{"id":6736,"date":"2026-07-02T10:00:00","date_gmt":"2026-07-02T07:00:00","guid":{"rendered":"https:\/\/www.gamermarkt.com\/blog\/?p=6736"},"modified":"2026-07-02T09:30:07","modified_gmt":"2026-07-02T06:30:07","slug":"xbox-drops-io-interactive-project-fantasy-layoffs-007-first-light","status":"publish","type":"post","link":"https:\/\/www.gamermarkt.com\/blog\/xbox-drops-io-interactive-project-fantasy-layoffs-007-first-light\/","title":{"rendered":"Xbox Drops IO Interactive&#8217;s Project Fantasy: Layoffs Hit the Studio Behind 007 First Light"},"content":{"rendered":"\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Microsoft&#8217;s Xbox pulled out of its publishing deal for IO Interactive&#8217;s Project Fantasy, an online fantasy RPG. The Hitman and 007 First Light developer has begun laying off staff as it seeks new funding for the project.<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Microsoft&#8217;s Xbox division has officially withdrawn funding and publishing support from IO Interactive&#8217;s in-development online RPG codenamed Project Fantasy. The Copenhagen-based studio, riding high on the commercial and critical success of 007 First Light (Metacritic 87, over 3 million copies sold in two weeks), confirmed the split on June 30, 2026, and announced that layoffs are already underway. Bloomberg News identified Xbox as the unnamed &#8220;external partner&#8221; referenced in IO Interactive&#8217;s statement.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is Project Fantasy?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Project Fantasy is an online fantasy role-playing game that IO Interactive owns entirely as its own IP. The project was first publicly acknowledged in 2023, though details have remained thin. Documents related to the game surfaced during the FTC&#8217;s review of Microsoft&#8217;s Activision Blizzard acquisition, and Windows Central reported as early as 2021 that the project (then codenamed &#8220;Project Dragon&#8221;) was being funded by Xbox.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">IO Interactive&#8217;s statement stressed that Project Fantasy will continue. &#8220;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,&#8221; the studio wrote. The fact that IP ownership stays with IO Interactive means the project does not die with Microsoft&#8217;s exit, but finding a new publisher or securing self-funding will take time and slow development.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why Did Xbox Pull Out?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">An Xbox spokesperson told Bloomberg News that the company is &#8220;taking a fresh look at where we invest so we&#8217;re focusing on our highest priorities.&#8221; The spokesperson added: &#8220;We&#8217;re not reducing our overall investment in games. We expect to invest about the same in content as we did last year. What&#8217;s changing is where we&#8217;re investing and the kinds of projects we&#8217;re backing.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The move is part of a sweeping &#8220;reset&#8221; being led by Asha Sharma, who became Xbox&#8217;s CEO in February 2026. In an internal memo, Sharma told staff that Xbox had &#8220;overextended&#8221; itself and that the current trajectory could not continue. The restructuring is expected to begin around July 6, 2026, shortly after Microsoft&#8217;s fiscal year closes on June 30.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Five Xbox Studios at Risk of Closure<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">IO Interactive&#8217;s situation is far from isolated. According to reports from Bloomberg, The Verge, Kotaku, and GamesBeat, Microsoft is preparing to close, sell, or spin off at least five of its game studios:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Ninja Theory<\/strong> (Hellblade series): Staff were informed of closure plans. The studio is looking for a buyer despite having announced a new Senua title at Xbox&#8217;s Summer showcase just weeks earlier.<\/li>\n\n\n\n<li><strong>Compulsion Games<\/strong> (South of Midnight, We Happy Few): Reportedly in buyout negotiations with Microsoft.<\/li>\n\n\n\n<li><strong>Double Fine<\/strong> (Psychonauts series): In active discussions to spin off and go independent.<\/li>\n\n\n\n<li><strong>Undead Labs<\/strong> (State of Decay series): Closure or sale options are on the table.<\/li>\n\n\n\n<li><strong>Arkane Studios<\/strong> (Dishonored, Deathloop): The Verge reports that Marvel&#8217;s Blade has gone over budget with its ship date pushed to late 2027, and Microsoft is weighing both the game&#8217;s cancellation and Arkane&#8217;s sale.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Notably, Hideo Kojima&#8217;s OD, also published by Xbox, is reportedly safe from the cuts, according to IGN. This suggests Microsoft is selectively protecting projects it views as highest-priority while dropping others.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">007 First Light: A Massive Hit That Could Not Shield the Studio<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The timing is striking. IO Interactive&#8217;s 007 First Light launched on May 27, 2026, across PS5, Xbox Series X|S, and PC. It sold 1.5 million copies within 24 hours, making it the fastest-selling game in IO Interactive&#8217;s history. Within two weeks, the total climbed past 3 million. It earned an 87 on Metacritic, an 88 on OpenCritic, and a 91% &#8220;Very Positive&#8221; rating on Steam. Critics widely called it the best James Bond game ever made, with some labelling it the best Bond story since Casino Royale.