The ousted leadership of video-game developer Unknown Worlds said parent company Krafton Inc. fired them after the executives presented the company with upbeat revenue projections that would have triggered most, if not all, of a $250 million bonus payment, according to a copy of their lawsuit which was unsealed Wednesday.
Former Unknown Worlds Chief Executive Officer Ted Gill and founders Charlie Cleveland and Max McGuire said Krafton sought to delay the release of their new game, Subnautica 2, after realizing they would have to pay that large a sum, according to their complaint. The South Korean game publisher offered the executives a lower payout before terminating their employment earlier this month, the lawsuit alleges.
Gill, Cleveland and McGuire filed a lawsuit for breach of contract on July 10. A representative for Krafton declined to comment on the suit. In a statement to press last week, Krafton said the three studio leaders had “abandoned the responsibilities entrusted to them” and that “the absence of core leadership has resulted in repeated confusion in direction and significant delays in the overall project schedule.”
Krafton purchased Unknown Worlds in 2021 for $500 million, with as much as $250 million more due to be paid in 2026 if the company hit certain revenue targets. The complaint argues that all was well between the two sides until a series of meetings in early 2025 when Gill was negotiating with Krafton about paying bonuses to employees who weren’t eligible under the original acquisition terms. About 40 people employed by Unknown Worlds at the time of the sale were told they would receive payouts, mostly in the six-or-seven-figures, but the executives also wanted to offer bonuses to those who had joined later.
During those meetings, Gill said that their revenue projections for the coming year had been conservative and that with the upcoming releases of the original Subnautica on mobile and Switch 2, they were expecting significantly higher numbers. Subnautica 2 was also expected to be a big hit, with nearly 2.5 million people adding the game to their wishlists on the PC platform Steam.
“After Krafton’s leaders reviewed Gill’s projections and evaluated the anticipated revenue and earnout numbers, everything changed,” they said in their complaint.
The leadership group said that in subsequent meetings, Krafton began pushing for Unknown Worlds to delay Subnautica 2. In the weeks that followed, Krafton employees told Gill they believed the company was trying to get out of paying the earnout, the complaint alleges.
During one lunch meeting, according to the complaint, Krafton Chief Executive Officer Changhan Kim told Cleveland that releasing the game in 2025 “could be disastrous financially and hugely embarrassing” for the company. Krafton later said that had been a mistranslation.
Throughout May and June, the two sides continued to battle as Krafton halted publishing duties such as marketing and adapting the game for local markets, as well as paying vendors, according to the complaint. The former leadership team said that the publisher refused to support the game’s imminent summer release and that Unknown Worlds missed out on “highly valuable” promotional opportunities because Krafton didn’t respond to emails. Gill said he was told by one of Krafton’s top executives that “pulling these resources was a permissible way for Krafton to avoid supporting the earnout,” according to the complaint.
By the end of June, the relationship had deteriorated. During various meetings, Krafton asked the leadership group to accept a lower earnout, according to the complaint. Around the same time, Kim wrote a letter to the leaders, reviewed by Bloomberg, accusing them of “failing to fulfill the responsibilities with which you were entrusted” and saying that Subnautica 2 had faced “slow and underwhelming progress.”
On July 1, Krafton fired the three studio leaders, who are now seeking damages “in an amount to be determined at trial,” according to their suit. Krafton has said it willextend the bonus period until next year, with Unknown Worlds employees able to share in a $25 million payout if revenue targets are hit.
One main point of contention between the founders and Krafton was whether the game was ready for release this year under the company’s early access model, which allows outsiders to play the game and submit feedback. Presentation slides from Krafton reviewed by Bloomberg, which included quotes from the company’s internal testers, argued that Subnautica 2 lacked content and didn’t feel innovative enough.
The lawsuit alleges otherwise. Pre-release tests involving hundreds of users “drew high marks and confirmed that the game was ready to meet those lofty expectations," it said.
