Xbox ends deal to fund and publish IO Interactive's Project Fantasy; redundancies expected

Xbox has exited a deal to fund and publish IO Interactive's online fantasy RPG, codenamed Project Fantasy, a move that may lead to job losses.

IO Interactive stated it must "adapt to this new reality and its short-term consequences, including staff decisions."

The developer added it will "support those affected through this challenging transition," and clarified it was "100% committed" to Project Fantasy and that the game "will see the light of day."

Speaking to Bloomberg, an Xbox spokesperson clarified the firm is "taking a fresh look at where we invest so we're focusing on our highest priorities" and is "not reducing our overall investment in games."

"We expect to invest about the same in content as last year. What's changing is where we're investing and the kinds of projects we're backing."

This decision coincides with a significant round of job cuts at Xbox expected to begin next week.

According to The Verge, further studio closures may occur, including Blade developer Arkane Studios Lyon.

Sources indicate Microsoft is "exploring options to sell" the developer, as was reportedly the case with Compulsion Games, Double Fine, and Ninja Theory.

Last month, Xbox CEO Asha Sharma said the firm needed to "reassess [its] investment priorities for the next five years," warning that it had "become too reliant on vendors to operate our systems and must become more self-reliant as an engineering culture to build for the future."

In response to reports of layoffs, the Communications Workers of America union expressed support for Xbox staff.

CWA District 9 VP Frank Acre said staff within Microsoft's gaming division "will not be treated as disposable."

"Every company faces real business challenges and pressures. That is a fact. But let me tell you this: it's our CWA members who make the gains that make Xbox valuable."

In response, Xbox said it respects "the right of our team members to make their voices heard."

It added: "We have a long track record of good faith partnership with labour organisations, as demonstrated by the several finalised bargaining agreements our teams have reached with the CWA and our labour principles.

"We are continuing to negotiate in good faith with the CWA to reach agreements across Xbox."