Hitman Dev IO Interactive Cuts Jobs After Xbox Funding Ends Project Dragon

IO Interactive, the studio behind Hitman and 007: First Light, is shutting down one of its locations and laying off an unspecified number of employees after Xbox pulled financial support for an upcoming project.

The company’s internal fantasy RPG—code-named Project Dragon—has been in development for years and relied in part on money tied to Xbox. That relationship is now over, and the wider shake-up at Microsoft has also meant studios are being dropped and some outside plans are being cancelled, leaving IO’s project without the same runway.

Although IO Interactive does not explicitly state Xbox as the funding source in its announcement, the situation is widely read as the result of Microsoft’s involvement with the title. The wording in IO’s message also echoes the kind of statement that Romero Games issued last year when Xbox ended support for its own game.

IO Interactive had already warned that layoffs could follow the termination of Xbox funding. Today, it confirmed that it would be “making changes and proposed changes,” with those decisions affecting “colleagues who have been a meaningful part” of the team. The studio also said its Istanbul facility will be closed outright, and that impacts extend beyond its Copenhagen headquarters to satellite offices in Barcelona, Brighton, and Malmö.

Quick scan: what IO Interactive says is changing

• IO Interactive says it will close its Istanbul studio.
• The studio says it is starting a process to part ways with certain colleagues.
• IO Interactive says it will support affected staff and encourages networking for job leads.
• The company says it will focus long-term on its internal core projects rather than external work and mobile offshoots.
• IO Interactive says Project Fantasy (Project Dragon) will continue to be developed and funded independently.

In a statement addressed to the “gaming community” and posted on social media, IO Interactive explained that the end of its external finance deal for Project Fantasy means the studio has “regained full ownership” of the project and its intellectual property. It says it will keep working on the game and fund it on its own alongside its other releases.

That shift, however, forces a rework of long-term planning for the studio’s structure. IO Interactive says it needs a “new balance” that prioritizes the success of its main internal core titles rather than outside projects and possible mobile spin-offs, and that this involves both actual changes and “proposed changes” across its network of studios.

Along with shuttering Istanbul, IO Interactive described the next step as beginning a separation process for colleagues it calls “meaningful” to what the company is. The studio framed the immediate period as one focused on helping those impacted as best it can while they look for their next roles.

IO Interactive also asked players and community members to share any leads: if people are aware of openings within their networks, the studio said it would be grateful for support directed toward the talented employees at IO Interactive who may be searching for new opportunities.

To close out the message, the studio called the decisions “hard, but necessary,” positioning them as the path to securing the long-term future of IO Interactive as an independent AAA developer and publisher. It also said Project Fantasy deserves the best possible foundation to succeed under IO’s own direction, and repeated that the team is fully committed to the game as both a “world” and an IP it intends to share with players.

These developments land as Xbox itself has been restructuring at a large scale. Xbox CEO Asha Sharma announced cuts of 1,600 employees yesterday, with another 1,600 expected to leave over the following 12 months. Four studios have already exited Microsoft as part of the change, which Sharma described as the “most significant” in Xbox history, while the status of a fifth studio remains unclear.

On the rationale for the layoffs, Sharma said Microsoft’s gaming strategy has not worked out, and singled out Game Pass as a key part of that failure. The Wall Street Journal reported that Microsoft expected Game Pass subscriptions to reach roughly 77 million this year, but that the service currently sits around 30 million. During the FTC vs Microsoft trial in 2023, the company’s earlier projection of 100 million subscribers by 2030 was revealed, and Sharma’s new messaging points to how far off that goal appears to be.

Sharma also outlined a new target: Xbox should reach a billion players every day. Right now, Xbox reaches a billion players every year, making the daily figure a much more aggressive benchmark.

For IO Interactive, the timing is especially tense beyond Project Fantasy. Plans to develop sequels for 007: First Light now have to account for Amazon owning the franchise’s publishing rights, adding another external constraint to what IO can do next.