Developers at Unknown Worlds speaking to Bloomberg said they believed the game was in good shape, as did some external parties, who asked to not be identified. One developer at a separate company who played Subnautica 2 and requested anonymity because they signed a non-disclosure agreement told Bloomberg they enjoyed the game and that it “seemed way more robust” than other titles in early access.
The other point of contention was the roles that Cleveland and McGuire played at the studio. In public statements and in documentation reviewed by Bloomberg, Krafton accused the two founders of neglecting their duties because they were minimally involved with the development of Subnautica 2.
In their suit, the founders said that Krafton was aware of their new roles and that Cleveland had spent a large amount of time working on a Subnautica film, which Krafton had asked the studio to develop.
Didn’t know Krafton was Korean. Now it all makes sense. Corporations in Korea are even worse than US corps. They hold so much power. Korea is basically a Cyberpunk country. On the other hand they shouldn’t have sold their soul to the devil. Like that deal was definitely too good to be true. Like half a billion + a quarter billion in bonuses for an indie studio. That’s probably more than the company made in their lifetime.
Before the Krafton acquisition, Unknown Worlds Entertainment has produced Natural Selection 2 (the first was a Half Life mod, not sure it counts), which sold 300,000 copies, Subanutica sold “over five million” at a $30 price point, and I can’t find any sales numbers for Below Zero, but for back of the napkin math let’s say it sold about as well as Subnautica at ~5 million copies, again at $30.
So both Subnautica and Below Zero grossed $150 million. Subtract the 30% that Steam takes, and you’re left with $100 million, so $200 million between those two games would have been the net take.
Meanwhile, Moonbreaker happened, and I have no sales figures for that.
Everybody talks about what a massive hit Subnautica is, and while it is a successful game, Stardew Valley sold 40 million copies. Subnautica 2 stood a good chance of being a solid commercial success with tons of 2 hour Youtube video essays about how it compares to the original. It was never going to make $750 million. Even if it outsold Subnautica and Below Zero combined at double the price. Add in merch, Peeper plushies, T-shirts, ball caps, they were talking about a movie…Subnautica 2 was going to make a good chunk of that but wasn’t going to make it all.
As far as I can tell, they never intended to pay that $250 million bonus, it was probably offered in bad faith as incentive to sell the studio, and when it looked like they were actually going to pull off the conditions Krafton broke the contract in order to break the contract.
If I get my way, Krafton will never do business in the United States again, and since I’m a vengeful asshole that likes doing brain surgery with a backhoe, I’d probably ban Samsung, Hyundai, Kia, Toyota, Sony, Nintendo and Honda, and half of those aren’t even Korean.
TLDR Bloated staff sizes and poor workflow management means salary costs skyrocket while a lot of people on staff are left waiting for things to do. The article keeps saying the costs aren’t just about better graphical fidelity, but I think this issue is somewhat related because a big chunk of staff are going to be artists of some variety, and the reason there are so many is to pump up the fidelity.
Not that it much matters to me personally. I’ve said before that games have long ago hit diminishing returns when it comes to technical presentation and fidelity. I’d rather have a solid game with a vision, and preferably a good visual style rather than overproduced megastudio visuals. Those kinds of games are still coming out from solo developers and small studios, so it doesn’t affect me one bit if big studios want to pour half a billion into every new assemblyline FPS they make.
Youll probably be waiting for a while since most indies are solo devs. Its hard to make 3D models and textures of the PS2/GameCube/Xbox era quality as a solo dev in a reasonable amount of time, especially for every object a game would need.
The programming isn’t even the hard part. Its mostly the amount of time and work required for making art assets that take the longest in game developmemt.
