As many as 115 Lego Group employees have been given their redundancy notice, after failing to yield enough money from a free-to-play project.
The Lego Universe MMO, which launched in the Autumn last year, is to close on January 2012, the Lego Group said.
That in turn has led to the decision to shut two of the firm’s studios; Play Well in the US and a second facility in Denmark.
Lego Universe, a free-to-play game that offers bonus content for paying customers, has managed to attract two million players.
“Unfortunately, we have not been able to build a satisfactory revenue model on our target group,” said the project’s executive Jesper Vilstrup.
He said the game itself won “very positive player feedback and a large number of players in the free play zone”.
The Lego Group said it would still partner with both TT Games and Warner Bros Interactive to produce further games based on its brand.
All affected employees will be assisted in finding new jobs, the Lego company said.