In a move that has taken many in the industry by surprise, Microsoft has announced the cancellation of upcoming PC and Xbox One game Fable Legends, and is discussing closing down the long-running studio behind the Fable frachise.

"After much consideration we have decided to cease development on Fable Legends, and are in discussions with employees about the proposed closure of Lionhead Studios in the UK,” wrote Hanno Lemke, General Manager of Microsoft Studios Europe, in a blog post.

Additionally, Microsoft’s post added that it would be closing down Press Play Studios in Denmark, ending development of the company's third-person multiplayer survival game, codenamed Project Knoxville.

"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,” the post states. "These changes are taking effect as Microsoft Studios continues to focus its investment and development on the games and franchises that fans find most exciting and want to play."

One-time PC luminary Peter Molyneux was one of the founders of Lionhead Studios in 1996. The company’s debut title was ambitious God game Black & White, before it introduced the popular RPG franchise Fable in 2004.

Lionhead shifted its entire focus onto the Fable games after it was acquired by Microsoft in 2006. Molyneux, who had led Lionhead from its inception, left in 2012 to start another studio, 22cans, where he faced so much controversy over promises he made to fans regarding Godus Wars that he swore to “completely stop talking to the press.”

Fable Legends was in development since 2013 and had gone through a series of redesigns over the years, including a move to a free-to-play model last year. Judging from Microsoft’s statement, it seems that not enough people were showing an interest in the game, which promised Xbox One and Windows 10 cross-platform play.

While Microsoft has categorically stated that Press Play Studios is being shuttered, the company didn’t use such certain terms when talking about Lionhead. But the likelihood is, unfortunately, that the studio will be broken up, rather than closed entirely. Hopefully, Microsoft will be able to find other positions for any affected staff members who work in the UK and Denmark.