Microsoft has ceased development of Fable Legends and is in discussions to close Lionhead Studios. The news was revealed on the official Xbox newswire by Hanno Lemke, general manager of Microsoft Studios Europe.

"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," he explained.

Lionhead, a British studio founded by Peter Molyneux in 1996, has developed acclaimed titles in the Black & White and Fable series. It was acquired by Microsoft in 2006. Molyneux left Microsoft and Lionhead in March 2012.

"The Lionhead Studios team has delighted millions of fans with the Fable series over the past decade," Lemke added.

Microsoft has not yet outright confirmed the studio will close and is instead saying it is "in discussions" with the employees. This is likely because UK law requires employers to create a consultancy period of at least 30 days. During this, measures to avoid redundancies are to be explored. The period also gives those affected some time to search for new jobs.

GameSpot contacted Microsoft for further details on Lionhead's status: "We aren't sharing additional details today beyond that we have ceased development on Fable Legends, and are in discussions with employees at Lionhead about our proposed closure of the studio as well," said a spokesperson.

Lemke went on to confirm Denmark-based Press Play Studios, which is known for Kalimba and Max: The Curse of Brotherhood, has been shuttered, and work on Project Knoxville has been suspended. The game was described as a third-person, multiplayer action title that "deals with fragile alliances and survival, in a game show setting."

"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," Lemke continued.

"Press Play imbued the industry with a unique creative spirit behind games like Max: The Curse of Brotherhood and Kalimba, which both captured passionate fans."

In his statement, Lemke said Microsoft will remain focused on investing and developing first-party games. It will also support those impacted by the closure and cancellations.

"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," he said.

"I speak for all of Xbox when I say that despite this news, we remain committed to the development communities in the UK and Europe, and Xbox will continue to support new IP and originality in the games we offer on our platforms, whether they're AAA blockbusters like Quantum Break from Remedy, adventurous new IPs like Sea of Thieves from Rare, or unique new creations from independent developers like Moon Studios with Ori."

He finished: "We have nothing but heart-felt thanks for the members of Lionhead and Press Play for their contributions to Xbox and gaming. We are committed to working closely with those affected by today's news to find them new opportunities at Xbox, or partnering with the broader development community to help place them in jobs elsewhere in the games industry should they desire."

Lionhead's last Twitter update was on March 4.