Activision also exploring the possible sale of the Liverpool-based studio.
Activision has confirmed it is "exploring the options regarding the future of" Bizarre Creations, the studio behind Microsoft's Project Gotham Racing series, Geometry Wars and more recently Blur and 007 Blood Stone.
Activision paid $67.4 million in cash to acquire Bizarre back in 2007, with an additional $40 million due should the studio have reached commercial targets by 2012/13.
"Over the past three years since our purchase of Bizarre Creations, the fundamentals of the racing genre have changed significantly," explained an Activision statement. "Although we made a substantial investment in creating a new IP, Blur, it did not find a commercial audience.
"Bizarre is a very talented team of developers, however, because of the broader economic factors impacting the market, we are exploring our options regarding the future of the studio, including a potential sale of the business."
An earlier MCV report claimed that the studio's entire 200-strong workforce could be out of a job within 90 days.
In the end Activision's decision will be based on a return on its investment and with both Blur and more recently Blood Stone failing to capture a large audience, the publisher is now looking at exit strategies.
Activision's statement also hints that the scrappage of proposed UK tax breaks for games production has made it too costly to continue operating Bizarre Creations in its current state.