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Published Jul 7, 2026, 10:28 AM EDT

Project Fantasy lives on as IO Interactive to close Istanbul studio

James Bond and Hitman developer confirms layoffs and studio closure, but its fantasy RPG lives on

Io Interactive/Square Enix

007: First Light and Hitman developer IO Interactive has confirmed that it will be laying off staff, as well as closing its Istanbul studio, in the wake of Xbox withdrawing funding for IOI's in-development online role-playing game, Project Fantasy. But the developer said it has regained full ownership of the project and will continue to build and fund it independently.

In a statement posted to X, IOI said it had to "find a new balance for the long-term future of the studio, focused on the success of our main internal core titles," and that this meant "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," IOI said, and asked for help finding laid-off staff new jobs.

"These are hard, but necessary decisions, 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," IOI said. "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."

IOI flagged last week that it might need to make "staffing decisions" after an "external partner," identified by Bloomberg as Xbox, had ended its support for Project Fantasy. Layoffs were expected, but not the closure of the company's fourth studio in Istanbul, Turkey, which was formed in 2023 as a support studio for the Danish developer's AAA productions like 007 First Light. IOI retains offices in Copenhagen, Denmark; Malmö, Sweden; Barcelona, Spain; and Brighton, U.K.

The jobs at IOI are another casualty of the sweeping cuts being implemented by new Xbox CEO Asha Sharma as she attempts to reform Microsoft's sprawling gaming business, which she has described as "not healthy." On Monday, Sharma announced 1,600 job cuts, with a further 1,600 to follow over the next year, as well as the sale or divestment of five game studios: Double Fine, Ninja Theory, Compulsion Games, Undead Labs, and Arkane.