IO Interactive’s Fantasy Game Project Gets Axed by Xbox, Studio Announces Layoffs
In a blow to VR fans eagerly awaiting new IP from IO Interactive, Microsoft-owned Xbox has suddenly pulled funding and publishing support for the studio’s untitled fantasy game codenamed “Project Fantasy”. The Danish developer, fresh off the success of James Bond 007: First Light, made the announcement on social media platform X, stating that the project’s external partnership had come to an end.
This isn’t the first time Xbox has been involved in a high-profile development cancellation. In 2025, the company halted work on Avalanche Studios’ Contraband, leaving many wondering about its strategy for supporting third-party titles. IO Interactive’s Project Fantasy was set to be one of the studio’s most ambitious projects yet, but it seems that Xbox’s priorities have shifted.
Despite the setback, IO Interactive remains committed to seeing Project Fantasy through, assuring fans that work on the game will continue. The studio’s statement emphasized its love for the project and its determination to bring it to life. While this news may be disappointing for VR enthusiasts who were eagerly anticipating a new IP from IO Interactive, the studio’s dedication to seeing projects through is reassuring.
IO Interactive has a proven track record of delivering high-quality VR experiences, with James Bond 007: First Light receiving widespread critical acclaim and commercial success. Fans are hopeful that the studio will continue to push the boundaries of immersive gaming with future titles. While Project Fantasy may not be happening as initially planned, IO Interactive’s commitment to its IP suggests that we can expect more from this talented developer in the future.
The news also highlights Xbox’s evolving strategy for supporting third-party developers and publishers. As the company continues to focus on internal projects and franchises, it seems that external partnerships are no longer a priority. This shift in priorities may have significant implications for the VR industry as a whole, with many studios relying on support from major players like Xbox.
As IO Interactive moves forward without Xbox’s funding and publishing support, fans can take comfort in knowing that the studio is committed to its IP and will continue working on Project Fantasy. With its proven track record of delivering exceptional VR experiences, there’s no doubt that IO Interactive will rise from this setback and bring us even more exciting titles in the future.
Source: Game Developer XR — 2026-06-30