Microsoft Xbox executives past and present have admitted that the way they handled Lionhead Studios – the Peter Molyneux-founded studio best known for the Black & White and Fable franchises – was one of their “biggest missteps.”

Source: Power On: The Story of Xbox | Chapter 6: TV…Or Not TV, Xbox, YouTube

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Recently, Microsoft released all six parts of their 20th anniversary “Power On: The Story of Xbox” documentary, wherein various figures involved with the console’s rise discussed its history, though they weren’t afraid to shy away from the brand’s low-points either, such as the “red ring of death” problem that plagued the Xbox 360.

All six parts are currently available on Xbox’s official YouTube channel. [1, 2, 3, 4, 5, 6].

Source: Power On: The Story of Xbox | Chapter 6: TV…Or Not TV, Xbox, YouTube

In the series’ sixth episode, “TV…Or Not TV”, discussed how Microsoft’s 2013 attempt to make the Xbox One an entertainment hub – by offering TV streaming services and shifting the general marketing tone for the console to one centered on general entertainment – backfired dramatically.

At that year’s E3, Microsoft’s debut of the Xbox One featured little discussion of video games, and within minutes of its reveal gamers felt Microsoft had turned their back on them. This fan resenment was only made worse by the console’s $499 price point – $100 more than what gamers wanted to pay- Microsoft’s attempt to push the Kinect motion camera few gamers wanted, and the implementation of always online DRM in order to prevent the sharing and used sale of games.

Source: Microsoft Conference, E3 2013

As such, Sony devastated Microsoft when they eventually took the stage. Not only was the PlayStation 4 $100 cheaper, but it was able to play and share used games without always online DRM, two simple decisions which drew open cheering and chanting of Sony’s name by the crowd in attendance.

A mere 18 days after E3, Xbox Head Don Mattrick left Microsoft, and in April 2014, it was found that the Xbox One was being outsold “six or seven to one” by the PS4. Eventually, Phil Spencer became the head of Xbox, which led to the company giving a greater focus to games, establishing [email protected] to help publish indie games, and a new $399 price for an Xbox One without a Kinect.

Source: Power On: The Story of Xbox | Chapter 6: TV…Or Not TV, Xbox, YouTube

Related: Xbox Hosts Q&A With The CDC To Promote COVID-19 Vaccinations

At 26:13 in the episode, the documentary turns to the topic of Lionhead Studios, first speaking with Shannon Loftis, who served as Xbox’s General Manager of Global Games Publishing at the time the studio was shuttered in 2016.

“We had already published Fable 1, and it was a hit, people loved it,” Loftis noted. “People wanted more, so we bought Lionhead.”

This purchase occurred in 2005, and while Fable II was well received, the Kinect-utilizing Fable: The Journey was less so, releasing as yet another Kinect game which struggled to function as intended.

These missteps subsequently led to Milo & Kate, another Kinect project by Lionhead, to be quietly cancelled.

Source: Fable III (2010), Lionhead Studios, Microsoft Game Studios, Power On: The Story of Xbox | Chapter 6: TV…Or Not TV, Xbox, YouTube

She was followed by Sarah Bond, Microsoft’s Corporate VP of Game Creator Experience & Ecosystem at Xbox, who described Lionhead Studios’ closure as one of the “biggest missteps” the company learned from.

“A couple years later, we reflected back on that experience,” Bond explained in the Xbox documentary. “What did we learn, and how do we not repeat our same mistakes?”

Fable (2004), Big Blue Box, Microsoft Game Studios, Was Fable as good as I remember?, The Salt Factory, YouTube

Howeve, long before Microsoft made their ultimate decision to close its down, other factors may have contributed to the studio’s failure. In 2016, Eurogamer reported – based on conversations with former developers – that the Lionhed Studios had set up a satellite studio system to work with other developers and help them sign deals with publishers.

While this system would help in the development of the first Fable game, which Lionhead made in collaboration with Big Blue Box, the larger number of developers brought in resulted in dilution of the tight-knit studio.

Lionhead also began to acquire more studios in order to build their portfolio of properties in preparation for a debut on the NYSE – right before the market crumbled in the wake of 9/11..

Fable (2004), Big Blue Box, Microsoft Game Studios, Was Fable as good as I remember?, The Salt Factory, YouTube

As Fable grew more ambitious, Big Blue Box merged with Lionhead, development became endless, and personalities began to clash – though office pranks still showed everyone’s camaraderie.

After its release, Fable’s success only resulted in more projects being developed at once, the addition of even more developers, and leaders who had been hands on – such as founder Molyneux – losing direction over projects and instead finding themselves relegated to management roles. 

Source: Fable III (2010), Lionhead Studios, Microsoft Game Studios

Eventually, Microsoft moved to officially acquire Lionhead, signing a deal which would see the studio paid only a portion of their acquistion cost upfront, with the rest set to be paid once Fable II was released.

However, this deal only created further strain across the studio, as some felt they were losing money in the deal that they should have rightfully earned, while others still felt that the price, despite “saving” Lionhead, should have been higher.

Fable II (2008), Lionhead Studios, Microsoft Game Studios, Was Fable II as good as I remember? – An imperfect clone of its predecessor, The Salt Factory, YouTube

With Microsoft in charge, the studio’s culture quickly shifted. The aformentioned office pranks were beginning to be sent to HR – as was the case with “fridge magnet-gate,” when a message intended to mock a friend was interpreted as a homophobic insult to another developer –  and Lionhead as a whole was now directed to work more formally.

