Xbox cancels Perfect Dark reboot and lays off half of Forza Motorsport developer

Microsoft has shut down developer The Initiative and cancelled the Perfect Dark reboot as Turn 10 sees their headcount cut by 50%.

As predicted, today is not a good day for Xbox or the games industry in general. Although it’ll probably be a good one overall for Microsoft, who will no doubt see their share price increase as they cut over 9,000 jobs worldwide.

It’s still unclear how many of those cuts will affect Xbox, and divisions like Bethesda and Activision Blizzard, but news is slowly leaking out about layoffs at King, ZeniMax, Rare, and more.

The biggest causality so far is new studio The Initiative, who were formed seven years ago and were working on a reboot of Perfect Dark. That will never be completed though, as the entire company has been shut down.

Perfect Dark was announced in 2020 and while there are long-standing rumours of it being a troubled production, the gameplay trailer from 2022 did look encouraging.

However, the fact that The Initiative has been around for seven years, and still wasn’t anywhere close to releasing a game, speaks to the poor management that Microsoft has often been accused of when it comes to its first party studios.

The Initiative has always seemed particularly bad though, with reports that over half the staff had left by 2022, reducing the head count to around 50.

There was also the strange annoucement that Tomb Raider developer Crystal Dynamics was being brought in to help with Perfect Dark – meaning there were actually two studios working on the game.

That’s very strange, as The Initiative was founded by a number of very experienced developers, including former Crystal Dynamics head Darrell Gallagher, Red Dead Redemption writer Christian Cantamessa, and God Of War senior producer Brian Westergaard.

Microsoft hasn’t confirmed any of the layoffs yet, but Windows Central has obtained a copy of the internal email sent round by Xbox Games Studio head Matt Booty:

‘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.’

Booty’s comments confirm previous rumours about the cancellation of Everwild, but Windows Central suggests that Forza Motorsport developer Turn 10 has lost half of its 100-odd staff.

It’s also suggested that QA (quality assurance) positions at Activision and Blizzard have been badly affected, along with Xbox marketing and sales, and game producers and managers.

State Of Decay 3 developer Undead Labs has also been hit by layoffs but apparently the game, which has rarely been shown in public, has not been cancelled.

The site suggests that anything shown at the Xbox Summer Showcase, including Clockwork Revolution, is ‘safe’ but there’s still very little that is certain, with Microsoft unlikely to publicly confirm exact layoff numbers at Xbox.

However, it is claimed that Microsoft’s next gen hardware plans are unaffected by the layoffs, even if let of substance is known about them at the moment.

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