After split with Xbox, Hitman developer IO will "continue to develop" Project Fantasy independently, but they're closing their Istanbul Studio

IO Interactive has regained full ownership of Project Fantasy following Xbox's withdrawal of support for the fantasy action project. The Hitman developer will continue development independently, though the studio confirmed layoffs are coming as a result of losing Microsoft's backing.

IO Interactive initially announced the split last week, pledging to keep Project Fantasy alive despite losing external financial support. The studio has now secured the rights outright, ending any shared ownership arrangement with Xbox. This puts full creative and financial responsibility on IO's shoulders.

The restructuring comes with a cost. IO Interactive is closing its Istanbul studio, marking a significant contraction for the company. The layoffs reflect the reality that developing an unproven fantasy IP without a major publisher's resources requires streamlining operations.

Project Fantasy represents IO's attempt to branch beyond the Hitman franchise, which has dominated the studio's output for years. The game targets a different audience and gameplay style, making it a strategic bet for long-term portfolio diversity. However, without Xbox Game Pass funding and Microsoft's distribution muscle, IO now shoulders the burden of financing, marketing, and delivering the project entirely alone.

The developer's commitment to see Project Fantasy "see the light of day" suggests the game is far enough along to justify continuation. How the studio funds ongoing development remains unclear. Publishing deals, self-publishing, or alternative partnerships could emerge. The closure of the Istanbul office, however, signals IO is cutting costs aggressively to preserve resources for the project that matters most to leadership.

This marks another example of the publishing landscape shifting away from long-term exclusive partnerships. Xbox has been selective about which projects justify sustained investment. For smaller studios like IO, losing that backing forces difficult choices between abandoning promising projects or going lean to retain ownership and creative control.