IO Interactive is closing its Istanbul studio and laying off staff following Microsoft's decision to pull funding from the developer's projects. The studio behind the Hitman trilogy and 007: First Light confirmed the cuts were necessary for long-term survival.
IO Interactive had been working on a fantasy RPG with Xbox backing, but that project hit setbacks that prompted Microsoft to withdraw support. The loss of that funding forced the studio to make difficult decisions about its operational footprint.
The Istanbul office closure represents a significant contraction for IO Interactive, which had expanded internationally in recent years. The layoffs affect an undisclosed number of employees, though the studio did not specify exact figures in its announcement.
IO Interactive remains independent after splitting from Square Enix in 2017. The studio regained the Hitman IP and has since built a strong reputation with the trilogy's critical and commercial success. However, the ambitious fantasy RPG project with Microsoft represented a major growth opportunity that depended entirely on that partnership.
This closure reflects broader industry turbulence. Microsoft has aggressively cut Game Pass spending and canceled numerous projects, while other studios face similar funding pressures. IO Interactive joins a growing list of developers downsizing or shuttering operations as publishers tighten budgets.
The studio still has offices in Copenhagen and Malmö, so core development operations continue. IO Interactive's leadership stated the company would focus on its established franchises and existing projects moving forward. The question now is whether IO Interactive can maintain its momentum without the financial backing that Microsoft provided, particularly as the studio explores what comes next for the Hitman series and other properties in its pipeline.