7 Studios, the Los Angeles developer and pinch-hitter for the Guitar Hero division, has been shut down according to Joystiq. Various staff members tweeted that the studio closed last night. One unnamed source claimed that half of the staff had been let go with 60 days severance pay, while the other half will remain employees for the next 120 days to resolve a legal dispute with the creators of Scratch: The Ultimate DJ.
Vicarious Visions, a New York studio that had been developing the next Guitar Hero, has also been hit with layoffs according to Develop. While an unnamed source claims that the studio is not closing completely, it has reportedly lost about fifty developers composing a quarter of the total staff.
"We're actively working with Activision on various options going forward for the studio. No decisions have been taken at this stage. We appreciate everyone's support through this process and will be as open and transparent as possible as soon as we know more."
We reported this morning that downloadable content for both Guitar Hero and DJ Hero will continue through February, then end. Whatever FreeStyle staff remains after the cuts will probably be reorganized into other studios.