The good news: according to a Kotaku report, Silicon Knights was actively developing a follow-up to the acclaimed Gamecube-era horror title. The bad news: it was part of the collateral damage in what ex Silicon Knights employees are saying was the disastrous development of last year's X-Men: Destiny.
Eternal Darkness II was being developed in parallel with the Marvel license, at the time severely splitting the the resources at Silicon Knights. The picture painted by the Kotaku piece is of a Silicon Knights' founder Denis Dyack robbing Peter to pay Paul--in this case, using the resources publisher Activision supplied for the development of X-Men: Destiny to quietly develop Eternal Darkness 2, which he hoped to shop out to potential publishers. According to one unnamed source, Silicon Knights would quietly pull team members off of X-Men: Destiny to work on a demo for Eternal Darkness 2 for potential publishers, leaving XMD without any serious development effort for its first year.
Dyack had been teasing a sequel to Eternal Darkness as far back as 2008 (along with a sequel to Too Human), but from the sounds of it, Silicon Knights may be down to a five-person studio after a number of layoffs and resignations probably doesn't have the tools and available talent to mount any kind of real development effort.
Whatever your feelings on the incredibly outspoken Dyack, the report is well worth a read, describing the trajectory of a licensed title gone bad at a respected developer.
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