Project Fantasy in Turmoil as Xbox Pulls Funding from IO Interactive

IO Interactive is facing a significant hurdle in the development of its upcoming online fantasy RPG, Project Fantasy. The studio has confirmed that its relationship with an external publishing partner has ended, a move that sources have identified as Xbox Game Studios Publishing pulling its financial backing from the project.

The loss of this funding has forced the studio to undergo a internal restructuring. Despite the change in development support, IO Interactive maintains that the project is still alive. In a statement released via Twitter, the developer noted that Project Fantasy is an IP the team loves and they remain "100% committed" to ensuring this "wonderful universe will see the light of day."

A Changing Landscape at Xbox

The decision follows a broader recalibration of the Xbox business model under new CEO Asha Sharma. As part of a push to reset the business to focus on "highest priorities," Microsoft is currently taking a fresh look at where it allocates investment across the industry. This shift is impacting not just first-party studios, but also external partners who previously relied on the publisher for funding.

For an independent developer like IO Interactive, the sudden withdrawal of support is a major setback. It has already prompted layoffs within the studio and introduces uncertainty regarding development timelines for the title.

The Future of IO Interactive

The news comes at a time of contrast for the studio. IO Interactive has been enjoying a successful period following the release of 007: First Light—widely cited as the strongest Bond game since Goldeneye—and the continued expansion of Hitman: World of Assassination. Additionally, the studio recently moved a remaster of the original Hitman trilogy into production with Saber Interactive.

When speaking with IO Interactive CEO Hakan Abrak in June 2026, the studio appeared confident in its trajectory. Abrak described the upcoming online fantasy RPG, which draws creative inspiration from the 'Fighting Fantasy' books, as a project that was progressing well. At the time, he suggested a reveal could happen "sooner than you think," as the studio looked to establish itself as a developer capable of maintaining multiple IPs simultaneously.

Following the recent funding news, IO Interactive has declined to comment on whether those reveal plans have changed, sticking only to its initial public statement. While the game was reportedly nearing a reveal after years of development, the studio must now decide whether to move forward independently or seek new outside investment to bring the ambitious title to market.