Breaking: Microsoft stops development on Contraband

Long-awaited, little-seen game "on hold" amid Xbox publishing cutback

Microsoft has stopped active development on one of its most enigmatic upcoming Xbox and PC games, the externally developed Contraband, Game File has learned.

Sweden-based Avalanche Studios (Just Cause) had been developing the game, with Microsoft’s Xbox team publishing.

Contraband was announced via a cinematic trailer during Microsoft’s E3 2021 online showcase.

At the time, the companies said that Contraband would be an open-world co-op game set in the fictional 1970s “smuggler’s paradise” of Bayan.

Avalanche and Microsoft have barely spoken of the game—let alone shown anything—since then.

Microsoft declined to provide a comment on the game’s fate but a source familiar with the matter noted that production—which is now “on hold”—had been ongoing for five years and that the company avoids cancellations as much as possible.

Update: 1:05pm - In a statement on their website, Avalanche stated that “active development has now stopped while we evaluate the project’s future.” The studio also noted that “we’re thankful for the excitement we’ve seen from the community since we announced and will give an update on what’s next as soon as we can.”

Contraband’s official trailer had been set to private on Xbox’s YouTube channel several weeks ago, stoking rumors that the game was in jeopardy.

Microsoft implemented significant cuts in its gaming teams in early July as part of the company’s overall workforce reduction of 4% of its employees, or about 9,000 jobs. Layoffs specifically on the Xbox team including big cuts at Forza studio Turn 10 and the closure of the studio The Initiative.

Microsoft said at the time that the cuts also included the cancellation of two announced games: The Initiative’s reboot of Rare’s Everwild (announced in 2019) and Perfect Dark (announced in 2020). Microsoft game studios chief Matt Booty said in an internal memo that the gaming group would “wind down several unannounced projects across our portfolio.”

Less widely reported at the time were cuts in Xbox’s publishing division, a group that worked with outside development studios to supplement Microsoft’s internally-developed games with projects made by partners. Such games have included Interior Night’s As Dusk Falls and Dontnod’s Tell Me Why. Two Game File sources said that team has been significantly impacted, with multiple producers cut and its longtime leader, Peter Wyse, also exiting the company.

While it was never officially confirmed, one of the unannounced projects referenced by Booty was a new game from Romero Games, to have been published by the Xbox publishing team.

Microsoft still has plans to publish games from Kojima Productions (OD), Platinum and Koei-Tecmo (Ninja Gaiden 4) and Asobo (Flight Simulator), according to a source familiar with the matter.

Microsoft is not expected to make any further cuts from its Xbox team due to the Contraband decision.

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In his July memo, Booty said Microsoft still had more than 40 games in development.

The company’s recent June showcase featured many upcoming games, though some long-awaited titles, including a new Fable, are still not expected until at least 2026.

Microsoft’s big releases this fall include Call of Duty Black Ops 7 and The Outer Worlds 2, which the company recently priced at $70, after floating a possible $80 pricepoint. The first Xbox-branded handled gaming PCs are also set for release late this year.

Last week, Microsoft said gaming revenue was up 10% to $5.5 billion for the April-June quarter compared to a year ago. But chief financial officer Amy Hood said that gaming revenue is likely to “decline in the mid- to high single digits” for July-September compared to a year ago due to “strong” performance in that summer 2024 quarter.