IO Interactive is making layoffs after Xbox ended its publishing deal for the online fantasy RPG Project Fantasy, though the studio says it remains committed to finishing the game independently.
- IO Interactive confirmed on 30 June 2026 that its external publishing partnership for Project Fantasy has ended, triggering layoffs.
- A Bloomberg report named Xbox as the publisher pulling out of Project Fantasy.
- Xbox said it is "taking a fresh look at where we invest so we’re focusing on our highest priorities."
- IO Interactive says it remains "100% committed" to Project Fantasy and will seek other funding or self-publish.
- The exact number of affected staff has not been disclosed.
IO Interactive is making layoffs after its publishing deal with Xbox for the online fantasy RPG Project Fantasy collapsed. The Hitman and 007 First Light studio confirmed on 30 June 2026 that its partnership with an external publisher had ended, forcing “staffing decisions” that are happening now. A Bloomberg report named Xbox as the publisher walking away, and IO says it will keep building the game regardless.
As reported by Video Games Chronicle, citing IO’s own statement and a Bloomberg report, the studio will now have to find other funding or self-publish Project Fantasy. The timing is pointed: Xbox is in the middle of what VGC describes as reported widespread layoffs, the same wave that has put other studios on the chopping block.
What IO Interactive said
IO framed the news as a hard turn after a good run, but it stopped well short of calling the project dead. The studio leaned on its recent Bond success before delivering the bad part.
For a good while, it has been all positive news from IO Interactive. However, today we have to share some more downbeat news. A relationship with an external partner on our own IP, Project Fantasy, has come to an end. This means we have to adapt to this new reality and its short-term consequences, including staffing decisions, which is what is happening as we write this update.
IO Interactive
The studio insisted it remains “100% committed” to the game, saying “this wonderful universe will see the light of day.” That is the company line, and it reads as sincere — but no number of affected staff has been disclosed, and “committed” without a publisher cheque is a different thing to committed with one. IO is independent again after its 2017 management buyout, which gives it room to move, but self-funding a long-haul online RPG is no small ask.
Why Xbox walked away from Project Fantasy
Xbox’s stated reason is a budget reshuffle instead of anything specific to the game. An Xbox spokesperson said the company is “taking a fresh look at where we invest so we’re focusing on our highest priorities.”
That is corporate shorthand for cutting things that do not clear an internal bar, and Project Fantasy — an unreleased online RPG with no public release date — is exactly the kind of long-term bet that gets reassessed when a publisher tightens up. It fits a pattern. The same cuts have reportedly put Dishonored and Blade studio Arkane at risk of closure, and Microsoft has been quietly reshaping its first-party plans for a while now, including softening its stance on exclusives.
Is Project Fantasy cancelled?
No — IO Interactive says the game is continuing, just without Xbox. The studio will either find a new publisher or fund development itself.
That is the important distinction here. Losing your publisher is not the same as losing your game, especially when the studio owns the IP, as IO does with Project Fantasy. What changes is the money and the platform picture: internal documents from the 2023 FTC vs. Microsoft trial suggested the game was lined up as an Xbox exclusive, and with Xbox out, that exclusivity is no longer in place. A game that was once Xbox-only could now land anywhere a new deal takes it.
How Project Fantasy got here
The Xbox connection goes back years, even though the partner was never officially named until now. Project Fantasy has been the worst-kept secret in IO’s lineup since 2021.
Windows Central first reported in April 2021 that IO had teamed up with Microsoft on a “dragon-themed IP” expected to ship as a first-party Xbox exclusive. IO confirmed the project in 2023, describing it as “a new world, a new IP — an online fantasy RPG” built “to entertain players and expand for many years to come.” Later that year, the FTC trial documents pointed at Xbox as the partner. The Bloomberg report on 30 June 2026 is the first confirmation, arriving at the same moment the deal fell apart.
Where this sits in Xbox’s wider cuts
This is not an isolated decision — it is one line in a longer story of Microsoft pulling back on first-party publishing. The Arkane closure reports landed the same day.
Over the past stretch, several of Xbox’s studios have been tipped for closure or spin-off, with Ninja Theory reportedly hunting for a buyer and the Marvel’s Blade project said to be in trouble. The through-line is a company narrowing its bets after years of buying up studios and IP. For a publisher that spent heavily on first-party ambition, walking away from a funded project it had backed for years is a signal of how the priorities have shifted.
FAQ
Is Project Fantasy still being made after Xbox pulled out?
Yes. IO Interactive says it remains “100% committed” to Project Fantasy and that “this wonderful universe will see the light of day,” but it will need to find alternative funding or publish the game itself.
Why did Xbox end its deal with IO Interactive?
An Xbox spokesperson said the company is “taking a fresh look at where we invest so we’re focusing on our highest priorities,” framing it as part of reported widespread cuts across Microsoft’s gaming division.
How many people are being laid off at IO Interactive?
The exact number has not been disclosed. IO Interactive confirmed “staffing decisions” are underway but gave no specific figure.
Was Project Fantasy meant to be an Xbox exclusive?
Internal documents from the 2023 FTC vs. Microsoft trial suggested it was planned as an Xbox exclusive, and a Bloomberg report on 30 June 2026 confirmed Xbox as the publisher. With Xbox now out, that exclusivity arrangement is no longer in place.