IO Interactive cuts staff after Xbox ends Project Fantasy partnership

IO Interactive announced that it will be reducing its workforce following the termination of an external partnership on its original IP, Project Fantasy. The studio said the partnership – widely reported to be with Microsoft’s Xbox division – has ended, prompting “short‑term consequences, including staffing decisions.”

Xbox confirmed it is reallocating its game‑investment focus, stating it will not reduce overall spending but will change the projects it backs. The move is part of a broader restructuring of the Xbox brand. Despite the funding pull‑out, IO Interactive affirmed its commitment to Project Fantasy, describing it as “a game, a world and an IP … that will see the light of day.” The studio also pledged to support employees affected by the layoffs. Project Fantasy, first revealed in 2023 as an online fantasy RPG, is not cancelled, and the studio’s recent hit 007 First Light remains successful.