Xbox Halts Development on Co-Op Game From Just Cause Studio, Kojima's OD Reportedly Still in the Works

Microsoft has stopped development on Contraband, a multiplayer co-op title that was in the works at Just Cause developer Avalanche Studios. The game, which was set to be published by Xbox Game Studios, was announced in 2021, but the developer had not shared any updates since the reveal. While Contraband follows a spate of game cancellations at Microsoft, the company has reportedly not axed Hideo Kojima's horror title OD, currently in development in collaboration with Xbox.

Microsoft Cancels Contraband

Contraband's cancellation was first reported by Bloomberg's Jason Schreier on Thursday before being confirmed by Avalanche. In an update on its website, the Swedish studio said it would assess the game's future.

“Over the past several years, Avalanche Studios Group and Xbox Game Studios Publishing have collaborated on Contraband,” the developer said. “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.”

While the statement suggests the game may yet have a future, Schreier, in a post on Bluesky, claimed the project was cancelled. Contraband was announced with a brief cinematic trailer at Xbox and Bethesda's E3 showcase in 2021. The game was described as a “co-op smuggler's paradise set in the fictional world of 1970s Bayan. Contraband was set to be an Xbox Series S/X console exclusive, with confirmed launch on Xbox Game Pass, Steam, and Windows.

Hideo Kojima's OD Still in Development

Amid several cancellations at Xbox, fans have speculated about the fate of OD, the horror game in development at Kojima Productions with Xbox Game Studios as the publishing partner. A Microsoft spokesperson, however, told Schreier that OD was still in development. No further details about the project are available.

The latest cancellation at Xbox comes a month after widespread cuts at Microsoft that saw nearly four percent of its total workforce — over 9,000 employees — laid off. The retrenchment drive led to several project cancellations at the Xbox division, including the Perfect Dark reboot, Rare's Everwild, and an unannounced MMO from The Elder Scrolls Online developer ZeniMax Online Studios.

Several other studios at Xbox, including Candy Crush developer King, Call of Duty makers Raven Software and Sledgehammer Games, Halo Studios, and Forza Motorsport developer Turn10 Studios, were hit with layoffs, as well. The entire Forza Motorsport team was reportedly laid off.

The cuts came despite strong quarterly results from Microsoft, which recently hit $4 trillion (roughly Rs. 3,49,15,020 crore) in market valuation — only the second company in history to do so. At its fourth-quarter FY 2025 earnings call last week, Microsoft CEO Satya Nadella announced that Xbox Game Pass annual revenue hit nearly $5 billion for the first time over the past year. The tech giant's Gaming revenue grew 10 percent, while Xbox content and services revenue rose 13 percent in FY 2025.