Xbox has reportedly withdrawn from a partnership to fund and publish IO Interactive's upcoming online fantasy role-playing game, codenamed Project Fantasy. The news was announced by IO Interactive on X, where the developer stated that a "relationship with an external partner on our own IP, Project Fantasy, has come to an end." The studio indicated that this development will necessitate "staffing decisions," suggesting potential layoffs.
While IO Interactive did not name the partner, Bloomberg confirmed that the external party was Xbox. According to the report, Xbox was set to provide funding and handle publishing duties for the new fantasy RPG. An Xbox spokesperson stated that the company is "not reducing our overall investment in games" but is instead "re-evaluat[ing] investment decisions" and shifting "where we're investing and the kinds of projects we're backing."
Project Fantasy was announced in 2023 as a departure from IO Interactive's recent work, which includes the Hitman series and 007 First Light. Unlike those titles, IO Interactive had planned to work with a third-party publisher for its new RPG. The studio intends to continue development on Project Fantasy, either by self-publishing or by finding a new partner.
The withdrawal comes as Xbox is reportedly preparing for significant layoffs and potential studio closures across its gaming divisions, with its fiscal year ending soon. Companies such as Compulsion Games and Undead Labs are rumored to be at risk. IO Interactive's 007 First Light, which the studio developed and published itself, was released in May and reportedly sold three million copies within weeks of its launch.