Last month, Microsoft announced the sad news that all development on asymmetrical multiplayer RPG Fable Legends was to be brought to a halt, and that venerable development house Lionhead Studios was likely to be shuttered. The news came as quite a shock considering not only the storied heritage of Lionhead (which was previously helmed by Peter Molyneux and counted many acclaimed ex-Bullfrog developers among its staff), but the fact that Fable Legends was very far along in development as well.

Now there are rumours floating around that Lionhead may not vanish, and that Fable Legends might not be dead in the water after all.

The news comes via MCV, who say that anonymous sources within Lionhead have revealed that they’re currently in talks with Microsoft to save the free-to-play Fable Legends. While there are currently no offers to purchase either the studio or the Fable IP, Microsoft is surveying the remaining employees at Lionhead to see if they’d prefer to continue working on the game, or if they’re happier accepting the redundancy packages they’ve been offered, in which case they’ll be let go at the end of April.

Most intriguingly, it’s said that “one of the sources told MCV that this stems from a proposal from certain Lionhead employees about taking Fable Legends and continuing development as an independent studio. Our other two sources were unable to verify this claim”.

Considering the fact that Fable Legends was very far along in development (it was in closed beta phase prior to the development shutdown), it make sense to me to do one final push to get the thing out the door and see how it goes. But maybe I’m just being naive, and that’s why Microsoft consistently refuses to let me make The Big Decisions. It’d be mighty interesting if Microsoft actually allowed development to continue at an independent studio, but I imagine they’ll still want to reap a sizeable chunk of whatever profits the game makes in that case.

Lionhead hasn’t done anything that excites me in years, but I still feel a strong bond with the studio that gave us Black & WhiteThe Movies and Fable. If there’s a way for it to live on in some form, I’d like to see it happen.

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