Microsoft’s video game division is in trouble once again. This Wednesday, July 2, up to 9,000 employees have been laid off across the conglomerate, among whom Xbox workers have also been affected. It has been confirmed that as a result of these cuts, Perfect Dark, which would have been the reboot of the legendary franchise that was born on Nintendo 64 in 2000, has been canceled. And not only that: The Initiative, the studio that was founded specifically to create this new game, has been closed.
Xbox cancels Perfect Dark reboot and closes its studio, The Initiative
On July 2nd, 2025, Microsoft laid off a whopping 9000 workers, many of whom belong to the Xbox division. These layoffs have, in turn, led to cancellations of projects such as Rare’s Everwild, which would have been in development for nearly a decade.
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The scissors have not only stayed with this company; there are also projects affected, such as a new MMORPG from Zenimax Online Studios—the creators of The Elder Scrolls Online—or, as in the case at hand, Perfect Dark and its developer, The Initiative, as sources from the studio have confirmed to Windows Central. This confirms what many already feared: Joanna Dark’s new game, which was to be a reboot of the franchise, will never see the light of day after the closure of her studio.
The development of this video game has been very tumultuous, so the news, although sad, is not particularly “surprising.” The Initiative was a studio founded in 2018 expressly to create this new Perfect Dark, which would use Unreal Engine 4. However, in February 2021, the problems began: the lead designer, Drew Murray, left for Insomniac Games. In September of the same year, Crystal Dynamics, currently responsible for the Tomb Raider franchise, began to assist The Initiative in the development of Perfect Dark, something that many interpreted as a bad sign because they had to ask for help as they did not have the necessary talent on their own.
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Between late 2021 and mid-2022, many developers of The Initiative left the studio, citing “lack of creative autonomy” and “slow development progress” as the main reasons for resignation. It was in 2022 that the project was restarted, this time using Unreal Engine 5. Finally, at the Xbox Games Showcase in 2024, we got our first glimpse of the game in motion, though with no confirmed release date.
This first-person adventure would have had a clear immersive sim component a la Deus Ex, leaving behind the more rigid level/mission design of previous installments. The game would have been set entirely in the city of Cairo, and Joanna’s objective would be to investigate and capture Daniel Carrington, who is hiding somewhere in a futuristic version of the Egyptian city. The game would also feature the typical spy thriller elements that inspired the original titles, as well as several interesting twists, such as the fact that the protagonist now worked for dataDyne, who were the villains in the Nintendo 64 and Xbox 360 games.
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Ultimately, this wave of layoffs is just another symptom of the precarious state of the video game industry. Multi-million-dollar acquisitions of studios such as Zenimax Media and Activision-Blizzard-King have worsened a situation that was already difficult to sustain. To monetize these multi-million-dollar purchases, Microsoft is moving further and further away from the concept of traditional consoles and even from the regular releases of the brand’s mainstays, such as Halo or Gears of War. Instead, its current business model revolves around Game Pass, and the main goal is to have as many subscribers as possible.
Laura Fryer, one of the founders of Microsoft Game Studios, recently lambasted Xbox for its strategic drift, stating that “I think Xbox hardware is dead.” Among other statements, she also stressed that “there is no one left on Xbox capable of releasing bombshells every few months as in the past,” and in view of the cancellation of Perfect Dark, she was right. Cliff Bleszinski, the creator of Gears of War himself, has even gone so far as to say that the branding of the upcoming ROG Xbox Ally is “very bad.” There are more and more critical voices from prominent industry personalities on Microsoft’s inordinate focus on services like Game Pass and Play Anywhere. Only time will tell if the company manages to reverse this major internal crisis, which also affects its prestige and brand image.
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