Lionhead made Fable and Black & White — Microsoft closed it after forcing Kinect

Lionhead Studios was founded in July 1997 by Peter Molyneux, Mark Webley, Tim Rance, and Steve Jackson — a breakaway from Bullfrog Productions, which Molyneux had sold to Electronic Arts. The studio became famous for ambitious, genre-blending games: Black & White (2001), a god game that won multiple BAFTAs, and the Fable series, an action RPG franchise that sold millions. At its peak around 2005, Lionhead employed roughly 220 people across its main studio and satellite teams.

Molyneux was notorious for over-promising features that never shipped. Black & White was meant to have an advanced creature AI that could learn any behaviour — the final game delivered far less. Fable was advertised with features (growing old in real time, planting acorns that became trees) that were cut before release. This culture of feature creep — what staff called 'Molyneux's ambition exceeding delivery' — built every Lionhead project on an unrealistic foundation from the start.

After Black & White 2 and The Movies underperformed financially, Lionhead sought a buyer in 2006. Microsoft won the acquisition over Ubisoft, paying an undisclosed sum to secure Fable as an Xbox exclusive. But Microsoft then steered Lionhead away from its core RPG strength: it pushed the studio to make Fable: The Journey (2012), a Kinect game that was a commercial disaster, and later insisted on a games-as-a-service model for Fable Legends that Lionhead had no experience with. Co-founder Steve Jackson and several key developers left, founding Media Molecule and other studios.

In March 2016, Microsoft cancelled Fable Legends and announced plans to close Lionhead. An internal attempt called Project Phoenix — a smaller-scale Fable project meant to save jobs — failed because employees found other positions before it could start. The studio closed on 29 April 2016. Microsoft's Phil Spencer later admitted: '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, not make them accelerate what you do.'