The troubled Perfect Dark reboot is canceled and Xbox studio The Initiative has shut down amid devastating layoffs sweeping across Microsoft today, sources have told IGN.

Perfect Dark’s demise comes as part of what is fast becoming a bloodbath at Microsoft, with reports suggesting over 9,000 staff at the company are set to lose their jobs. Sources have told IGN that Rare’s Everwild is canceled as layoffs hit the legendary UK studio. Candy Crush maker King is also hit hard, as is Bethesda’s London office.

In a memo sent to all Microsoft gaming staff and viewed by IGN, Matt Booty, head of Xbox Game Studios, confirmed Everwild and Perfect Dark’s cancelation and said the company was winding down several unnanounced projects.

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

Perfect Dark was conspicuous by its absence during Microsoft’s June 2025 showcase, having starred a year earlier with a flashy new trailer. It featured a look at gameplay for the first-person shooter, as well as the welcome return of protagonist Joanna Dark.

The Initiative was a studio spun up by Xbox in 2018 to steer Perfect Dark towards release, with Tomb Raider developer Crystal Dynamics brought in to support. Perfect Dark first debuted on the N64 back in 2000, developed by Rare, which has survived today’s cull.

In a memo to staff sent today and reviewed by IGN, Xbox boss Phil Spencer failed to confirm specifics, telling staff “any organizational shifts will be shared by your team leaders in the coming days.”

The following message from Phil Spencer was shared to all gaming staff today:

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

Microsoft has made a huge number of cuts to its gaming business since acquiring Activision Blizzard for $69 billion. It laid off 1,900 staff in January 2024, then made further cuts just a few months later when it closed Redfall developer Arkane Austin and Hi-Fi Rush developer Tango Gameworks. In September 2024, Microsoft cut a further 650 staff from its gaming business. And in May this year, Microsoft cut an eye-watering 6,000 staff, or 3% of its entire workforce. Today’s round of layoffs is the fourth to hit Microsoft’s gaming business in 18 months.

Speaking to IGN in June 2024, Xbox boss Phil Spencer said: “I have to run a sustainable business inside the company and grow, and that means sometimes I have to make hard decisions that frankly are not decisions I love, but decisions that somebody needs to go make.”

The cuts come hot on the heels of Microsoft’s confirmation that it plans to release next-gen Xbox consoles, and has a strong presence at video game show gamescom.

Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at [email protected] or confidentially at [email protected].