Overnight the Company confirmed that they plan to close the British video game studio behind the classic Fable series. Also set to be closed is the Press Play Studios in Denmark, which created Max: The Curse of Brotherhood and Kalimba.
"These have been tough decisions and we have not made them lightly," wrote Hanno Lemke, general manager of Microsoft Studios Europe.
The latest instalment, Fable Legends, had been in development at Lionhead Studios for more than two years and was due to be released in September 2016.
Work on it will now cease, the firm said in a blog post.
The studio was founded by Peter Molyneux in 1996 and was bought by Microsoft ten years later.
"We have nothing but heartfelt thanks for the members of Lionhead and Press Play for their contributions to Xbox and gaming," Lemke added.
James Batchelor, editor of Develop magazine, told the BBC the closure of Lionhead would be a blow for the UK video gaming industry.
"It's a fantastic studio," he said.
"One that really shows a proper British sense of humour in its games - lots of talented people work there."
But he said that deciding to halt a game like Fable Legends after so long in development is not that uncommon.
"It happens - sometimes for some reason [a studio] can't make it the hit they want it to be. That's the risk of development, particularly when you openly announce a game and raise expectations."