Update: Harada has put out a TwitLonger, attempting to clarify some nuances that were lost in translation. While the English subtitles—which are provided on Harada's video—referred to Tekken x Street Fighter as "dead," Harada said the translation should instead have been closer to a "pending state" or "pause" on the project.
"You can see that the original Japanese and English subtitles give a very different impression," Harada wrote. "So people who can hear Japanese are not particularly interested in this topic."
Looks like Tekken x Street Fighter is still in development limbo, then. At least it's not dead... though it's not exactly alive, either.
Original story: Unfortunately, it looks like Tekken x Street Fighter is officially dead in the water, nearly 11 years after it was originally announced.
Tekken creator Katsuhiro Harada and Tekken 7 director Kouhei Ikeda broke the news in the latest episode of Harada's Bar, revealing that the project was canned while Bandai Namco was roughly 30% into development (thanks, TheGamer). "We were working really hard on that, we really were," the developers said. "Wish we could show you the models and stuff."
Harada and Ikeda highlighted Chun-Li and Dhalsim as characters that looked great in the leap from 2D to 3D, and added most of the female characters "were really good." The disappointment in the developers' voices is palpable, with both repeatedly stating how much they'd love to show off the cast in 3D. "We wish we could show them to you eventually, but Street Fighter belongs to Capcom so we can't do it on our own."
The game has been up in the air for several years now, but Harada always insisted that it was still coming. He told The Independent in 2012 that development was "not quite 10%, but almost" completed, before announcing in 2016 that the game was officially on hold. Doubt was further cast in 2019, when Harada said Tekken x Street Fighter was becoming increasingly difficult to justify with the huge success of Tekken 7 (via VGC).
Capcom's contribution to the collaboration, Street Fighter x Tekken, released in 2012. It threw Tekken's cast into the 2D plane, but poor balancing, frequent timeouts and a universally panned gem assist system put the game in an early grave. A huge 2013 update made the game much better, but the damage had already been done. It's hard to say if this had an impact on the rocky development of Bandai Namco's counterpart, but it wouldn't be surprising.
Despite Tekken x Street Fighter being put to rest, it seems its development did actually have an impact in Tekken 7, thanks to Street Fighter guest fighter Akuma. "You can see Akuma's model, it's pretty cool," the two said. "We even had motions, which you can see reflected in Akuma."