Xbox shuts down developer, cancels Perfect Dark reboot

In a statement released by Xbox Game Studios’ Matt Booty, the company announced a major restructuring, including the closure of The Initiative studio and the cancellation of Perfect Dark and Rare’s Everwild. The move is part of what Booty describes as a “broader effort to adjust priorities and focus resources” in response to ongoing changes in the gaming industry.

The Initiative, based in Santa Monica and founded in 2018 by former Crystal Dynamics lead Darrell Gallagher, was originally established to create high-end Xbox exclusives. Its first title was to be a reboot of Perfect Dark, which Xbox finally revealed gameplay for last summer after years of internal challenges. Reports from 2022 highlighted significant leadership turnover and development hurdles within the team.

In an internal memo obtained by Windows Central, Booty confirmed that multiple unannounced projects have also been shelved, and emphasized the difficulty of the decision, acknowledging the years of effort and creativity invested in these games.

Despite these cancellations, Booty reaffirmed Microsoft’s long-term strategy:

“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.”

Affected employees will receive severance packages, career support, and where possible, offers to transition into new roles within other teams.

The announcement comes amid a wider wave of layoffs at Microsoft, reportedly affecting around 9,100 employees across various divisions — roughly 4% of its total workforce. According to Microsoft’s head of gaming Phil Spencer, these cuts are part of an effort to streamline operations, reduce management layers, and “increase agility and effectiveness.”

A Microsoft spokesperson added:

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