Games of that era were frequently made a dozen or so people in 18 months. Whether that passes some arbitrary line in the sand for what counts as “indie” or not, I don’t much care; it’s just a market segment that’s been left behind by AAA that I’m waiting for someone to pick up the mantle on. Most genres that AAA have left behind have been filled by now, but FPS games that fit the mold of what we got between ~1998 and ~2016 are still an itch I need scratched. From what I can see on the horizon, there’s Fallen Aces in early access that I’d like to see once it’s 1.0, Core Decay going for a Deus Ex sort of thing, and then Mouse: P.I. for Hire, but I’d still like to see the full package with co-op and deathmatch modes like we got back in the day.
The new C&C is Tempest Rising. The new Neverwinter Nights has a variety of answers, from Baldur’s Gate 3 to Solasta to Pillars of Eternity, depending on what you’re looking for. Commandos has spawned an entire genre at this point; not only is there a new Commandos coming soon that looks good, we just had a series of three and a half games from the sadly-now-defunct Mimimi that all fit the bill, as well as that game Sumerian Six just last year.
No worries. There are lots of kinds of games we used to get a lot of back in the day, but their successors or spiritual successors don’t get the kind of attention or marketing that the industry giants do. Often times, if you miss a certain kind of game, just start searching for “modern games like X”, and you’ll probably find it.
Zortch is a neat one, less Quake and more early 2000s FPS feel. Pre-Doom 3, pre-HL2 in gameplay, but with the style of comedy and charm you’d get out of a Shiny Entertainment game. Very much a solo labor of love, and it’s only like $5 if memory serves me right.
Thanks for the recommendation. I’ll check it out. I’ve got Phantom Fury from this past year, and even with a ton of criticism heaped toward it, it was still in the ballpark of what I wanted to scratch this itch.
As someone who works in corporate America this is 10000% true. Giant corporations are hugely bloated, inefficient, slow, and stupid. I honestly can’t believe they are somehow the best way to do things in groups of people. I have never had less work to do than working in a huge corporation.
It’s no surprise that indie games can compete with them. Working in startups compared to huge corporations, I did more code and we got more done in shorter amounts of time vs big corps. There’s no red tape, there’s no committees or directors or people you have to please. There’s no political games, you just do your work. As simple as that. You come in, you code for 7-8 hours, you push your feature, and you go home.
In a megacorp you come in, you get 5 minutes for coffee before 3 people are pinging you on slack for some stupid downstream thing they didn’t read the manual on or was never documented, and then you have 5 hours of meetings, lunch, 2 hours of ad hoc meetings, and then Shirley has to swing by to ask you to take another HR training. So you get maybe 20 minutes of coding done in a day.
For you engineers who have never coded in a megacorp - As an example, most megacorps have an ID service (usually named after a comic book character). This is usually a real service deployed somewhere that nobody maintains anymore, but it’s where you get your… IDs from. Really wrap your head around that. It’s a microservice who is in charge of returning Guid.NewGuid(). Then they get pulled into meetings because the ID service doesn’t support this or that, they never thought of this case or that case, how can we upgrade off the old ID service to the new one. In a startup, you’re calling Guid.NewGuid()
The main issue corporations run into that cause this bloat is a situation like the following: Project A needs 500 people to meet schedule and workload. Project B begins spinning up and will need the same 500 at it’s peak. Project A ends and the workload is really only for 200 people on Project B. Do you lay off Project A folks you know you will need in a year? No, that’s a waste of all the talent/training/know how that was built. So you bloat and carry them until you actually need them. Still have to pay them though
Every single time I have played an Annapurna published game, I had a fantastic time. I won’t say that everything they did was equal, but everything they did was entertaining, and thought-provoking.
I can’t quite follow the legalese required to parse EXACTLY what this means going forward, but I am sure it is not good, and that is disappointing.
All the money that’s supposed to be spent fighting pedophiles are actually spent on SLAPP suits against youtubers exposing the pedophile developers on their payroll
Jill Braff, head of ZeniMax studios, said in the town hall that she hoped the reorganization would allow the division, which also develops Fallout and Doom, to put more focus on fewer projects. “It’s hard to support nine studios all across the world with a lean central team with an ever-growing plate of things to do,”
Why gobble up so many studios to consolidate into a gaming megacorp, then get gobbled up yourself by Microsoft? What’s the purpose of acquiring so many studios and holding onto so much IP if you can’t handle them?
