To rewind, Valve released the original Half-Life back in 1998 to immense critical acclaim. A first-person shooter noted for strong combat and total immersion in the game's viewpoint character, Gordon Freeman, the game sold over 10 million copies and completely redefined the first-person shooter genre. Two expansions, Opposing Force and Blue Shift, followed in 1999 and 2001. Opposing Force launched the career of Gearbox, themselves now one of the biggest FPS developers in the industry for their Borderlands series.
Half-Life 2 was released in 2004 to even greater acclaim and sales. It was praised for its graphics and its pioneering use of physics technology. More importantly, the game launched the Steam digital distribution platform which is now the leading online retail store for PC games with over 125 million users.
Unhappy with the six-year wait between the two games, Valve decided to split the next Half-Life game into three distinct episodes. Half-Life 2: Episode One was released in 2006 and was followed by Episode Two in late 2007, which infamously ended on a massive cliffhanger involving the death of a major supporting character. Episode Three, it was speculated, would be released in 2009. Valve also improved their game catalogue by releasing Episode Two alongside two other games in the "Orange Box" collection: Team Fortress 2, a colourful and fun multiplayer shooter, and Portal, a sophisticated puzzle game using portals, physics and momentum to solve puzzles in a story with a very dark sense of humour and a break-out villain character, the evil computer GLADOS. Portal also took place in the Half-Life universe and fans had fun spotting the Easter eggs linking up the two storylines.
Portal 2 was released in 2011 and was a massive success. A far larger, funnier and more sophisticated game than its forebear, it gained immense acclaim. It also had much closer ties to the Half-Life franchise, including some elements that seemed to be helping set up Episode Three.
Since 2011 there has been almost blanket radio silence from Valve on the status of the Half-Life franchise, except for rumours that Episode Three was dead and the next game would be a full-blown Half-Life 3. Valve has since released Counter-Strike: Global Offensive (2012), Dota 2 (2013) and Portal VR spin-off The Lab (2016) but no more games, instead focusing on online content for Team Fortress 2 and experimenting with new hardware, particularly virtual reality.
Game Informer's investigation relies on an interview with an insider at Valve. According to them, the game never gained much traction due to Valve's way of working, where developers work on projects that they like and then take prototypes to senior management to approve and take to the next level. For whatever reason, Valve's senior management (and its overall boss, Gabe Newell) have never formally approved a Half-Life 3. Apparently some of the ideas and prototypes were pretty wild, including an real-time strategy game spin-off and a live-action movie with branching storylines based on player choice. It does look like that Episode Three did get off the ground after Episode Two's completion, but it was canned pretty quickly, possibly in favour of Portal 2, and the momentum was never regained.
Valve has occasionally released concept art for Half-Life 3, including this image of the Borealis, a ship which was heavily referenced in both Episode Two and Portal 2.
Half-Life 3 is a difficult project to take on at this point. Gabe Newell seems to want a game that will redefine the FPS genre as the first two titles did with new ideas and technology, but no-one seems really to have come up with a viable idea. In addition, the Half-Life franchise may have sold over 25 million copies but its console ports have never been more than modestly successful, whilst a new game would also have to appeal to console gamers. The direction of FPS games on console has been to lowest-common denominator, cut scene-heavy and violence-focused titles. That's not to say that a smarter, more thoughtful FPS could not be successful (arguably the Fallout series has moved away from being RPGs to narrative and conversation-heavy FPS games instead), but the project has to be seen as being risky from a commercial POV.
On the other hand, there is no way that a new Half-Life game from Valve would bomb. It'd be a big success regardless of the mechanics it employed. The huge cliffhanger ending of Episode Two, not to mention the numerous storyline nods from Portal and Portal 2, have also set up expectations and questions that Valve should really answer, if not in a new game than perhaps in a novel or comic.
The one thing that might resurrect the franchise? A movie. Star Wars and Star Trek producer and director J.J. Abrams is a massive fan of the Half-Life and Portal games and recently confirmed that his company, Bad Robot, is developing movies set in both universes, although it sounds like the Portal movie will happen first. Whether Abrams would direct or just produce remains to be seen. But if something lights a fire under the franchise and gets a new Half-Life game going again, this might be it.