Xbox has officially paused development on Contraband, an eagerly anticipated open-world co-op game from Avalanche Studios. Announced during Xbox’s E3 2021 showcase, Contraband was envisioned as a 1970s-set “smuggler’s paradise” in the fictional world of Bayan, promising a blend of cooperative gameplay and expansive exploration. However, after four years of minimal updates, the project has been put “on hold,” with Avalanche Studios confirming that “active development has now stopped while we evaluate the project’s future.”
The decision comes in the wake of significant restructuring within Microsoft’s gaming division. In early July 2025, the company announced layoffs affecting approximately 9,000 employees, or 4% of its global workforce, with notable impacts on Xbox teams. These cuts included the closure of The Initiative studio and the cancellation of high-profile titles like Perfect Dark and Rare’s Everwild. Less publicized were reductions in Xbox’s publishing division, which oversaw external partnerships like the one with Avalanche. Sources indicate that multiple producers were let go, and the division’s longtime leader, Peter Wyse, has exited the company.
The Contraband trailer, originally shared on Xbox’s YouTube channel, was set to private several weeks ago, fueling speculation about its fate. This follows a pattern of silence since its cinematic reveal, with no gameplay footage or substantial updates released in the interim. Meanwhile, Microsoft continues to support other external projects, including Hideo Kojima’s OD, Platinum, and Koei-Tecmo’s Ninja Gaiden 4, and Asobo’s Flight Simulator, signaling a selective focus on high-impact collaborations.
What’s Next for Avalanche Studios?
The cancellation of Contraband, coupled with rumors of other shelved projects like Just Cause 5, paints a concerning picture for Avalanche Studios’ future. As a studio renowned for its action-packed open-world titles—amplified by recent layoffs and the closure of its Montreal and New York offices—raises serious questions about its stability.
While Avalanche’s statement leaves the door ajar for future evaluation of Contraband, the cumulative impact of these cancellations could strain the studio’s resources and morale. Hopefully, the studio can weather this storm and find new opportunities to showcase its creative strengths, perhaps through partnerships or a revitalized focus on its flagship franchises.
