"Black Isle Studios is dead." So says a source formerly employed by the developer. We've already brought you the initial details based on a post on the Interplay forum, but we've now confirmed that Black Isle now exists only as a brand under the Interplay umbrella. Digital Mayhem, the other development division within Interplay, has also "been dissolved and combined under Interplay Production," according to our source.

The dissolution was prompted by an apparent political "ass-kissing battle" within the separate divisions of Interplay. Black Isle Studios' director quit in frustration, leaving Black Isle unofficially under the management of Digital Mayhem's director. Citing disharmony with the new management, Black Isle Studios appealed to Interplay to adopt a more hands-off approach.[...]

By Black Isle's account, the demo as delivered was 95% done, including all game functionality but only one finished demo level. (Work on the rest of the levels was approximately halfway complete; all that remained to be done was to populate and script the maps.) The next day Interplay began laying off people at Digital Mayhem. Since the Fallout demo was so polished, employees at Black Isle felt (relatively) secure.