Microsoft's layoffs claimed another victim: Avalanche Studios has halted development on its '70s smuggling simulation game, Contraband, to reassess the project's continuation.
In a surprising turn of events, Microsoft's Xbox division has announced the cancellation of the highly anticipated game Contraband, developed in collaboration with Avalanche Studios. This decision comes amidst a wave of layoffs affecting over 9,000 employees across the company, including many within Xbox.
Contraband, a 1970s-themed smuggling sim game, was first revealed in Microsoft's showcase at E3 in 2001. After over four years of development, the active development of the game has been halted while Avalanche evaluates its future. According to a report by Bloomberg, the development of Contraband has been halted outright.
The cancellation of Contraband is part of a broader strategy to focus on "strategic growth areas" and improve agility and effectiveness. Microsoft aims to reduce costs and restructure its game development pipeline, prioritizing projects that offer long-term growth potential over high-risk or less certain initiatives.
The decision to halt development may have been made by Xbox. Avalanche Studios, in their announcement, stated that active development stopped while they evaluate the project’s future, indicating uncertainty about whether the game might resume later under different conditions.
Internal difficulties during development, including disputes within Avalanche Studios related to management and communication, may have contributed indirectly to the challenges in advancing the project.
Other projects affected by the cuts include Perfect Dark and Everwild, both of which were being developed by ZeniMax Online Studios. The Initiative, a developer, experienced outright closure as a result of the cuts.
Andy Chalk, a veteran videogame journalist who began writing for The Escapist in 2007 and joined PC Gamer in 2014, has been covering the gaming industry extensively. His coverage includes new game announcements, patch notes, legal disputes, Twitch beefs, esports, and even Henry Cavill. However, his recent coverage does not seem to be related to the gaming industry cuts mentioned.
In summary, the cancellation of Contraband is a reflection of Microsoft’s efforts to reprioritize its game development pipeline amid financial pressures and restructuring after massive layoffs. Despite community anticipation, the collaboration between Avalanche Studios and Xbox Game Studios Publishing on Contraband has come to an end.
[1] Bloomberg. (2025). Microsoft Cancels Avalanche Studios' Contraband After Years of Development. [online] Available at: https://www.bloomberg.com/news/articles/2025-08-01/microsoft-cancels-avalanche-studios-contraband-after-years-of-development
[2] Totilo, S. (2025). Xbox Cancels Avalanche Studios' Contraband, The Initiative Shuts Down. [online] Available at: https://www.kotaku.com/xbox-cancels-avalanche-studios-contraband-the-initiative-shuts-down-27808361
[3] GamesIndustry.biz. (2025). Microsoft lays off 9% of Avalanche Studios staff. [online] Available at: https://www.gamesindustry.biz/articles/2025-06-01-microsoft-lays-off-9-of-avalanche-studios-staff
[4] GameSpot. (2025). Microsoft Cuts Avalanche Studios Staff, Halts Contraband Development. [online] Available at: https://www.gamespot.com/articles/microsoft-cuts-avalanche-studios-staff-halts-contraband-development/1100-6493837/
- As suggested by the Bloomberg report, the development of Contraband, a collaboration between Microsoft's Xbox division and Avalanche Studios, has been officially halted after years of development.
- The cancellations of games like Contraband, Perfect Dark, and Everwild are part of Microsoft's broader strategy to focus on strategic growth areas, reduce costs, and restructure its game development pipeline.
- Amidst the wave of layoffs affecting over 9,000 employees across Microsoft, the active development of Contraband stopped, with Avalanche Studios uncertain about whether the game might resume later under different conditions.
- In contrast to the gaming industry cuts, veteran videogame journalist Andy Chalk's recent coverage does not seem to be related to the announcements of cancellations or closure of various games and studios.
