IO Interactive, the studio that just released 007: First Light, announced that an ‘external partner’ pulled funding for its new IP, currently codenamed Project Fantasy. The move could result in layoffs and restructuring for those affected. That external partner is Xbox, Bloomberg confirms.
Dear gaming community,
For a good while, it has been all positive news from IO Interactive. We remain humbled and honored by the response to our latest outing with a young, unproven Bond. A bold new story and a take on one of the most famous characters in entertainment, whichâŚ
â IO Interactive (@IOInteractive) June 30, 2026
This news isnât resulting in Project Fantasy being cancelled as IO Interactive intends to continue work on the project, but due to this change they will now have to find new funding or find a way to publish the game themselves.
Whatâs going on at Xbox?
Massive changes are coming to Xbox, and this is one of the many being affected by this âresetâ being done by the new CEO Asha Sharma. There are reports that at least five studios are in talks with Xbox as they are on the verge of being shut down. These studios are Ninja Theory (Senua, Senuaâs Saga: Hellblade 2), Compulsion Games (South of Midnight, We Happy Few), Undead Labs (State of Decay), Arkane (Marvelâs Blade, Dishonored) and Double Fine (Psychonauts 2, Keeper, Kiln) as reported by The Verge. Nothing is official right now, but these studios are in active negotiations with Microsoft to avoid being shuttered, but an official announcement is said to be done in the first week of July.
This major shift at Xbox was hinted by the Xbox CEO:
âWe expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming, and devices. In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.â
There are also reports that Xbox has halted deals with third-party studios for Game Pass, further showing that leadership is serious about this reset as they are looking at everything right now.
Since Asha took the lead at Xbox, things were looking positive as the removal of their AI tool Copilot from Xbox and reducing the price of Game Pass worldwide was a positive sign. A strong Xbox Games Showcase was also a good momentum builder, but harsh truth soon followed to balance things off as Xbox console prices will rise again and the talks of studios shutting down are imminent. Itâs hard to see this as a positive thing from someone looking from the outside, but one can hope that these changes can steer Xbox into an overall positive light for consumers in the long run.
About the Author – Carlos Hernandez
Carlos Hernandez is the founder and Editor-in-Chief of Too Much Gaming, where he writes about video games, reviews, and industry news. A lifelong gamer, he would do anything to experience Final Fantasy Tactics for the first time again and has a love/hate relationship with games that require hunting for new gear to improve your character.
