It'd have been super easy to cancel it because nobody knew what Arkane was making -- until Microsoft announced it on their stage.
Also, even if people came to know about the canceled Redfall project, Arkane could just spin it into a positive thing in like 1 message. It'd have gone something like this:
"Yes, we were working on a project named Redfall, and it was supposed to be a multiplayer co-cop vampire shooter. But the game wasn't coming along well and didn't have the "Arkane DNA" that our fans love and expect from us.
The project started because we felt a need to make a big GaaS shooter that could bring in recurring revenue. After Microsoft's purchase of Zenimax, however, that stopped being a problem for us. That's why it's so good to be a part of Xbox Game Studios, where we can pursue our creative ambitions without worrying about where our next cheque is coming from.
With Microsoft's support, we are developing [insert franchise name here: Dishonored 3, Prey 2 etc.], which will be our biggest and most ambitious single-player game yet and a true love letter to our Arkane fans. It's very early in production, but we can't wait for the time when we can show more of it."