IO Interactive to lay off staff after Xbox pulls Project Fantasy funding
Xbox’s funding pull on Project Fantasy is forcing IO Interactive layoffs, even after the studio shipped 007 First Light and kept backing the fantasy RPG.
IO Interactive said it will lay off an unspecified number of employees after Xbox withdrew funding and publishing support for Project Fantasy, the studio’s in-development online fantasy RPG. The cuts come after IO Interactive launched 007 First Light worldwide on May 27, a stark reminder that a shipped game does not insulate a studio when outside financing disappears.
IO Interactive first unveiled Project Fantasy in February 2023 and still lists it on its own site as a project it remains committed to building. The studio said it is “100% committed” to the game and will keep developing it despite losing its external partner, but it has not disclosed how many workers will be affected or which teams will be hit.
Xbox confirmed it had pulled out of the deal to fund and publish the game. A spokesperson said the division was “taking a fresh look at where we invest so we’re focusing on our highest priorities,” while also saying Xbox is not reducing its overall investment in games and expects to invest about the same in content as last year. That leaves Project Fantasy caught inside a broader recalibration of Microsoft’s spending, not a simple dispute with one developer.
The timing is especially sharp because IO Interactive had just cleared one major milestone and was still managing another. Its June 4, 2025 announcement for 007 First Light said the Bond title was coming to PlayStation 5, Xbox Series X|S, Nintendo Switch 2 and PC, and the game’s global launch followed on May 27 from IO Interactive’s Copenhagen headquarters. One project shipped; another lost its backer.
For Nintendo developers, designers, QA testers and production staff who work with external partners, the sequence is a familiar risk in sharper relief. Nintendo’s business depends on a mix of internal and outside development, and platform decisions can ripple quickly through co-development schedules, localization pipelines and support staff. IO Interactive’s layoffs show how fragile that model can be when a platform-holder changes its priorities after a project is already in motion.
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