Banjo Kazooie and Viva Pinata series developer Rare, a wholly owned subsidiary of Microsoft, has warned that it may soon eliminate "a small number of current positions."

"As the entire industry struggles to address the increasing scale and cost of development, we too have felt a need to restructure our current approach so we can speed development and better manage the scale required to create high quality games," studio manager Mark Betteridge said in a statement acquired by Gamasutra.

"With four projects recently underway, now is the right time to make this change."

Microsoft has previously said that it plans to cut up to 5,000 positions across its global workforce by the middle of 2010, recently closing Flight Simulator series developer ACES and loosing former Games for Windows Live manager Chris Early.

Phil Spencer, head of Microsoft Game Studios, wants to allay fears surrounding the fates of subsidiary studios Rare and Lionhead after the publisher closed Ensemble Studios, Shadowrun developer FASA, and UNO maker Carbonated Games.

Speaking to GamesIndustry, Spencer remarked that "the work that those studios are doing [is] incredibly important to [Microsoft]." He offered additional praise for Rare, perhaps in response to recent criticism of the studio. "What studio on the planet signs up for two launch games? That's just crazy," he commented.

As for Lionhead, its Xbox 360 exclusive Fable 2 just went gold, potentially leaving the studio's future in the air. "The next Lionhead game is definitely [a Microsoft Game Studios] game," Spencer promised.

Last week, former Xbox executive Peter Moore fired some strong criticism at Microsoft subsidiary Rare and its Xbox 360 launch titles Kameo and Perfect Dark Zero.

"I think the industry had passed Rare by," said Moore, who later retracted the statement. "It's a strong statement, but what they were good at, new consumers didn't care about anymore.. their skillsets were from a different time and a different place and were not applicable in today's market."

Yesterday I had a chance to speak with Rare creative director Gregg Mayles, a company veteran who served as lead designer on the original Donkey Kong Country.

I queried Mayles' for a reaction to Moore's comments, as well as whether he feels nervous following the shutdown of fellow Microsoft-owned developer Ensemble Studios (Age of Empires, Halo Wars).

Shack: I wonder if you saw Peter Moore's recent comments?

Gregg Mayles: Yes, I did.

Shack: What was your reaction to that?

Gregg Mayles: Amusement, really. I personally don't tend... Read more

"The planets just aligned a little bit," said Rare artist Lee Musgrave regarding the timing of Microsoft's Avatars, a customizable-character feature coming in this fall's Xbox 360 dashboard update often characterized as a response to Nintendo's similar Mii characters.

"It was an idea that we had before Miis were a part of the gaming scene," Musgrave told Eurogamer TV. The show visited the Microsoft-owned studio to seek out the root of the Avatars program and found that, rather than being a knee-jerk reaction to Miis, Rare had already been working on customizable characters to somehow be implemented into the Xbox 360 console.

According to Musgrave, during the making of the new Xbox 360 dashboard--which is a complete overhaul of the system software--Microsoft used its user interface expertise to design the new system, but entrusted "the creative side" to Rare.

Then, as the new interface was unveiled, the long-under-wraps Avatars found a home. In a bit of Rare's trademark British humor, Musgrave attempted to put the issue to rest with a one-liner: "Microsoft did not turn up in a speeding car one day and say, 'They've got Miis! Do something!'"

Despite widespread interest in a downloadable Xbox 360 or Wii version of Rare's Nintendo 64 shooter GoldenEye 007, licensing issues and other concerns have the project "locked in a no-man's land," Rare senior engineer Nick Burton stated.

"The ball's not in anybody at Rare's court really," Burton informed Videogamer. "It's squarely in the license holders' courts. It's a shame. It's kind of locked in this no man's land. There's nothing on [Xbox] Live Arcade, there's nothing on Wii."

The Microsoft-owned studio had developed an Xbox Live Arcade port of the game but was unable to successfully acquire the rights from Nintendo, which originally published GoldenEye 007. Video game rights for the James Bond franchise, meanwhile, are owned by publisher Activision Blizzard.

"You've got the guys that own the license to the gaming rights now, the guys that have the licence to Bond as an IP, and there are umpteen licensees," Burton... Read more

A portable version of Rare's pinata-breeding, garden-tending franchise Viva Pinata will arrive on Nintendo DS this fall, publisher THQ has announced.

Titled Viva Pinata: Pocket Paradise, the game is being developed by series creator and Microsoft subsidiary Rare. While it made seem odd for THQ to publish a Microsoft title, the companies have paired in the past to distribute portable renditions of other Microsoft-owned properties.

Along with a new Playground mode that is said to let players "create a lush garden full of exciting and exotic pinatas in a very short amount of time," the game will include rare pinatas that are only accessible by trading items to another local player through the portable's wireless connection.

"Nintendo DS is the perfect platform for the Viva Pinata franchise because players can have direct interaction with the environment and their pinatas using the stylus," said THq marketing VP Bob Aniello.