Update: Microsoft has confirmed to IGN that Scalebound has been canceled. IGN provided the follow statement:
Microsoft did not comment on the question of who now owns the rights to the title, which would go a long way to determine whether there's any chance the game might see the light of day in the future.
From Earlier: Scalebound was a major Xbox exclusive title when it announced. Unfortunately, that was nearly three years ago. It now appears the game may be in serious trouble. One report is claiming that the long in development title may be canceled, while another says the game is officially dead.
Scalebound was unveiled during Microsoft's E3 Press Conference in 2014 as a game coming to Xbox One and Windows platforms. Since then, the game has been shown off at most major Microsoft events, including last year's E3 press conference. However, with essentially nothing since then Kotaku is now reporting that rumors that have reached them are implying the game is in trouble, and might already have been canned. However, Eurogamer is going one step further and saying that Platinum Games and Microsoft parted ways on the title before the end of the year, and the title is dead.
Scalebound is, or was, the project of Bayonetta creator, Hideki Kamiya. From what little we saw of the gameplay, the title was a third-person action RPG where you took the role of a character named Drew. Drew's sidekick was a massive dragon who aids him in combat. The game was originally set to be released at the end of 2016 but was delayed into 2017 about a year ago. The fact that we hadn't heard anything since then doesn't bode well for the title.
According to Eurogamer, last fall several key members of the development team actually took time away from the game because the workload was becoming overwhelming and they just needed a break. They all returned, however, the break put the game behind schedule. This lead to major problems regarding meeting deadlines. This, combined with some apparent concerns about the game engine, apparently led to the decision being made, one would assume by Microsoft, to end the project.
What's not clear is if there's a chance the game could be revived by another party. It's possible, however unlikely, that another publisher might swoop in and provide the necessary funds to continue the game to completion. That would seem unlikely, but we'll have to wait and see. Most of all it would depend on who has the rights to whatever was created. If Platinum Games has the rights, it could happen. If Microsoft gets to keep everything, then we can pretty much forget about it.
For now, Scalebound certainly appears to be dead, though we're still waiting for an official word to confirm what we're hearing. Microsoft told Kotaku they would have "more to share" on the title soon, so one way or another, we'll likely get some clarification before long.