That was my take too. “We’re spread too thin”… Then why the fuck did you buy up all these companies? Sure sounds like they just gobbled up all the good IP to hoard like a dragon on its pile of gold. Or to make sure those IPs don’t make it to Sony exclusives, wish the FTC would hang them by the balls since they’ve basically done opposite of what they promised during the mergers.
Because CEOs are fucking idiots. So many companies do this shit, it’s not just the gaming side. A company starts to grow and instead of keeping with an organic growth they buy companies over and over.
The ceo makes $96.5 million a year. Where’s the “accountability margins” when that was decided? These companies and their decisions really show how stupid the stock market really is. At least that’s the way I see it being uneducated from the outside
Cap executive pay at 12x the lowest paid employee in the company. You can’t make more in one month than the drones make in a year. If you want a raise make sure everyone else gets one too.
I can’t wait to see the exemption for “part time workers” and suddenly everyone making less than a triple digit salary has exactly 32 hours a week, or whatever is legally permissible to pass as “part time work” in your country.
You’ve provided a fantastic common-sense solution designed off the simple premise that no one needs 12x of a living wage, and I can’t agree enough, but I know the capitalists would fuck it up at every stage possible, while simultaneously arguing that they’re justified in doing so because the method of economy that they worships has given them moral purchase to look down on the poors.
Make it 12x the lowest paid by hourly rate. Then maybe it’s 32 hours, or less, but you’ll be paid no more than 12x less than the highest paid employee on an hourly basis.
Also, the hourly wage should include all compensation, including benefits and stock options, so they don’t try to stuff their benefit and stock packages (eg private plane and company car).
Also, tax all wealth above 20x the median wealth of the nearest 100,000 people at 90%.
In support of the move in spirit, but: Any ideas to prevent a company from circumventing this via dummying up contractor firms? Eg, “We employ this software company started by our founder to write our code. Coincidentally, their pay is .1% of the pay at Microsoft”
Like any proposal you would have to word it in a way that minimizes loopholes initially, as well as muster the political will to close any new loopholes that come up.
Off the top of my head, you would probably want to use averages in some way. Perhaps use the median income of the bottom 20% of domestic wage earners in a given company, with some sort of multiplier or additional penalty for offshore employees. You would also want to ensure all forms of executive compensation like bonuses and stock options are included in the equation.
There’s probably more you would need to include but those 3 things would minimize the most obvious loopholes I can see.
That’s straight up the behavior of a company that wants to create a monopoly. Buy up the smaller companies so the competitors can’t buy them up and then just shut those companies down so their products can’t compete with the existing money makers. The money they put into those studios for game development is just a charade to please the authorities. Cause if they would shut those companies down immediately after purchasing that would be undeniably anti-competitive behavior and illegal even in the US.
Which is exactly what I expected them to do. I laughed at Blizzard fans being hopeful about the acquisition because things didn’t go well at the time. It was always just another step towards closure.
Blizzard fans have a habit of believing Blizzard is still this small indie company with humble games like Starcraft, Lost Vikings, and Diablo, and that it’s just mean ol Activision making them do things like…
sigh
Have two to three whole expansions of Sylvanas Windrunner being not only the Warchief of the Horde, but for all intents and purposes being basically the main fucking character, complete with a writer who brought her previously killed off-boyfriend Nathanos, only as a self-insert.
Like I love Sylvanas, she was my favorite character, but Jesus fucking Christ that was cringe. Not only was it completely out of character for the Horde to give her leadership (Protip: The Forsaken aren’t trusted by anyone because they’re scary fucking zombies who do scary zombie shit, the Horde just figures they’re less dangerous as allies than enemies), but she continously forced the Horde to do horrible shit.
