Microsoft is Shutting Down The Initiative and Cancelling its Perfect Dark Reboot

Microsoft has cancelled its Perfect Dark reboot and shut down The Initiative, the US-based studio that has been working on the game since its creation back in 2018. Xbox Games Studio head Matt Booty announced the news today in an internal email shared by Windows Central, confirming the cancellation of Rare’s Everwild game along the way.

The Perfect Dark reboot was officially announced during The Game Awards 2020 ceremony, but its development had been tumultuous. The game was being co-developed with Tomb Raider developer Crystal Dynamics, and we saw a first gameplay reveal during last year’s Xbox Games Showcase.

Despite looking promising, the game is being axed alongside “several unannounced projects” at Xbox Games Studios. You can find the full message from Matt Booty below:

“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 Booty, Xbox Game Studios

The cancellation of Everwild and Perfect Dark and the shutdown of The Initiative aren’t the only bad news resulting from Microsoft’s latest round of layoffs. Bloomberg’s Jason Schreier is reporting that Blackbird, a new MMORPG project from Zenimax Online Studios has also been canceled. “Many of Xbox’s subsidiaries are getting hit by the layoffs this morning, including Call of Duty studios such as Raven,” Schreier also posted on Bluesky. Lastly, the reporter said that Forza Motorsport developer Turn 10 will be losing nearly 50% of its workforce as a result of the layoffs affecting the Xbox division.

According to Windows Central’s Jez Corden, Microsoft is not cancelling State of Decay 3, which has been in development for many years at Undead Labs, a studio Microsoft acquired in 2018. Corden also said that none of the first-party games Microsoft showed at its Xbox Games Showcase this year are being cancelled, and that includes the upcoming Clockwork Revolution from inXile Entertainment.

In a separate internal memo, Microsoft Gaming CEO Phil Spencer explained that the company’s gaming arm is making difficult decisions to ensure that it can continue to “deliver exceptional games and experiences” for generations to come. “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,” Spencer said.