Hideo Kojima says Sony ended PHYSINT funding on a June Zoom call and Xbox stepped in

Hideo Kojima and Kojima Productions have spent more than three decades building a reputation for dense, idiosyncratic games, from the Metal Gear series at Konami to Death Stranding after the studio went independent. In June 2026, that independence was tested in a way the veteran designer says he had not prepared for: Sony Interactive Entertainment told him on a Zoom call that it would stop funding PHYSINT, the action espionage project many observers had described as a spiritual successor to Metal Gear Solid.

The decision was revealed publicly months later. IGN published an exclusive interview with Kojima on September 20, 2026, the first time he had spoken at length since PlayStation walked away from the project. In it, he described a meeting that lasted only as long as it needed to, a studio that suddenly had to question whether it could keep paying its staff, and a scramble for a new partner that ended with Microsoft Xbox.

Kojima Productions is an independent company that signs funding deals one project at a time. At the moment of the June call, the studio had only two projects: PHYSINT for PlayStation and OD, a horror game being made with Xbox and co-written by Jordan Peele. That narrow pipeline is central to why the loss of a single contract carried such weight, and why the episode has become one of the most closely watched publishing stories of the year.

The fallout also collided with a competing account of events. Bloomberg's Jason Schreier reported on September 11, 2026 that Sony had walked away over missed internal deadlines, budget concerns and weaker than expected revenue from the Death Stranding games. Kojima Productions pushed back hard on that characterisation, and Kojima himself has consistently said he still does not know the real reason.

Key Facts

IGN reported on September 20 that Sony Interactive Entertainment asked Kojima to join a Zoom call in mid-June 2026 and told him there that funding for PHYSINT would end. Kojima attended with Kojima Productions president Shinji Hirano and Aki Saito, the studio's head of talent development. He said his mind went blank, that Sony gave no explanation, and that the company has not been in touch since. He added that he did not press for many details during the meeting.

The numbers behind the studio's exposure are stark. Kojima Productions is independent and had roughly 200 staff at the time, a headcount it had expanded specifically because PHYSINT was moving forward. It had only two projects, PHYSINT and OD. Kojima told IGN that if the studio lost one contract, he thought he might have to cut all the people working on PHYSINT, or that the studio could end up collapsing.

PHYSINT had first been agreed with Jim Ryan, the former CEO of Sony Interactive Entertainment, before his retirement, and the game was officially announced in January 2024 as a PlayStation exclusive. Kojima said he had already begun scanning actors for the project, which brought back memories of P.T., the cancelled Silent Hills teaser. He also described bank loans that had helped the studio staff up after Death Stranding and that depended on projects continuing.

TechPowerUp reported on September 20 that after the June call, Kojima Productions spent close to three months searching for a new partner before landing at Xbox, which was already working with the studio on OD. Microsoft Xbox, led by CEO Asha Sharma, agreed to publish and help fund the game. Kojima said he met Sharma in Redmond in April and felt the pair kind of clicked.

InvenGlobal reported on September 21 that Kojima pitched PHYSINT to several potential partners, including film studios and streaming companies, as a wider intellectual property that could extend into film, anime and music. Part of the PHYSINT team moved across to OD while a smaller group kept developing the game. Kojima said no one was let go and no one left, and that staff were told about the Xbox move the day before it was announced.

Analysis

The reporting paints a picture of a single call that reshaped the near term future of one of the industry's best known independent studios. What this really means is that the risk in modern big budget game development has shifted decisively onto the developer, even when the developer is a celebrated auteur with three decades of hits behind him. Kojima Productions did not own PHYSINT in any practical sense. It owned a contract to make it, and when that contract ended, so did the certainty of the payroll.

Bloomberg reported on September 11 that the split stemmed from missed deadlines, a budget on pace to run well over projections, and Death Stranding and Death Stranding 2 falling short of PlayStation's revenue targets. TalkEsport reported on September 20 that Sony was reluctant to keep funding a game that would not remain permanently exclusive. Kojima has said he is not in a dispute with Sony, holds no bad feelings after roughly 30 years, and would simply have wanted to hear the decision a little earlier.

The counter argument from the studio is that the Bloomberg account rests on unnamed sources. Kojima Productions issued a statement on X the same day as the IGN interview, saying it is in a healthy and profitable state, that development of PHYSINT continues to move forward with Xbox, and that its relationship with PlayStation remains strong. It also called the Bloomberg claims unverifiable and urged readers to treat them with scepticism.

What is not in dispute is the speed of the recovery. A studio that had two projects and no corporate backstop turned a termination into a publishing deal covering a single player game, a planned release on Xbox and PC, and reportedly film and television rights tied to both PHYSINT and OD. The bigger picture here is that Kojima Productions traded a platform exclusive arrangement for a multimedia arrangement, and in doing so may have ended up with a broader set of rights than it held before.

Why It Matters

The episode is a rare public window into how publishing deals actually end. Platforms rarely explain themselves, and developers rarely speak. Kojima's account, given to IGN and later to The Washington Post, has put a name and a date on a decision that would normally surface only as a quiet change in a release schedule.

It also matters for Xbox. Microsoft's console business has spent years buying studios and signing deals to fill a first party pipeline, and landing PHYSINT gives it a prestige stealth action title from the person who defined the genre. Whether PHYSINT reaches PlayStation 5 remains undecided. Kojima said he does not know and that it is a question for Xbox, adding that he believed Xbox wanted to reach as many players as possible but that more would be announced later.

For the wider industry, the timing is uncomfortable. The story landed weeks before the game's own reveal cycle resumed, and it sits alongside a report that a major platform walked away from a marquee project partly over exclusivity and revenue expectations. Independent studios that rely on one or two contracts will read the same lesson Kojima described: the cushion is thin.

Next Up

PHYSINT is now heading to Xbox and PC. At Xbox's Tokyo Game Show broadcast on September 17, 2026, Kojima confirmed Bill Skarsgard as the lead, joining Charlee Fraser, Don Lee and Minami Hamabe. Whether a PlayStation 5 version follows, and on what terms the reported film and television rights are structured, remain open questions that now rest with Xbox.

Kojima Productions continues work on OD alongside PHYSINT, and the studio has said its development pipeline is intact and profitable. The next public milestone will be any further detail on platforms, casting and release timing, and whether the relationship with Sony, described by both sides as not a dispute, produces anything new in the years ahead.