game Sea of Thieves, has been quietly working on a new IP, Everwild. Alongside the studio being downsized as part of this culling, Everwild has now been cancelled. Furthermore, reports from VGC indicate that game designer and Rare icon Gregg Mayles will be departing the studio after 35 years, following the cancellation of the game.

Reports suggest that King, the huge name behind Candy Crush, is downsizing, with 10% of staff being shown the door, which equates to roughly 200 people losing their livelihood. Windows Central, Jason Schreier, Gamespot and various other outlets have also reported that ZeniMax Online Studios has been affected, with its rumoured unannounced MMORPG getting scrapped as part of the process.

Jason Schreier of Bloomberg has provided further clarification on the layoffs, reporting that Call of Duty support studio Raven Software is affected, although the number of jobs lost remains unknown at this stage. Schreier also stated that Forza Motorsport developer Turn 10 has been gutted, with as many as 50% of staff being shown the door according to his sources. It seems that consistently producing widely loved and critically acclaimed entries into one of Xbox’s marquee franchises isn’t enough to keep a studio from being eviscerated. Blizzard is also in the mix, with the company ending support for the tower defence game Warcraft Rumble, as per an official statement.

Many of Xbox's subsidiaries are getting hit by the layoffs this morning, including Call of Duty studios such as Raven. Big cuts at Forza Motorsport developer Turn 10 – nearly 50% of staff, per source.

— Jason Schreier (@jasonschreier.bsky.social) 2025-07-02T16:43:19.681Z

This is an evolving situation, and there are likely to be more difficult headlines to come. Every part of this story is devastating, but what’s to come is insulting.

An internal memo from Xbox boss Phil Spencer has been shared with staff and is likely supposed to bring comfort to those who still have a job. The statement, acquired by IGN, reads:

Today we are sharing decisions that will impact colleagues across our organization. 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. 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.

I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger. The success we’re seeing currently is based on tough decisions we’ve made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come.

Prioritizing our opportunities is essential, but that does not lessen the significance of this moment. Simply put, we would not be where we are today without the time, energy, and creativity of those whose roles are impacted. These decisions are not a reflection of the talent, creativity, and dedication of the people involved. Our momentum is not accidental — it is the result of years of dedicated effort from our teams.

HR is working directly with impacted employees to provide severance plan benefits (aligned with local laws), including pay, healthcare coverage, and job placement resources to support their transition. Employees whose roles were eliminated are encouraged to explore open positions across Microsoft Gaming, where their applications will be given priority review.

Thank you to everyone who has shaped our culture, our products, and our community. We will move forward with deep appreciation and respect for all who have contributed to this journey.

Phil

“I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger.”

In a statement that is ostensibly meant to address concerns surrounding an extremely difficult time of uncertainty among your staff, it’s unconscionable to use that platform as a propaganda tool to crow about your success. People have lost their jobs because of decisions made by Xbox and Microsoft as a whole, so forgive me if I take exception to your HR-approved line about the prosperous state this company’s gaming division finds itself in.

Following Phil’s misguided blurb, Matt Booty, the head of Xbox Game Studios, delivered a similar sentiment in his own letter, distributed to staff. Again, via IGN, the statement reads:

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.

– Matt

This time, let’s focus on Booty’s alleged commitment to players. “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.”

Ignoring that, again, this line feels tone-deaf following the sacking of hundreds of employees; this callout feels particularly hollow given the direction that Xbox has been heading in recent years. Xbox Game Pass continues to expand its reach, and the “everything is an Xbox” marketing beats are being backed by moves to consolidate gaming libraries and homogenise your gaming experiences. More and more, the value proposition that Xbox is providing is sounding less like the best way to play and more like the gaming equivalent of Microsoft 365: a lifeless platform that cares more about selling you a subscription than it does about the products within it.

I’ve stood on my soapbox long enough, and I’ve done it plenty of times in the past. So, for now, I would like to extend the thoughts of the entire WellPlayed team to anyone affected by this devastating round of job cuts.