IO Interactive has announced staffing cuts after Microsoft pulled funding and publishing support for the studio's untitled online fantasy RPG, codenamed Project Fantasy. The Danish developer, fresh off the release of James Bond 007: First Light, confirmed on X that an external partnership on its own IP has ended, forcing immediate adjustments including layoffs while pledging continued work on the title.

Bloomberg identified Xbox as the partner, noting the publisher is resetting investment priorities to focus on higher-priority projects without reducing overall game spending. This mirrors Xbox's earlier halt on Avalanche Studios' Contraband, extending the ripple effects of corporate restructuring beyond its own studios. IO Interactive emphasized its 100% commitment to the fantasy world but offered no details on project scope, timeline, or how the loss of external backing alters plans.

The move comes amid broader industry contraction, with community discussions on Reddit and X highlighting concerns over Microsoft's shifting strategy away from experimental new IPs. No specific layoff numbers or affected roles have been disclosed.