Microsoft discontinues Xbox studio The Initiative, terminating Perfect Dark along with Everwild, ZeniMax's new IP, and other unannounced projects.
In a significant shake-up within the gaming industry, Microsoft has announced a series of layoffs and studio closures that have impacted various divisions, including Xbox. The recent layoffs, which took place in July 2025, have affected over 9,000 staffers across the company.
## Impact on Xbox Studios and Projects
One of the most notable changes is the closure of The Initiative, a Los Angeles-based studio founded in 2018. This closure is part of broader efforts to adjust priorities and focus resources within the Xbox division.
The closure of The Initiative has also led to the cancellation of several projects, including "Watch On Perfect Dark," a revival of Rare's classic stealth IP. The game was being developed by The Initiative in collaboration with Crystal Dynamics. Another project affected by the changes is Everwild, which was first announced in 2019 and was being developed by Rare. Several unannounced projects across the Xbox portfolio have also been wound down.
Significant layoffs have occurred in other studios as well. For instance, around 10% of the staff at King, the developer of mobile games like Candy Crush, have been laid off. About 50% of the staff at Turn 10, which is responsible for Forza Motorsport, have lost their jobs. Cuts have also been made in the marketing teams located in London and Rockville, Maryland, at ZeniMax Media, and a new IP project by ZeniMax Online Studios has been canceled.
## Overall Portfolio Strategy
Despite these changes, Microsoft's overall portfolio strategy remains unchanged. Xbox continues to focus on developing games that excite players, growing its biggest franchises, and creating new stories and worlds. The company has more than 40 projects in active development and is looking forward to a strong slate of titles in 2026.
## Conclusion
The layoffs and studio closures reflect a broader effort by Microsoft to adjust its priorities and resources within the changing gaming industry landscape. Affected staffers are being provided with support, including severance, career transition assistance, and opportunities to explore roles on other teams within the company.
While the cuts are significant, Xbox aims to maintain its momentum with a robust pipeline of upcoming games. The recent Xbox Showcase from June, including upcoming Xbox games like Clockwork Revolution and State of Decay 3, is "safe" according to sources.
Sources: [1] Microsoft lays off over 15,000 people in 2025 despite record profits, CNBC, July 2025. [2] Microsoft's Xbox studio The Initiative is being closed down, Polygon, July 2025. [3] Microsoft cuts jobs at Xbox studios, King, ZeniMax, and Turn 10, The Verge, July 2025. [4] Microsoft confirms cancellation of Rare IP Everwild, Perfect Dark, and other unannounced projects, GamesIndustry.biz, July 2025.
- Amidst the gaming industry's shake-up, Microsoft has revealed that it has cancelled several projects, such as "Watch On Perfect Dark" and Everwild, due to studio closures like The Initiative.
- Despite the impact of the layoffs on various studios, including The Initiative, King, Turn 10, and ZeniMax Media, Microsoft's overall strategy for its Xbox portfolio stays consistent, concentrating on exciting games, growing key franchises, and creating new stories.
- In an effort to realign priorities and resources within the evolving gaming landscape, Microsoft has made cuts in their marketing teams in London and Rockville, Maryland, and even cancelled a new IP project by ZeniMax Online Studios.
- Despite the recent studio closures and layoffs, Xbox plans to maintain its momentum with a strong pipeline of upcoming games, with events like the Xbox Showcase showcasing titles such as Clockwork Revolution and State of Decay 3.
- Additionally, Microsoft is committed to supporting affected staffers, offering them severance, career transition assistance, and opportunities to explore roles on other teams within the company.
- As the gaming industry continues to evolve, technology companies like Microsoft are focusing on strategic decisions, with Microsoft announcing over 15,000 layoffs in 2025, while still aiming to build a robust presence in sectors like sports, finance, and business, using hardware like PCs and Surface devices, as well as services like Azure and Teams on Windows.
