This time, last week’s rumors were right on the money: several major projects are dead, and even a studio once hailed as elite has been wiped out…

Microsoft Gaming has started the broad wave of layoffs that insiders have been expecting since last week, as reported by Jason Schreier of Bloomberg. Subsidiaries Activision and King, the studio behind Candy Crush, are each planning to cut about 10% of their workforce—roughly 200 jobs—according to people familiar with the plans. Other European branches, including ZeniMax Media, will also be affected by staff reductions. U.S. subsidiaries were informed today of the specific number of positions being eliminated at each office. This is the fourth round of mass layoffs at Microsoft Gaming in just eighteen months. According to Variety, the broader Microsoft corporation is expected to cut about 4% of its global workforce, which means around 9,000 jobs. It’s still unclear exactly how many employees in the Microsoft Gaming division will lose their jobs.

Here’s the full statement from Phil Spencer, head of Xbox, courtesy of Windows Central:

“Today we are making decisions that will impact colleagues across our entire organization. In order to ensure the long-term success of Gaming and focus on strategic growth areas, we are eliminating or reducing roles in certain parts of the business and following Microsoft’s example of removing layers of management to increase agility and efficiency. Out of respect for those affected today, notifications and details on organizational changes will be shared by team leaders in the coming days.”

“I recognize that these changes come at a time when we have more players, more games, and more gameplay hours than ever before. Our platform, hardware, and gaming experiences have never seemed stronger. The successes we are seeing today are built on tough decisions made in the past. Now we must make decisions that will allow us to succeed in the years ahead, and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and focus our efforts on areas with the most potential while meeting the company’s expectations for our business. This focused approach means we can deliver exceptional games and experiences to players for generations to come.”

“Determining our priorities is essential, but it doesn’t diminish the significance of this moment. Simply put, we wouldn’t be where we are today without the time, energy, and creativity of those whose roles are impacted. These decisions are not a reflection of the talent, creativity, or dedication of the people affected. Our momentum is no accident—it is the result of years of hard work from our teams. HR will work directly with impacted employees to provide severance packages (in line with local laws), including pay, healthcare, and outplacement resources to support their transition. For those whose roles are being eliminated, we encourage you to explore open positions within Microsoft Gaming, where your applications will be prioritized. Thank you to everyone who has shaped our culture, our products, and our community. We look forward with deep appreciation and respect to all who have contributed to this journey.”

According to Windows Central, Microsoft Gaming is shutting down its Santa Monica-based The Initiative studio and canceling the Perfect Dark reboot, which was first announced in December 2020, amid these mass layoffs. Matt Booty, head of Xbox Games Studio, sent the following internal email regarding these changes:

“Following Phil Spencer’s remarks, I want to share more about changes to our studio business units. We’ve decided to stop development on Perfect Dark and Everwild, as well as several unannounced projects in our portfolio. As part of this, we are closing one of our studios, The Initiative. These decisions, as well as other changes impacting our teams, reflect a broader effort to realign priorities and focus resources to set our teams up for success in a changing industry landscape. These were not easy decisions, as every project and team represents years of effort, imagination, and commitment.”

“Our overall portfolio strategy remains the same: we will keep making games that excite players, continue building our biggest franchises, and create new stories, worlds, and characters. We have over 40 projects in active development, a strong lineup for the coming fall, and robust plans 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 other roles within our teams. To everyone in 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 are headed.”

According to Bloomberg, ZeniMax Online Studios—the team behind The Elder Scrolls Online—has also had its new MMORPG project canceled. The project, codenamed Blackbird, had been in development since 2018 and would have been the studio’s first new title since launching The Elder Scrolls Online in 2014.

Studio president Matt Firor announced he is stepping down after 18 years, leaving the company later this July:

“After more than 18 years leading ZeniMax Online Studios, I will be stepping down later this month. The studio and The Elder Scrolls Online are in great hands with incoming studio head Jo Burba, executive producer Susan Kath, and director Rich Lambert. Together, this leadership team has driven many of ESO’s biggest ideas and expansions, and will continue to shape the game into something we can all be proud of. While I’ll no longer be working on the game, I’ll be rooting for you all and adding to the thousands of hours I’ve already spent playing. There are many more stories to tell and adventures to experience, and I know this amazing community will continue our shared legacy and success. Thank you all.”

Both VGC and Bloomberg confirm that Everwild has also been canceled as part of these sweeping layoffs. Developers say the project was in the works for over a decade, but even a recent reboot couldn’t give it a final direction. This would have been Rare’s first new game since Sea of Thieves in 2018.

Source: Gematsu, Bloomberg, Windows Central, VGC