Confirming rumors, Microsoft today announced the acquisition of UK-based development studio Lionhead. The studio is headed by Peter Molyneux, the mastermind behind Black and White as well as the popular RPG Fable. Lionhead had been rumored to be in financial difficulties following the less than stellar sales performance of its recent PC releases, Black and White 2 and The Movies.

In addition to Lionhead, Microsoft's line-up of first party development studios include Halo makers Bungie, Kameo masterminds Rare and Age of Empires creators Ensemble.

• gamesindustry.biz