Having spoken with several "concerned" developers, Screen Play is reporting that Microsoft have begun to "dramatically reduce" the number of independent titles they publish on Xbox Live Arcade.
It's believed that the crackdown is a response to fears that there's simply too much stuff available on the service, and that major publishers are behind the move, having been pressuring Microsoft to cut down on the number of games competing for advertising and awareness.
Independent developers are also upset at what they feel are two different sets of rules for publishers, one for indies and one for major publishers, which sees "independent games rejected for being too similar to an existing title on the service, yet major publishers were able to flood it with retro remakes".
We've contacted Microsoft for comment, and will update if we hear back from them.
UPDATE - Microsoft have provided the following statement, which reaffirms their commitment to indie games without actually addressing the anonymous developers specific complaints...
Xbox LIVE is a great supporter of independent game development. Xbox LIVE Arcade is home to some of the best games to come out of the IGF including "N+," "Braid" and "Castle Crashers." Our biggest annual program, Summer of Arcade, includes "Splosion Man" from the Twisted Pixel studio and we're releasing "Mad Balls in Babo: Invasion" this week. In addition to our support of indie games on Xbox LIVE Arcade, we've also drastically reduced the barriers for developers to distribute a game on Xbox 360 through Xbox LIVE Indie Games, and we've made development easier with XNA Game Studio. The result is that more and more independent developers are distributing their games to the Xbox LIVE community. There are currently hundreds of games available on Xbox LIVE Indie Games with more coming every week.
Closed shop [Screen Play]