Microsoft and Lionhead Studios have declined to comment on rumours concerning the cancellation of Project Milo.
Microsoft and video games developer Lionhead Studios have refused to be drawn on whether Milo, Peter Molyneux's experimental artificial intelligence project, has been cancelled.
“Microsoft does not comment on speculation or rumour," said a Microsoft official, adding that Lionhead was not undertaking any interviews with regards to Project Milo.
Speculation began after a news story on the video games website Eurogamer.net stated that sources close to the studio had claimed the project had been cancelled, and 19 contractors had been laid off.
The source said that Lionhead would instead focus on the Fable franchise, and that the technology used to power Milo would be repurposed for a "Fable-themed Kinect game".
Project Milo was unveiled during Microsoft's keynote press briefing at last year's E3 video games expo in Los Angeles. Demonstrated by Lionhead director Peter Molyneux, Milo was said to be an "emotional AI" character, with whom players could interact. Milo could recognise who he was talking to, engage in conversation, and even interpret a person's emotional state through their tone of voice.
The project was demonstrated again at a Technology, Entertainment and Design (TED) conference in Oxford earlier this year, where Molyneux hinted that the AI could one day become a commercial product, used by millions of players.