IO Interactive to lay off employees after Xbox pulls support for untitled fantasy game

IO Interactive, the studio behind Hitman and the recently successful 007: First Light, has announced layoffs following the cancellation of its partnership with Xbox over the online fantasy RPG Project Fantasy.

The Danish developer revealed that its relationship with an “external partner” on Project Fantasy—which multiple sources confirm was Microsoft’s Xbox—has come to an end. In a statement on social media, IO Interactive noted this forced the studio to make “staffing decisions” as a short-term consequence of adapting to this new reality.

The timing comes just over a month after 007: First Light’s successful launch, which sold 1.5 million copies in its first 24 hours and received critical acclaim. Project Fantasy, which IO Interactive had been developing for several years as an online fantasy RPG, was previously expected to be published by Xbox.

While Xbox has not disclosed the specific number of layoffs at IO Interactive, the company has attempted to downplay the broader impact of this decision. A Microsoft spokesperson claimed Xbox is “not reducing our overall investment in games,” but rather “re-focusing” spending on the company’s “highest priorities.” The statement acknowledged that “what’s changing is where we’re investing and the kinds of projects we’re backing,” indicating a strategic shift in Xbox’s development portfolio.

This cancellation reflects broader cost-cutting efforts at Xbox under CEO Asha Sharma, with multiple studios reportedly facing shutdown or significant staff reductions as the company undergoes a “reset” of its gaming division.

IO Interactive to lay off employees after Xbox pulls support for untitled fantasy game

Sources