While not officially cancelled, the game has received no updates for a year. In response to several questions about Possession, Blitz/Volatile has sent out the same message to any person who requested the status of the game.
“Hi there, Thanks for your interest in Possession. Unfortunately we still haven’t managed to secure a publisher to take on the project. We haven’t given up on Possession completely, we want to see it made as much as you do. We are pursuing other games at the moment though. Best regards, PR Dept, Volatile Games”
The nature of the email and its content, especially the “pursuing other games” comment seem to suggest that the game will not be completed. It is still noted though that no Publisher yet is found and that they didn’t give up Possession completely indicating that the game is not yet cancelled and it has a chance that once a Publisher takes the project, the game would be continued to be completed. – [info from Wikipedia]
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