Microsoft has reportedly canceled Rare's long-in-development game Everwild amid widespread layoffs affecting Xbox teams today.
IGN obtained an internal memo from Xbox chief Phil Spencer confirming the restructuring, with over 9,000 Microsoft employees potentially affected. Subsidiaries like Candy Crush studio King and Bethesda appear particularly impacted.
VGC initially broke the Everwild cancellation story, later verified by IGN's sources. Microsoft declined to comment when contacted.
Spencer's memo avoided specifics, stating: "Team leaders will communicate organizational changes in coming days."
The full message to gaming staff reads:
Today we're implementing difficult organizational changes across Microsoft Gaming. To ensure long-term growth, we're streamlining operations according to corporate strategy by reducing management layers and focusing resources. Impacted employees will receive detailed notifications from their managers shortly.
These changes arrive during unprecedented engagement across our ecosystem. Our current hardware, platform, and content pipelines represent years of strategic planning. Maintaining this momentum requires disciplined prioritization - doubling down on high-potential opportunities while meeting corporate expectations will enable us to deliver outstanding player experiences for years to come.
While necessary for future success, we acknowledge the profound impact on affected colleagues. Their contributions built everything we celebrate today - these decisions reflect business realities, not individual performance. Our HR teams are providing comprehensive transition support, including severance packages and priority consideration for other Microsoft Gaming roles.
Microsoft remains committed to supporting departing employees with severance benefits compliant with local regulations, including continued pay, healthcare coverage, and career placement assistance.
We deeply appreciate every team member's role in shaping our gaming community and products. Moving forward, we carry this gratitude with us.
Phil
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Spencer previously addressed Everwild's absence from Xbox showcases during a February update, following its 2019 debut.
Speaking with XboxEra, Spencer expressed enthusiasm about Everwild's progress after visiting Rare's studio. The developer continues maintaining Sea of Thieves while working on the new IP.
"The Rare team's advancement with Everwild particularly excites me," Spencer noted. "Similarly, I appreciate Double Fine's collaborative development approach and remain committed to State of Decay's future."
The Xbox head emphasized Microsoft's ability to grant development breathing room despite a crowded release calendar enhanced by Bethesda and Activision Blizzard acquisitions.
"We prioritize giving creative teams adequate development time," Spencer added, mentioning upcoming meetings with Gears of War studio The Coalition.
Everwild faced development challenges including a 2020 creative leadership change, with veteran designer Gregg Mayles (Banjo-Kazooie, Sea of Thieves) assuming direction.
Originally pitched as a third-person adventure with god game mechanics, Everwild's final direction remained unclear after years in development. Its July 2020 trailer promised "a unique experience in a magical natural world."
Microsoft's gaming division has undergone significant workforce reductions following its $69 billion Activision Blizzard purchase. January 2024 saw 1,900 layoffs, followed by studio closures at Arkane Austin and Tango Gameworks. Additional cuts occurred in September 2024 (650 employees) and May 2025 (6,000 staff). Today's restructuring marks Microsoft's fourth major gaming sector reduction in eighteen months.
"Operating sustainably requires making unpopular but necessary decisions," Spencer told IGN last June regarding workforce reductions.
These cuts coincide with Microsoft preparing next-generation Xbox hardware and maintaining strong presence at industry events like gamescom.
