Despite Microsoft’s immense financial resources and the strong internal support previously shown for Xbox head Phil Spencer’s vision, the company’s gaming division continues to face troubling developments. While the Game Pass subscription service has steadily gained momentum, recent news from Xbox has painted a far grimmer picture.
Xbox has now been confirmed as one of the divisions affected by Microsoft’s broader cost-cutting initiative, which will result in approximately 9,000 employees being laid off across multiple departments and countries.
The impact on Xbox’s internal structure has been significant. A large number of its first-party studios have been affected by the downsizing, with some forced to cancel ongoing projects entirely. Among the casualties are Everwild from Rare and a mysterious MMORPG in development at ZeniMax Online.
What Happened to the Perfect Dark Reboot?
However, the most devastating blow so far has come to one of Xbox’s newest first-party studios, The Initiative. Located in Santa Monica, the studio is not just experiencing layoffs but is being completely shut down. As a result, the highly anticipated Perfect Dark reboot, the reimagined action game that was officially unveiled with considerable hype in 2024, has now been cancelled.
The Initiative was established as a prestigious studio, staffed with top-tier talent from some of the industry’s most respected studios. Its leadership included Darrell Gallagher, best known for leading the successful Tomb Raider reboot during his tenure at Crystal Dynamics. The team also consisted of veterans from prominent studios such as Rockstar Games, Insomniac Games, Sony Santa Monica, Respawn Entertainment, and Naughty Dog.
This shutdown and cancellation of Perfect Dark is not merely a standard restructuring move, it marks a major retreat from one of Xbox’s most ambitious original efforts in recent years. At the time of writing, The Initiative is the only studio confirmed to be completely closed as part of Microsoft’s layoffs, which are expected to affect approximately 4% of the company’s global workforce.
With this decision, Microsoft signals a more conservative direction for its gaming arm, prioritising efficiency over expansion, even at the cost of long-hyped projects and promising creative ventures.
