It looks like Microsoft's cuts got another one: Avalanche has stopped work on its 1970s smuggling sim Contraband to 'evaluate the project's future'

A month after Microsoft laid off 9,000 employees, cancelled multiple game projects, and closed The Initiative, Avalanche Studios says work on its 1970s-themed smuggling sim Contraband—which was being developed in partnership with Xbox—has been halted.

"Over the past several years, Avalanche Studios Group and Xbox Game Studios Publishing have collaborated on Contraband," Avalanche wrote. "Active development has now stopped while we evaluate the project's future. 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."

There's no mention of Microsoft's role in the decision to halt development of Contraband, but a Bloomberg report says the call was made by Xbox, and also claims that development has been halted outright. Stephen Totilo's Game File suggests the same thing, saying in its report that Xbox's publishing division, which works with external studios, was "significantly" impacted by the July layoffs, and that Microsoft had cancelled work on the project.

The situation seems at least superficially similar to that of Romero Games, which announced the day after the Microsoft layoffs were made public that it had lost funding for a new shooter it was working on. Romero Games has never officially confirmed that Microsoft was the source of the lost funding, but the Game File report claims it was.

As for Contraband, we never really heard anything more about it after its 2001 reveal in Microsoft's showcase at E3. The Contraband game page at Xbox.com says only that it's "a co-op smuggler’s paradise set in the fictional world of 1970s Bayan," while Avalanche's own website adds that it's "brought to you by Avalanche Studios and Xbox Game Studios, and exclusive to Xbox Series S|X consoles and coming to Xbox Game Pass, Steam, and Windows 10 PC."

The E3 announcement teaser, meanwhile, wasn't terribly informative but it did set a very definite vibe. It's been set to private on the Xbox YouTube channel, but it's easy to dig up elsewhere.

Whether it's cancelled or merely paused, the Contraband development stoppage is more bad news for a studio that really doesn't need it. Just over a year ago, in June 2024, Avalanche closed its offices in New York and Montreal—which it had only acquired eight months earlier—and laid off roughly 50 employees, representing 9% of the studio's global workforce.

Xbox boss Phil Spencer said in a memo sent to employees amidst the layoff of roughly 9,000 people that Microsoft's gaming business has "never looked stronger," and that Xbox has "more players, games, and gaming hours than ever before." The cuts also saw the end of development on Rare's Everwild, the highly anticipated Perfect Dark reboot (and, as mentioned, the outright closure of developer The Initiative), and an unannounced MMO that was in the works at ZeniMax Online Studios.