Hitman and 007: First Light developer IO Interactive will close one of its studios and lay off an unknown number of staff, after Xbox pulled funding for an upcoming project.
Codenamed Project Dragon, IO’s under-wraps online fantasy RPG has been in development for years, partly funded by cash from Xbox. But now — with Microsoft laying off thousands of workers, offloading studios and scrapping various external partnerships — IO’s game has also fallen victim to tightening purse strings.
While IO Interactive does not specifically name Xbox as its funding partner, it is widely understood that Microsoft had been partnered with IO on the project. The language used in IO’s statement today is also sadly reminiscent of the similar statement released by Romero Games last year, when Xbox pulled funding for its game.
IO Interactive previously warned it would face layoffs as a result of Xbox’s decision to end funding. Today, the company admitted it would be “making changes and proposed changes” that would impact “colleagues who have been a meaningful part” of its team. In addition, the company’s entire Istanbul studio will be shuttered, leaving behind its Copenhagen headquarters, plus its other satellite studios in Barcelona, Brighton and Malmö.
“Dear gaming community,” IO began in a statement posted to social media, reproduced below in full.
“Following the end of our external finance partnership on Project Fantasy, IOI has regained full ownership of the project and our IP. We will continue to develop and fund it independently amongst our other projects. With this context, we had to find a new balance for the long-term future of the studio, focused on the success of our main internal core titles instead of external projects and potential mobile game derivatives. This has meant making changes as well as proposed changes across our studios: the closure of our Istanbul studio and starting a process to part ways with colleagues who have been a meaningful part of what makes IOI what it is.
“Our immediate focus is on supporting those affected as best we can through this period. If you are aware of any opportunities within your network, we would be genuinely grateful for any support you can offer to any of the talented people across IOI who might be looking for new opportunities.
“These are hard, but necessary decisions,” the studio concluded, “in order to retain the long-term future of IO Interactive as one of the very few fully independent AAA developer and publisher, as well as to give Project Fantasy the best possible foundation to succeed under our own passion and direction. Project Fantasy is a game, a world, and an IP that we are wholly committed to, and we cannot wait to share the love with you.”
Xbox CEO Asha Sharma cut 1,600 staff from Xbox yesterday, with another 1,600 staff to go over the course of the next 12 months. Four studios have left Microsoft as part of the restructure, which Sharma called the “most significant in Xbox history”, with the future of a fifth still unclear.
Explaining the cuts, Sharma admitted that Microsoft’s gaming strategy had failed, and a key part of that failure had to do with Game Pass. The Wall Street Journal said that Microsoft had expected Game Pass subscriptions to hit around 77 million this year, but it currently has only about 30 million. As revealed during the FTC vs Microsoft trial of 2023, Microsoft had hoped for 100 million subscribers by 2030, which seems very unlikely at this stage. Yesterday, Sharma announced a fresh target: for Xbox to reach a billion players every day. Currently, Xbox reaches a billion players every year.
Today’s news continues a tumultuous time for IO Interactive, whose plans to develop 007: First Light sequels will have to contend with Amazon now owning the franchise’s publishing rights.
Tom Phillips is IGN’s News Editor. You can reach Tom at [email protected] or find him on Bluesky @tomphillipseg.bsky.social
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