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Revenue estimates suggest around $25 million in Steam sales alone during the launch window, though the game&#8217;s reported $200 million budget means full cost recovery will take longer. A Nintendo Switch 2 version is due later in summer 2026. None of this commercial momentum was enough to keep Xbox committed to Project Fantasy.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">IO Interactive&#8217;s Global Footprint<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">IO Interactive operates five studios worldwide: Copenhagen (headquarters), Malm\u00f6 (Sweden), Barcelona (Spain), Istanbul (Turkey), and Brighton (England). As of mid-2025, the company employed over 500 people. The Istanbul studio, opened in 2023, was specifically set up to contribute to Project 007, Project Fantasy, and Hitman development, with a target of growing to 150 staff. It is located on Marmara University&#8217;s Teknopark campus in Kad\u0131k\u00f6y.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The studio&#8217;s CEO, Hakan Abrak, has not yet publicly commented on how many employees or which locations will be affected by the layoffs. The company&#8217;s statement referenced &#8220;short-term consequences, including staffing decisions&#8221; that were happening in real time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Microsoft&#8217;s Pattern of Gaming Layoffs<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Xbox&#8217;s gaming workforce has faced repeated rounds of cuts since Microsoft completed its $69 billion Activision Blizzard King acquisition in 2023. In January 2024, 1,900 gaming staff were let go. In September 2024, another 650 followed. Arkane Austin and Alpha Dog Games were shut down, and Tango Gameworks was sold. In summer 2025, Microsoft cut approximately 9,000 employees company-wide, with Xbox again absorbing heavy losses, including the closure of The Initiative and cancellation of Perfect Dark and Everwild.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Industry-wide, the Game Industry Layoffs tracker estimated roughly 14,600 gaming jobs were lost in 2024 alone, following approximately 10,500 in 2023. Microsoft has been one of the largest single contributors to these numbers.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Happens to Project Fantasy Now?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">IO Interactive retains full IP ownership over Project Fantasy, which is its most significant strategic asset beyond Hitman and the 007 licence. The studio can seek a new publishing partner or attempt to self-publish. Given the critical and commercial success of 007 First Light (and the Hitman: World of Assassination trilogy&#8217;s 25 million lifetime sales), IO Interactive is well-positioned to attract interest. However, the negotiation process, contract alignment, and budget restructuring could take many months.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">During this transition, the development team will likely be reduced. IO Interactive&#8217;s careful wording about &#8220;short-term consequences&#8221; suggests the studio aims to preserve its core creative team while trimming peripheral roles. Whether the Istanbul, Brighton, or other satellite studios bear a disproportionate share of the cuts remains unclear.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What This Means for Gamers<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">For 007 First Light owners, the near-term outlook is stable. Post-launch support continues, and the Switch 2 port is still on track. For anyone excited about Project Fantasy, the road just got longer and murkier. IO Interactive&#8217;s commitment is on the record, but without a confirmed funding source or publisher, no release timeline can be taken seriously.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The broader concern for Xbox players is the potential loss of beloved studios and franchises. Ninja Theory, Arkane, Double Fine, Compulsion, and Undead Labs collectively represent some of the most creatively distinctive voices in Xbox&#8217;s portfolio. If July 2026&#8217;s layoffs play out as reported, Microsoft will have closed or divested more studios than most publishers have ever owned. The exact scope will become clear in the days ahead as Microsoft&#8217;s new fiscal year begins.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Microsoft&#8217;s Xbox pulled out of its publishing deal for IO Interactive&#8217;s Project Fantasy, an online fantasy RPG. The Hitman and 007 First Light developer has begun laying off staff as it seeks new funding for the project.<\/p>\n","protected":false},"author":5,"featured_media":6737,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[322],"tags":[],"class_list":["post-6736","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/posts\/6736","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/comments?post=6736"}],"version-history":[{"count":1,"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/posts\/6736\/revisions"}],"predecessor-version":[{"id":6738,"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/posts\/6736\/revisions\/6738"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/media\/6737"}],"wp:attachment":[{"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/media?parent=6736"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/categories?post=6736"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gamermarkt.com\/blog\/wp-json\/wp\/v2\/tags?post=6736"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}