Microsoft has cancelled the Perfect Dark reboot and is shutting down The Initiative, the Xbox studio responsible for developing the modern reimagining of the classic Rare title, while at the same time sacking another 9,000 people.

The studio closure is part of broader workforce reductions affecting approximately four percent of Microsoft’s global workforce, according to a report first published by Windows Central.

Xbox Game Studios head Matt Booty confirmed the decision in an internal memo obtained by Windows Central, which Microsoft has verified as authentic.

The memo reveals that the cancellation of Perfect Dark drove the decision to close The Initiative, rather than studio closure leading to project cancellation.

“We have made the decision to stop development of Perfect Dark and Everwild as well as wind down several unannounced projects across our portfolio,” Booty wrote.

“As part of this, we are closing one of our studios, The Initiative.”

The Perfect Dark reboot was intended to be The Initiative’s flagship project, based on the acclaimed Rare game from the Nintendo 64 era.

Development was being conducted in partnership with Crystal Dynamics, and Microsoft showcased the first gameplay footage of the reimagined title in 2024.

The game was positioned as a significant addition to Xbox’s exclusive game portfolio and represented a major investment in reviving dormant intellectual property.

Rare’s Everwild, another high-profile project mentioned in the cancellation announcement, has experienced a troubled development cycle since its initial reveal in 2019.

The game reportedly underwent a complete restart in 2021, indicating ongoing challenges that may have contributed to its ultimate cancellation alongside Perfect Dark.

The layoffs extend beyond cancelled projects to impact multiple established studios within Microsoft’s gaming division.

According to Bloomberg’s Jason Schreier, Call of Duty developer Raven Software is facing staff reductions, while Forza Motorsport studio Turn 10 could potentially lose up to 50 percent of its workforce.

These cuts suggest the restructuring affects both struggling projects and successful franchises within Microsoft’s gaming ecosystem.

The Initiative was established as a premium AAA development studio within Xbox Game Studios, positioned to create high-quality exclusive content for Microsoft’s gaming platforms.

The studio’s closure represents a significant shift in Microsoft’s approach to internal game development and raises questions about the company’s commitment to developing exclusive content through wholly-owned studios.

Microsoft’s gaming division has faced increasing pressure to deliver profitable results following the company’s massive acquisitions of Activision Blizzard and other major publishers.

The workforce reductions and project cancellations suggest the company is prioritising financial efficiency over ambitious development projects that may not guarantee commercial success.