IO Interactive Confirms Layoffs After Fantasy Partner Collaboration Ends
IO Interactive has confirmed it is cutting jobs following an unexpected disruption tied to its next fantasy project. The Danish studio says a collaboration with an outside partner has ended, forcing it to reduce staffing, even as it highlighted the momentum from its recently released James Bond-themed title, 007 First Light.
Layoffs confirmed after partner split; Project Fantasy linked to Xbox
| Item | What’s known |
|---|---|
| Studio | IO Interactive (Denmark) |
| Cause | Ended work with an “external partner” on the upcoming fantasy game |
| Layoffs | Number not specified; layoffs confirmed |
| Upcoming game codename | Project Fantasy (previously referred to as Project Dragon) |
| Reported publisher | Xbox, with Xbox Game Studios cited in a 2023 FTC vs. Microsoft trial document |
| Context | Rumors point to broader Xbox restructuring (studio closures, cancellations, more layoffs) |
In a message shared on social media, IO Interactive explained that its partnership with an unnamed “external partner” involved with the studio’s upcoming fantasy game has come to an end. The company did not provide details on what the partnership covered or why it ended, but it said that as a result it will be laying off an unspecified number of employees.
IO Interactive also stressed that it intends to continue supporting affected workers. While the studio did not quantify how many roles are impacted, it framed the move as a direct consequence of the failed or stalled arrangement with the partner handling work on Project Fantasy.
The job cuts appear to be separate from the rollout of 007 First Light. The studio celebrated the release of 007 First Light in the same post where it discussed the layoffs, suggesting the setback affecting its next fantasy effort is not tied to the performance of that recent release.
Statement details and what “Project Fantasy” was expected to be
While IO Interactive did not name the external partner outright, Project Fantasy has been widely reported as a title positioned for Xbox publishing. A leaked document from the FTC vs. Microsoft proceedings in 2023 reportedly listed the project—at the time referred to as Project Dragon—as an Xbox and PC exclusive.
That same leaked material also indicated that the game would be published under the Xbox Game Studios label. These claims connect the fantasy project’s expected path to Microsoft’s publishing structure, even though IO Interactive’s announcement itself focused only on the end of its external relationship rather than any publisher decision.
It’s worth noting that the studio’s layoffs were announced as a response to the partner relationship ending, not as a reaction to 007 First Light’s success. Still, players will likely be watching closely for how this affects visibility, timelines, and staffing on the fantasy game moving forward.
Xbox “reset” rumors add pressure to an already shifting landscape
The news arrives amid expectations of major changes across Xbox. Reports say Microsoft is planning a “reset” for the Xbox brand, a move that could involve studio closures, game cancellations, and broad layoffs.
Unionized Xbox workers are reportedly pushing back against the reset and trying to secure additional protections for employees. However, the outcome is unclear, and it remains to be seen how any internal Microsoft changes will interact with what IO Interactive is already dealing with on its own.
Cade Onder is a freelancer for IGN’s news team. He covers all things entertainment, including gaming, film, and more. You can find him on Twitter @Cade_Onder.
