UPDATE: Phil Spencer spoke about Lionhead and Fable Legends last week, before any of this happened. In hindsight, the phrasing is... interesting.
ORIGINAL STORY: Microsoft announced today that the four-vs-one twist on the Fable series, Fable Legends, has been cancelled. The developer behind the game, Lionhead Studios, is also proposed to be shuttered. Additionally, Press Play, the studio that invited gamers to vote for its next project in August of last year, will be closed. Project Knoxville, the winner of that vote, will also cease production.
Founded by (in)famous developer Peter Molyneux in 1996, Lionhead Studios was responsible for the Black & White series of god games, as well as the Fable RPG series. Lionhead also created The Movies, a Sims-like game where players used sets, props, and various camera techniques to create in-game films. Lionhead was acquired by Microsoft in 2006.
Press Play was a smaller group than Lionhead, but its games - such as Max: The Curse of Brotherhood and Kalimba - were of exceptional quality. It was acquired by Microsoft in 2012.
"These have been tough decisions and we have not made them lightly, nor are they a reflection on these development teams – we are incredibly fortunate to have the talent, creativity and commitment of the people at these studios," wrote Hanno Lemke, General Manager at Microsoft Studios Europe in a news release. "We have nothing but heart-felt thanks for the members of Lionhead and Press Play for their contributions to Xbox and gaming."
Lemke added that Microsoft is working to find those affected by the decision new positions, either within Xbox or elsewhere. Microsoft still owns the Fable IP, but it's unclear when or if we'll see it again, and if so, who will develop it.
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