IO Interactive has announced it plans to lay off an unknown number of employees after Microsoft-owned Xbox pulled funding and publishing support for its in-development project codenamed "Project Fantasy."

The studio, which recently launched James Bond 007: First Light to critical acclaim and commercial success shared the news in a post on X. "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," the company said in its post.

"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, and we are fully committed to supporting those affected through this challenging transition."

Shortly after posting, Bloomberg News confirmed that the unnamed external partner was Xbox, which had pledged to fund and publish the unnamed fantasy game. A spokesperson for the company (which reportedly plans to lay off an unknown number of employees and shut down or spin off several studios) told the outlet that it is "taking a fresh look at where we invest so we’re focusing on our highest priorities."

Related:Own goal specialist Xbox rifles another into the roof of the net - Patch Notes #60

"We're not reducing our overall investment in games...we expect to invest about the same in content as we did last year. What's changing is where we're investing and the kinds of projects we're backing."

A similar situation played out in 2025, when Xbox halted development on Avalanche Studios' Contraband.

IO Interactive says work on Project Fantasy will continue. "Project Fantasy is a game, a world, and an IP that we absolutely love and remain 100% committed to, now and in the future. This wonderful universe will see the light of day."

About the Author

Bryant Francis

Senior Editor, GameDeveloper.com

Bryant Francis is a writer, journalist, and narrative designer based in Boston, MA. He currently writes for Game Developer, a leading B2B publication for the video game industry. His credits include Proxy Studios' 4X strategy game Zephon, Iron Anchor Studios' Down With The Ship, and Amplitude Studio's 2017 game Endless Space 2.