IO Interactive confirmed on Tuesday (30th) that layoffs are underway following Xbox's decision to halt funding for Project Fantasy, a fantasy RPG in development since 2023. In an official statement, the Danish developer said that "a relationship with an external partner on our own IP, Project Fantasy, has come to an end," forcing the studio to adapt to this "new reality and its short-term consequences, including staffing decisions."
According to IGN and GamesRadar, the external partner is Xbox. Microsoft confirmed the decision through a spokesperson cited by Bloomberg, though it reaffirmed that it is "not reducing our overall investment in games." IO Interactive did not specify how many employees would be affected, but stated it remains "fully committed to supporting those affected through this challenging transition."
The layoff announcement arrives shortly after the success of 007 First Light, which sold 3 million copies and exceeded IO's internal forecasts. Project Fantasy was first revealed in 2023 during the FTC-Microsoft trial and described internally as a new intellectual property. The cuts at IO occur amid larger restructuring efforts expected across Microsoft's gaming division in the coming weeks.