Now if the point was that Sylvanas was evil and the Horde’s mistrust of her was valid, I guess that’d work, but the way it was executed was more like “Look how cool Sylvanas is for doing all this edgy shit.”
I don’t know who the Warchief is now, I honestly don’t think they have any fucking Horde characters left to be Warchief given how often Horde leaders get killed off. Jesus Christ WoW’s story just completely shit itself after Legion.
I got off-topic, my point was Microsoft was never going to save Blizzard from Activision, because Activision isn’t holding Blizzard at gunpoint and forcing them to kill off Heroes Of The Storm, Steal female employees’ breast milk, or making Overwatch 2, Blizzard’s just not a cool company.
I think the data shows that advertisement is super effective, not that people prefer to be advertised. If people preferred advertising over a better product then games like Balatro, Vampire Survivors etc. literally couldn’t be successful, because those games had effectively zero marketing budget. Their success came from word-of-mouth because the game itself was great.
Lots of obvious astroturfing going on regarding this. I’ve seen this news everywhere from Slashdot to Reddit with people sucking Microsofts dick. It’s either that, or people are too young to remember the bullshit Microsoft pulled … since forever basically. People aren’t going to benefit from this merger. Microsoft is patient. Embrace, extend, extinguish is their strategy. 10 year agreements are nothing for them to wait out.
And it’s the same with every merger – “This will bring more competition, blah blah blah”, then merger goes through and half the people are fired, half the rest are rolled into existing systems, and some empty shell of the previous company just wanders along with no real spirit any longer.
I’m not happy with the state of consolidation in every market under the sun, but I’m sure as shit happy Bobby Kotick is finally going to fuck off and I’m happy I’ll be able to play activision games on gamepass. When gamepass inevitably enshitifies I’ll just get rid of my subscription.
Yeah I can see that. Nadella brought new energy and almost made MSFT look cool, but years later we can see how MSFT is basically gobbling up everything in every domain.
Update: Why am I being downvoted? Did you all forget that MSFT has acquired LinkedIn, GitHub, Mojang, Bethesda, ABK and 49% stake in OpenAI all under Satya? Each one of those are massive acquisitions.
Microsoft are far, far, far from being close to the leader in the market even with ABK on their books, so your FUD makes no sense. Pretty much no one in the entire industry is against the acquisition apart from their main competitor, Sony, who are the market leader and abuse that position every day of the year to pull content away from Microsoft.
ABK will operate like they do currently, just like Bethesda do, only now they have Microsoft money and backing.
The only people that this deal is bad for are people who only play on PlayStation consoles. Everyone else benefits.
You said nothing will change. They will be part of the microcrap veil and will follow their ways of doing things. Like not hire people and only contract for 18 months then get in new contractors to pick up where the recently fired left off… Like what happened at 343i.
At this point anyone selling a company to a bigger studio is just either ignorant or greedy. It’s almost a given that they’ll just crash it into the grounds. Acquisitions and mergers might be like the eighth deadly sin. Everyone loses.
Who cares? It’s the audiences fault for assuming that prior performance is an indicator of future performance. Let the founders cash out. Buyers get rich because audiences think quality will be maintained post acquisition. How often does that really happen though?
Yeah I mean, I have a hard time being too sympathetic to people who unnecessarily sold their company. There is no reason to do it. If you need money, you can always get investors to get a minor stake or something.
According to the article the old leadership wanted to share the bonus with the whole development team of around 100 people. I don’t think the motivation of the team will be great now that the publisher pushed the bonus in unreachable distance. Fucking assholes can’t even stand by their own promises.
According to the wiki page… “In May 2024, Take-Two announced it would shut down Intercept Games but continue to update Kerbal Space Program 2 under the Private Division label.”
I wonder how will they manage that logistically. They are firing every single developer from IG. Who exactly in Private Division is going to be doing the updating? I suspect they will just brush a little of the code that is ready, then completely abandon the product in a year or so.
bloomberg.com
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