UPDATE: A report from Bloomberg has confirmed that Xbox has ended its publishing partnership with IO Interactive for Project Fantasy.
According to an Xbox spokesperson, Microsoft is:
“Taking a fresh look at where we invest so we’re focusing on our highest priorities.”
The decision comes amid Xbox’s wider restructuring efforts and a broader reassessment of its gaming investments.
Despite the success of 007 First Light, IO Interactive has confirmed that layoffs are taking place at the studio following the end of a publishing partnership tied to its original fantasy IP, Project Fantasy.
The Danish developer says it remains fully committed to the project, despite losing financial backing from an external partner.
IO Interactive Confirms Layoffs
In a statement shared on the studio’s official social media channels, IO Interactive revealed that its relationship with an unnamed publishing partner had come to an end.
As a result, the studio has been forced to restructure, leading to staff reductions.
The company said:
“A relationship with an external partner on our own IP, Project Fantasy, has come to an end.”
It added that the situation carries “short-term consequences,” including difficult staffing decisions, while emphasizing that affected employees will receive support during the transition.
Project Fantasy Is Still in Development
Although the publishing agreement has ended, IO Interactive stressed that Project Fantasy has not been canceled.
The studio reaffirmed its long-term commitment to the new original IP, stating:
“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.”
That statement should reassure fans who were concerned the project might have been shelved following the partnership’s collapse.
Bloomberg Confirms Xbox Was the Publishing Partner
Shortly after IO Interactive’s announcement, Bloomberg reported that Xbox was indeed the external partner referenced by the studio.
Microsoft confirmed it has decided to step away from publishing Project Fantasy as part of a broader review of its investment strategy.
An Xbox spokesperson said:
“We’re taking a fresh look at where we invest so we’re focusing on our highest priorities.”
The move aligns with Microsoft’s recent restructuring, which has included layoffs, canceled publishing agreements, and reports of reduced investment in certain third-party projects.
Xbox Continues to Reshape Its Portfolio
The cancellation of the Project Fantasy publishing deal follows a string of major Xbox developments, including:
- Widespread layoffs across Microsoft Gaming
- Reports of potential studio closures
- Changes to Game Pass investment strategy
- Continued support for select projects such as Hideo Kojima’s OD
While Xbox says it is not reducing its overall spending on games, Microsoft has made it clear that it is becoming far more selective about where those investments are directed.
For IO Interactive, the immediate challenge will be navigating the loss of a major publishing partner while continuing development of one of its most ambitious original projects to date.
