Microsoft has confirmed the closure of The Initiative, the Santa Monica-based Xbox studio tasked with reviving the Perfect Dark franchise, marking the end of development on the highly anticipated reboot. This announcement came on July 2, 2025, amidst a broader wave of layoffs affecting approximately four percent of Microsoft's global workforce, which translates to roughly 9,000 employees across various divisions.
The Initiative, established in 2018 and promoted as a "AAAA" studio, was led by former Crystal Dynamics head Darrel Gallagher and staffed by industry veterans from Respawn, BioWare, Naughty Dog, and others. The studio was initially formed to breathe new life into Perfect Dark, a beloved spy-themed first-person shooter originally developed by Rare. The reboot was co-developed in partnership with Crystal Dynamics, known for their work on the Tomb Raider series.
Perfect Dark’s journey was fraught with challenges. Though the first gameplay footage was unveiled at the 2024 Xbox Games Showcase, showcasing immersive sim elements with series protagonist Joanna Dark using gadgets, stealth, and melee takedowns, the project never secured a release window. Reports leading up to the gameplay reveal indicated a turbulent development process marked by clashes among developers and a lack of clear leadership vision. IGN noted that the game was effectively rebooted again in 2022 and remained years from completion.
Xbox Game Studios head Matt Booty confirmed the closure in an internal email shared with employees and obtained by Windows Central. Booty wrote, "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." He emphasized that these decisions were not made lightly, acknowledging the years of effort, imagination, and commitment poured into each project and team.
Rare's Everwild, another ambitious title announced in 2019, also fell victim to the cuts. Everwild’s development had been troubled, including a significant restart in 2021. Alongside Perfect Dark and Everwild, several other unannounced projects—one reportedly being ZeniMax Online Studios’ next MMORPG—were canceled as part of Microsoft's strategic reshuffling.
Booty explained the rationale behind these moves: "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." Despite these upheavals, Microsoft’s overall portfolio strategy remains intact, aiming to build games that excite players, grow its biggest franchises, and create new stories, worlds, and characters. The company boasts more than 40 projects currently in active development, with continued momentum on titles set to ship later this year and a strong slate planned for 2026.
The closure of The Initiative is part of a larger pattern of cutbacks within Microsoft’s gaming division. Other studios have faced layoffs, including Raven Software, known for Call of Duty, and Turn 10 Studios, the developer behind Forza Motorsport, which reportedly could lose up to half its staff. Additionally, Zenimax Online Studios saw the cancellation of a long-in-development online role-playing game. These moves follow previous reductions in 2023 and 2024, when Microsoft laid off an estimated 10,000 people and shut down four Bethesda studios, including Arkane Austin and Tango Gameworks.
Industry observers see these developments as symptomatic of broader shifts in the gaming landscape. The "deprofessionalization of video games," highlighted at recent events like PAX East, underscores how the success of small teams and solo developers is reshaping expectations. However, this trend also threatens the survival of specialized talent and large-scale projects that require extensive resources and coordination.
For employees affected by the layoffs and studio closures, Microsoft has pledged support through severance packages, career transition assistance, and opportunities to join other teams within the company where possible. Booty expressed gratitude to all Xbox Game Studios staff, stating, "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."
The end of The Initiative and the cancellation of the Perfect Dark reboot mark a significant moment for Xbox and its fans. Once envisioned as a flagship title to showcase the studio’s AAAA ambitions, Perfect Dark’s demise reflects the challenges of balancing innovation, scale, and corporate priorities in an evolving market. As Microsoft recalibrates its gaming strategy, the industry will be watching closely to see how these changes influence the future of game development and the stories that reach players around the world.
