Sony has confirmed that Studio Liverpool, the development house previously known as Pysgnosis, is to close.

Founded in 1984 by Ian Hetherington and David Lawson, Pysgnosis is best known for work on the 1987 eight-bit classic Barbarian, 1989 parallax-scrolling platformer Shadow of the Beast and as the publisher for DMA Design's Lemmings in 1991. Following its acquisition by Sony in 1993 for use as a PlayStation development house, Psygnosis would go on to make some of the console's best-known hits including gravity-defying racer Wipeout.

In 1999, the classic Psygnosis name was dropped and the studio rebranded to Sony Computer Entertainment Studio Liverpool - or just Studio Liverpool for short. As Studio Liverpool, the group would take over the Formula One series of games until Sony's licence for the franchise expired in 2007, as well as numerous successful Wipeout sequels.

In later years, however, Studio Liverpool has hit troubled times. In 2010, Sony announced that the group would be forced to close down certain projects to focus on more profitable ventures. 'It has been decided that production on a number of projects within Studio Liverpool will cease immediately due to project prioritisation' the company announced in January 2010. 'This decision will have no impact of the role that the North West Studio Group will play in the future of all PlayStation platforms.' As a result of the restructuring, Studio Liverpool halved its head-count.

Two and a bit years later, things have finally reached a head: rumours are circulating that Sony has closed Studio Liverpool altogether, telling the group's employees that an impending reorganisation has left them surplus to requirements.

Sources close to events and posting on the GRcade site have claimed that Michael Denny, senior vice president of Sony Worldwide Studios Europe, gathered the Studio Liverpool staff together this morning to announce the studio's closure, ending the group's 28-year run in the computer game industry.

Sony, for its part, has not commented on the reasons for the Studio Liverpool closure. Contacting the company via telephone, we were told that nobody from the press office was available, and we are waiting on a statement via email - with which we will update the story accordingly.

UPDATE
Sony has given us a formal statement confirming the closure. 'As part of SCE Worldwide Studios, we do regular reviews to ensure that the resources we have can create and produce high quality, innovative and commercially viable projects in an increasingly competitive market place.

'As part of this process, we have reviewed and assessed all current and planned projects for the short and medium term and have decided to make some changes to our European Studios. It has been decided that Liverpool Studio should be closed. Liverpool Studio has been an important part of SCE Worldwide Studios since the outset of PlayStation, and have contributed greatly to PlayStation over the years. Everyone connected with Liverpool Studio, past and present, can be very proud of their achievements.

'However, it was felt that by focusing our investment plans on other Studios that are currently working on exciting new projects, we would be in a stronger position to offer the best possible content for our consumers. Our Liverpool Facility will continue to operate, housing a number of other vital WWS!E and SCEE Departments. This should not take anything away from the great work WWS are doing and the incredible games and services that we have made, and continue to make.
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