Microsoft’s attitude as an “overprotective parent” could also be seen in their push to have employees reach ever loftier goals, such as requiring Fable II to get a Metacritic score of at least 85% in order for staff to achieve a bonus. Nonetheless, most felt the extra money was better overall.

Fable II (2008), Lionhead Studios, Microsoft Game Studios, Was Fable II as good as I remember? – An imperfect clone of its predecessor, The Salt Factory, YouTube

When Fable II required harsh crunch in the six months before its launch due to the game being found to be “dangerously unfinished,” Microsoft’s marketing was critisized for being too focused on the game as a fantasy RPG, rather than highlighting what set it apart.

Molyneux’s involvement with Fable III was also noted as a hindrance, as he was said to make 11th hour requests for new features which resulted in months of added development time and even announced said features at E3 before developers even knew of their intended addition.

For example, Kinect integration for mini-games was one such feature that failed at this juncture.

Fable: The Journey (2012), Lionhead Studios, Microsoft Studios, Power On: The Story of Xbox | Chapter 6: TV…Or Not TV, Xbox, YouTube

Molyneux’s dream project of Milo & Kate reportedly had to rely on “smoke and mirrors” to make its now infamous E3 2009 demo video, such as rendering it in HD frame-by-frame.

While it’s unclear exactly what led to the game’s cancellation, various reports blame its failure on such elements as the Kinect technology not working, the concept itself not going anywhere, and its inability to live-up to the claims that it had a ‘revolutionary’ AI.

Milo & Kate (Cancelled), Lionhead Studios, Microsoft Game Studios, Project Milo (2009) – First 3D face and voice recognition, YouTube

Fable: The Journey continued to have Molyneux’s big promises, and likewise, failed to deliver.

In early 2012, multiple Lionhead veterans quit on the same day – now dubbed coloquially as “Black Monday” – in protest of the company’s new direction of the company and the projects it was working on.

Source: Fable III (2010), Lionhead Studios, Microsoft Game Studios

Molyneux was reportedly incensed, demanding those developers leave the building immediately without even being given time to pack their things. Not long after this, Molyneux himself quit, and while the studio became more organized after he left following his departure, its creative spark was gone.

After this, Microsoft executives told Lionhead to make a games-as-a-service title, with all of the company’s first party studios getting the same directive. In addition Microsoft wanted more Fable titles, despite the developers having long been burnt out on the series, and pressured the studio to focus on making major profits. 

Fable Legends (Cancelled), Lionhead Studios, Microsoft Studios, Xbox Media Asset Library

Nonetheless, pitches for an industrial-era Fable 4 were rejected, with the concept of GaaS receiving focus instead. This led to Lionhead chief architect John McCormack leaving the company, enraged that Microsoft would not give them the chance that Mass Effect or Skyrim had, as Fable titles “only tripled the money” that was invested into them.

Along with a multi-device spanning city builder/third-person shooter dubbed Project Opal – originally conceptualized while Molyneux was still at the studi – Fable Legends, a coop asymmetrical 4v1 action RPG, would have been Lionhead’s next project. Some claimed elements of Opal became Legends, while others claimed Microsoft had given Opal the Fable name. 

Fable Legends (Cancelled), Lionhead Studios, Microsoft Studios, Xbox Media Asset Library

Related: Xbox Head Phil Spencer Discusses Current Company Focus on Black Leaders: “We Need A More Diverse Team”

Still keen on games as a service, Microsoft greenlit the project. Unfortunately, developers were not experienced in free-to-play titles, and the development was thus plagued with technical and design issues. 

Microsoft promoted the title as cross-platform for Xbox One and Windows 10, depiste the developers not even knowing of the OS’ existence when they started the project. The project was also used to promote Xbox in various ways. 

Fable Legends (Cancelled), Lionhead Studios, Microsoft Studios, Xbox Media Asset Library

The desire to make Fable Legends a flagship title saw its scale quickly expand, and every time Lionhead met mechanical goals, new ones were given. Then, on March 7th, 2016, staff were told that after $75 million had reportedly been spent on development and a sizeable delayed, Fable Legends was cancelled, as Lionhead was set to be shut down on April 29th.

Fable Legends (Cancelled), Lionhead Studios, Microsoft Studios, Xbox Media Asset Library

Ultimately, Spencer himself explained what Microsoft’s approach should have been, and what their attitude would likely be now.

“You acquire a studio for what they’re great at now, and your job is to help them accelerate how they do what they do,” Spencer stated, “Not them accelerate what you do.”

“I wish Lionhead were still a viable studio,” Loftis concluded the discussion.

Source: Fable III (2010), Lionhead Studios, Microsoft Game Studios

After the launch of the Xbox One X in 2017, Microsoft began to acquire new studios. This included Compulsion Games, inXile Entertainment, Ninja Theory, Obsidian Entertainment, Playground Games, Undead Labs, and Double Fine Productions.

The Xbox Series X|S launched in 2020, and acquisitions since then have included Arkane Studios, ZeniMax and Bethesda. 

Source: Fable III (2010), Lionhead Studios, Microsoft Game Studios

What do you make of Microsoft’s reflection on their mishandling of Lionhead Studios? Let us know your thoughts on social media or in the comments down below!

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  • About The Author

    Ryan Pearson

    Taking his first steps onto Route 1 and never stopping, Ryan has had a love of RPGs since a young age. Now he's learning to appreciate a wider pallet of genres and challenges.

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