Xbox Cancels ZeniMax Online's "Project Blackbird" Amidst Sweeping Microsoft Layoffs

Microsoft has confirmed the cancellation of "Project Blackbird," an ambitious alien noir-themed massively multiplayer online (MMO) game from ZeniMax Online Studios (ZOS), as part of a significant wave of layoffs impacting approximately 9,000 employees across various divisions, including its Xbox gaming arm. The decision blindsided the development team, who had been preparing the large-scale project for full production.

Key Takeaway: Microsoft has canceled ZeniMax Online Studios' "Project Blackbird," an alien noir MMO, amidst widespread layoffs affecting 9,000 employees across the company, including its Xbox division. This cancellation, along with others at studios like The Initiative and Rare, signals a significant restructuring within Microsoft's gaming strategy.

The Vision for "Project Blackbird"

"Project Blackbird," developed by the studio behind *The Elder Scrolls Online* and *Fallout 76*, had been in pre-production for several years, employing nearly 200 dedicated staff. The game was envisioned as a third-person shooter action-RPG, set on a tidally locked planet called Soteria. Players would embody "Revenants," augmented humans working for alien syndicates within the hovering megacity of Exodus. Gameplay was designed to feature deep character customization, a housing system, player-versus-player (PvP) combat, and robust live service goals with weekly, monthly, and quarterly events, echoing elements from titles like *Destiny* and *Warframe*. A core aspect of the experience was traversal, with players utilizing a grappling hook and fluid movement mechanics for climbing and wall-running, akin to *Spider-Man*.

A demo build of Project Blackbird, presented to Microsoft in October 2024, reportedly received positive feedback, and the team was gearing up to enter full production by October 2025, with an initial release target of late 2027, later shifted to late 2028.

Abrupt Cancellation and Team Impact

The abrupt cancellation came as a complete surprise to the development team, who learned of the project's shelving only with the broader layoff announcement on July 2, 2025. The entire development team for "Blackbird" has reportedly been cut, and ZeniMax Online Studios' head, Matt Firor, has also stepped down, with Jo Burba taking over the leadership role.

Broader Impact of Microsoft's Restructuring

The cancellation of "Project Blackbird" is one of several high-profile casualties in Microsoft's latest round of organizational changes. These widespread layoffs, affecting roughly 4% of the company's global workforce, are part of a strategic realignment aimed at "increasing agility and effectiveness" and prioritizing key growth areas, notably artificial intelligence development. This marks Microsoft's second major layoff event in 2025 and its fourth in the past 18 months, following the substantial acquisition of Activision Blizzard in late 2023.

Other significant impacts within Xbox's gaming studios include:

The Initiative: The studio responsible for the highly anticipated *Perfect Dark* reboot has been entirely shut down, leading to the cancellation of the game.
Rare: The long-gestating fantasy adventure *Everwild*, first announced in 2019, has also been canceled. Additionally, veteran game designer Gregg Mayles has reportedly left the studio.
Turn 10 Studios: The developer of *Forza Motorsport* saw over 70 employees, nearly half its staff, impacted by the layoffs.
King: The studio behind *Candy Crush* reportedly experienced a 10% reduction in its workforce.
Other Studios: Raven Software and other *Call of Duty* developers were also affected, while Romero Games had funding pulled for a new shooter, and Blizzard's *Warcraft Rumble* will cease receiving new content updates.

Despite Xbox CEO Phil Spencer's assurances that the platform's, hardware's, and game roadmap's strength has "never looked stronger" and that business is " booming," these strategic cuts indicate a shift in resource allocation. The focus appears to be on consolidating efforts and redirecting investments towards areas with the greatest potential, even if it means discontinuing projects that had been years in the making. The recent layoffs underscore the volatile nature of the video game industry and Microsoft's aggressive push to streamline operations and enhance its position in a rapidly evolving technological landscape.