Reductions continue in the gaming software development world as studios continue to close, merge, or realign in an effort to remain profitable. The latest victim this time around appears to be Midway Austin.

Reports now have Midway Austin canceling an unannounced project that had been in development. While we don’t really have any details yet on what this product was, we have been able to confirm through our sources that the cancellation of this project will result in the layoff of between 90 and 130 Midway Austin employees.

The decision by Midway to lay off these employees is part of an overall plan to reduce 10% of the company’s work force. By terminating this project, Midway will be taking a $10 million write down in development costs along with another estimated $1.2 million in severance packages related to this layoff.

Unnamed sources indicate that the Midway Austin Studio will stay open despite the layoffs and continues to be home to the company’s Central Outsourcing Group. In addition, reports claim that two small internal teams will continue to soldier on working on new prototyping for two future announced projects that are supposedly new IP for the company.

Inside sources claim that the decision was difficult for Midway CEO Matt Booty, but the decision was made in the best interests of the future of the company. Midway has struggled over the past couple of years in not receiving the hits and acclaim that the company has been known for in the past.

Several Midway franchises and recent titles have not proved to be as popular with players and this has contributed to a recent downturn in Midway’s fortunes. Many insiders claim that the loss of the NFL license to the Blitz franchise, as well as the lack of popularity of the Hits franchise, has also contributed to downturn at Midway.

Some analysts claim that it is simply a case of Midway not making a successful transition to the Xbox 360, PlayStation 3, and Nintendo Wii systems with titles that gamers are excited about playing.