IO Interactive is cutting staff after Xbox pulled out of its Project Fantasy RPG

IO Interactive is laying off staff. The Copenhagen studio confirmed the cuts on June 30, after the outside company that had agreed to fund and publish its long-in-development online RPG, codenamed Project Fantasy, walked away from the deal. IOI has not said how many people are affected.

The partner it declined to name is Microsoft's Xbox. Bloomberg reported the same day that Xbox had signed on to bankroll and publish Project Fantasy and has now pulled out. That matches what has been floating around since 2023, when documents from the FTC's case against Microsoft listed the game as an Xbox project. IOI first teased it back in 2021 as a fantasy RPG built around dragons, which was already a big swing for a studio known for stealth and suits.

What IOI is saying

The studio's message is that the game is not dead. In its statement, IOI called Project Fantasy "a game, a world, and an IP that we absolutely love and remain 100% committed to, now and in the future," and said "this wonderful universe will see the light of day." It plans to look for new financing and has left the door open to self-publishing if no other partner steps in.

Worth taking that at face value, with the obvious caveat: a studio saying it remains committed to a project is not the same as a studio that has the money to finish it. Right now IOI has the IP and no publisher attached to it.

Why this one stings

IOI is one of the studios that fought its way to independence. It bought itself back from Square Enix in 2017, self-published the World of Assassination trilogy on its own terms, and shipped a James Bond game, 007 First Light, that reportedly cleared three million copies. This is not a studio that was circling the drain.

That is what makes the cuts frustrating. The people losing their jobs were not on a broken product. They were staffed on a project whose external cheque got torn up over their heads, in a deal negotiated well above their pay grade. There is a difference between "this game had problems" and "this game lost its funding," and this is squarely the second one.

The bigger pattern

This fits a rough stretch for anyone whose paycheck traces back to Xbox. Microsoft has spent the past year trimming projects and headcount across its games division, including the round of layoffs and studio spinoffs that hit up to 3,200 jobs. The IOI situation is a different shape from those. IOI is an outside partner, not an internal Xbox studio, so this is Xbox choosing to stop paying for someone else's game rather than closing a team it owns.

For the developers on the receiving end, that distinction does not change much. Whether the funder is your parent company or a partner, the result is the same set of people packing up their desks.

What happens to Project Fantasy from here comes down to whether IOI can find another company willing to write the check, or whether it can carry the game on its own books. The staff already cut do not get to wait around for that answer.