http://www.eurogamer.net/articles/2016-03-10-a-celebration-of-lionhead wrote:(More at the link. The following is merely last few paragraphs.)
Lionhead's best game may be a sequel, but it never felt like the type of developer that suited the role of Fable factory. Molyneux got Lionhead into financial troubles in the past and, one would wager, there is some untold story about just what the investment in its famous Kinect experiment Milo & Kate was, and whether it ended because Microsoft lost faith in the hardware, the software, or the studio.
But what we know of Milo & Kate does say something. Milo is one manifestation of a game Molyneux has wanted to make for decades, built around the concept of a boy growing up. There is no telling how much of the incredible E3 demo was smoke-and-mirrors, but I have colleagues who subsequently 'played' it at the studio and attest to it being a functional experience that - with hiccups - seemed reasonably responsive.
From the outside, it seems Lionhead went really big on Milo, but Microsoft didn't see it as a viable commercial product. In September 2010, the news broke that work on Milo had been halted and, despite the odd tidbit, that has been that.
Who knows whether Microsoft was right or wrong, but it seems that many had invested much in Milo - not least Molyneux, who would see Fable: The Journey to completion before leaving in early 2012. And Microsoft also deserves its due: however things ended, without Redmond's involvement, there may never have been anything after Black & White 2.
Lionhead was a studio that tried for moon shots, and sometimes didn't make them. But in this it supported many great artists, some of whom have gone on to establish themselves independently. For a while, Lionhead had the reputation of a 'nearly' studio - one that always threatened to make a great game without ever doing so. Well that, at least, can be forgotten about. If Lionhead is to go, it's a sad day for British development, and we owe it at least the dignity of a headstone at 1 Occam Court, Guildford. "Here was Lionhead, 1996-2016. A dreamer that followed through."