Vancouver-based Propaganda Games has closed its doors for good, parent-company Disney Interactive confirmed to Joystiq. Disney's decision doesn't come as much of a surprise given the studio's recent--and unfortunate--proclivity for being forced to shelve projects and shed its workforce.
In October 2010, Propaganda saw a promising Pirates of the Caribbean action title, Armada of the Damned, canceled by its parent. Rumors at the time were that, in one fell swoop, Disney hit the developer with a wave of layoffs, affecting "as many as 100" employees.
At the time of the canceled Pirates title, Disney noted that Propaganda would still be active, producing downloadable content for (what would become its last release) Tron: Evolution. It's unclear if more DLC will be released for the game going forward.
In February 2009, sources told me [when I worked at Joystiq] that the team lost "at least 75 employees." Sources also informed me that a planned sequel to 2008's Turok had been canceled due to the reduced team size. (One source provided me with concept art for the project.)
A statement from Disney regarding the closure stated: "Disney Interactive Studios confirms the closure of its Vancouver-based internal game development studio, Propaganda Games. The studio has completed all work associated with its most recent project." Our sympathies go out to those affected by Propaganda's closure.