Microsoft's Shane Kim confirms in an interview the death of the Cryptic/Marvel MMO 

From MTV's MultiplayerBlog :

Microsoft announced in September 2006 that “City of Heroes” makers Cryptic Studios would develop a massively multiplayer game set in the Marvel Comics universe. But last November, rumors swirled that development of the game had been shut down.

First, I asked if the game was truly canceled. He said: “I’ll confirm. Marvel and we have agreed to end development on the MMO. It was an amicable decision…. It’s just something that we felt that, for us and for them, it would be better if we ended development. Which is disappointing, because that had a lot of promise. But sometimes you have to make these decisions.”

Cue the natural follow-up: What went wrong?

“I don’t think it’s necessarily a case of what went wrong,” Kim told me. “I don’t know that that’s the right way to put it. For us we look at our priorities and all of the things we have to do. It’s a tough space. It’s a very competitive space. And it’s a space that’s changing quite a bit. …When we first entered into the development and agreement of the development of ‘Marvel Universe Online,’ we thought we would create another subscription-based MMO. And if you really look at the data there’s basically one that’s successful and everything else wouldn’t meet our level or definition of commercial success. And then you have to look [and say]: ‘Can we change the business model for that? Is that really viable given how far we are in development? And so forth. Does Marvel want to do that?’ There’s a whole bunch of factors.”

I asked if he meant that he would have wanted — but was too far in development — to consider other business models for the Marvel MMO such as an ad-supported version. “Item-based or transaction- based,” he chimed in, expanding the possibilities further. “Clearly there are emerging models that have come about. At the end of the day, all of those combined for us to say, look, it’s probably in the interest of both parties for us not to continue.”

Kim made it clear the Marvel project is done, but said that the cessation of development of two MMO’s during his tenure — the other being “True Fantasy Live Online” — wouldn’t discourage him from greenlighting a new one, “if the right opportunity came along.”