IO Interactive is closing its Istanbul studio and laying off an undisclosed number of employees after Xbox withdrew its funding and publishing agreement for the studio’s in-development online RPG, Project Fantasy.
It’s one of the secondary effects of Microsoft pulling back in its gaming efforts with the Monday announcement of the unloading of five studios and up to 3,200 layoffs during the coming year.
The Danish developer, best known for the Hitman franchise and last year’s 007 First Light, announced the closure Monday in a statement posted to X, saying it had “regained full ownership” of Project Fantasy and its intellectual property following “the end of our external finance partnership” on the game. IOI did not name Xbox directly, but Bloomberg reported in late June that Xbox was the partner in question.
“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,” the company said.
IOI Istanbul opened in 2023 in the city’s Sarıyer district as a foothold for AAA development in Turkey, according to the studio. It contributed to 007 First Light, upcoming Hitman titles and Project Fantasy. Its closure reduces the number of studios contributing to Project Fantasy from five to four, according to IOI’s original production breakdown. The company is based in Copenhagen and also operates studios in Brighton, Barcelona and Malmö.
IOI said it will now fund and develop Project Fantasy independently, prioritizing “internal core titles instead of external projects and potential mobile game derivatives.” The company described the decisions as necessary “to retain the long-term future of IO Interactive as one of the very few fully independent AAA developer and publisher.”
The Istanbul closure lands one day after Xbox announced its own sweeping restructuring. Xbox CEO Asha Sharma, who took over the division in February, told staff Monday the company would cut roughly 3,200 jobs and divest several studios from the Xbox brand, calling it the most significant restructuring in Xbox’s history. Microsoft is cutting 4,800 jobs company-wide as it redirects spending toward AI infrastructure. The cuts have also hit id Software, where roughly half the staff has reportedly been laid off.
Project Fantasy’s roots go back further than its 2023 announcement. Industry reports first referenced the game in 2021 under the codename Project Dragon before IOI officially unveiled it as Project Fantasy in February 2023.
IOI, the maker of the Hitman games, regained its independence from Square Enix in 2017. It said its immediate focus is on supporting affected employees and asked its network to share any open positions for departing staff.