Kojima's OD Survives Xbox Cuts
Hideo Kojima's Horror Game OD Remains Safe Despite Xbox's Broader Investment Resets
Key Points
OD is being developed in Unreal Engine, signaling a technically ambitious production beyond typical horror titles.
OD was part of Xbox's third-party partner slate announced in 2023 and, unlike many other bets, remains safe as Microsoft reconsiders its investments.
IO Interactive's Project Fantasy has lost Xbox funding and staffing has been cut, but the studio asserts the IP will see the light of day and remains committed to it.
OD is repeatedly described as a high-priority project that is safe from the broader cuts of Xbox's reset, with multiple outlets confirming its continued development under Xbox publishing.
Hideo Kojima's mysterious horror game OD is safe from Microsoft's sweeping cuts to its gaming division, according to Kotaku and IGN. The news comes as Xbox's new CEO Asha Sharma slashes third-party partnerships and pushes dozens of studios toward closure or independence.
OD, developed by Kojima Productions and set to be published by Xbox, is now one of the few third-party projects to survive what insiders call the "Xbox Reset" — a major restructuring driven by a razor-thin 3% profit margin across the entire gaming division.
Xbox's Reset Is Closing Studios and Killing Projects
On June 10, 2026, CEO Asha Sharma and Chief Content Officer Matt Booty released a memo admitting Xbox was "over-extended." The division had spent over $20 billion on content and hardware subsidies in five years, yet annual revenue still fell by nearly $500 million, according to Bloomberg. Sharma called the 3% profit margin unsustainable.
Studios are now paying the price. Double Fine, Ninja Theory, and Compulsion Games entered negotiations to spin off as independent studios, The Verge reported. Undead Labs and Arkane Lyon also face restructuring. A wave of 1,000-plus layoffs is expected to begin in July. Microsoft says it is "focusing on highest priorities" — not cutting total investment.
IO Interactive Loses Xbox Funding for Project Fantasy
IO Interactive — the studio behind the Hitman series — confirmed on June 30 that Xbox pulled funding for its online fantasy RPG, Project Fantasy. Immediate layoffs followed, Wccftech reported. The studio said it remains committed to the project and believes the IP "will see the light of day" in some form.
Project Fantasy losing its backer is a sharp sign of how dramatically Sharma is rewriting Xbox's third-party strategy. Resources are being funneled toward established, reliable franchises: Halo, Fallout, Call of Duty, and The Elder Scrolls. Niche experimental projects no longer fit the new math.
OD Survives Because It Is a Cloud Technology Showcase
Despite the bloodbath, OD is being treated as a protected asset inside Microsoft, Kotaku reported. Insiders say the game survives because it serves as a technical showcase for Xbox Cloud Technology and Unreal Engine 5. It is viewed as a "global brand play" — not just another software title.
Kojima has described OD as a single-player experience built around a new system that tracks player stress to "modulate fear." The game was first teased in 2023 at The Game Awards alongside Jordan Peele, actors Sophia Lillis and Hunter Schafer, and the late Udo Kier. It runs on Unreal Engine, signaling an unusually ambitious production, according to VGChartz.
What OD's Survival Tells Us About Xbox's New Direction
Xbox co-founder Seamus Blackley compared Sharma's role to a "palliative care doctor" managing the brand's shift away from traditional console gaming, as noted by iXBT Games. Hardware costs are rising fast too — the 1TB Xbox Series X will hit $800 by August 2026, up from its original price, driven by a global memory and storage component crisis.
OD stands out in this landscape precisely because it aligns with where Microsoft wants to go: cloud-native, globally marketable, and tied to a name — Kojima — that generates press without spending a dollar on ads. For now, it is the rare bright spot in an otherwise brutal reset, confirmed as safe by multiple outlets including Kotaku and Wolves Gaming Blog.
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