5 Sad, Instructive and Fascinating Stories of Game Developers That Went Bankrupt
It seems as though dozens of developers disappear every year, some of them obscure, some flash-in-the-pans, and some fan favorites that cause a major outcry in the game community when they go. These five stories of game devs who went bust proves you’re never too big — or small — to fail.
5. FireForge
With one game under their belt, the companion to 2016’s Ghostbusters remake, FireForge filed for bankruptcy only three days after the game’s release. Ouch. Previously, FireForge had made attempts at getting games out the door with two MOBA-esque projects, but Ghostbusters was their only success (in a manner of speaking: the game was a critical failure). The twin-stick shooter was apparently a rush job finished in eight months to coincide with the movie’s release.
FireForge has been liquidating assets and is reported to be $12 million in debt,
much of it to Chinese publisher Tencent. They’re also currently in a legal battle with Min Productions over a contract on an uncompleted game, Zeus.
Perhaps a company with more experience and resources could have pulled off an eight-month production cycle, but the odds were never good. FireForge’s lack of demonstrated ability only makes their failure seem that much more inevitable in hindsight.
4. 3DO
3DO might not ring a bell for younger readers: the company was founded in 1991 and went bankrupt in 2003. Its initial objective was to create a CD-based home console system, which would put it in competition with Sega and Nintendo. However, the 3DO Interactive Multiplayer failed to saturate the market. (The $699 price tag in 1993 might have had something to do with its lack of success.)
3DO turned its eyes to game development rather than hardware production. The company managed to last until 2003, a full ten years after the debut of the failed console. Some of 3DO’s properties saw a decent amount of success with series’ like Army Men and Might and Magic. There was no singular project failure that drove 3DO to bankruptcy, but the company did endure a slow profit decline — and several alarm-bell-raising layoffs — until they folded. Their ultimate weakness may have been sticking too closely to their existing titles instead of adapting to market trends.
3. 38 Studios
Founded by former MLB pitcher Curt Schilling, the company developed Kingdoms of Amalur: Reckoning, a single-player action RPG. One would expect ‘founded by a baseball player’ to be the end of the story, but Kingdoms did well, selling 1.2 million copies in its first 90 days of release.
The company’s real trouble had to do with a loan from Rhode Island’s Economic Development Corporation.
For whatever reason, 38 Studios bounced a sizeable check (upward of $1 million) toward their loan repayment, and despite managing to make that payment later (and late), the company wasn’t able to keep afloat. Amidst public scrutiny — and an inability to make payroll — the CEO and other high-ranking employees stepped down. The company declared bankruptcy shortly after.
Police, the U.S. Attorney’s Office, and even the FBI began an investigation, and ultimately Rhode Island filed a lawsuit against the studio backers. The case was settled for $4.4 million.
That isn’t even the end of the story for 38 Studios and those involved: it was
reported by WPRI that backers knew the loan from the EDC would not be enough to cover game production. The Securities and Exchange Commission charged the EDC and Wells Fargo with fraud, claiming 38 Studios failed to notify bond investors of their lack of funds. Currently, though an investigation did not unearth enough evidence to move forward with criminal charges, civil charges are still pending.
It’s a sad, messy end for a company that had such a surprising success story for a beginning.
2. THQ
THQ, founded in 1989, started out as a toy company — its name is actually an
abbreviation of Toy Head-Quarters. Once it fashioned itself as a game developer, producing content for consoles, handhelds, computers, and phones, THQ grew exponentially, acquiring companies becoming a global force. In 2007, at its peak, THQ earned $1 billion.
Much of the company’s success was because of tie-ins with popular licensed
content, everything from Spongebob to the WWE. It may actually have been the shift to internally produced content rather than relying primarily on tie-ins that lead to THQ’s financial downfall. However, placing the company in a historical context gives a clearer view of its ills: the recession of 2008 was hard-hitting for many, many devs and publishers. In its attempts to stay afloat, THQ sold off many of its properties and assets and began to restructure.
They released a number of products in the 2010s, including Homefront (which wasn’t universally beloved by any means) and the uDraw tablet (a Wii accessory that didn’t catch on). It invested a lot of money in an ultimately canceled game, Warhammer 40,000. Whether it was the shift from courting a younger crowd, or the shift away from games featuring licensed IP, THQ was struggling. Stocks were down, unpaid loans were looming, and releases were delayed.
Finally, in 2013, they filed for chapter 11 bankruptcy and tried to cut their losses. Properties were auctioned off to a variety of buyers, like Ubisoft, Take Two, and more.
The THQ brand isn’t dead, however. In 2014, Nordic Games acquired the THQ
trademark and will continue to publish content under THQ Nordic.
1. Atari
I’m not sure there’s a game company with more immediate name recognition than Atari. Founded in 1972, its storied history would take hours to get through, so I’ll condense it to some of its more well-known incidents.
Atari started out producing games for arcades and saw mega, culture-changing success with Pong and Asteroids. They broadened their horizons to the console market with the Atari 2600 and Atari 2800 and then competed with Apple by releasing the Atari ST computer system.
In 1998, Atari — still doing quite well despite many shakeups within the company itself — was sold to Hasbro, but that only lasted until 2000 when Infogrames took over Hasbro. Infogrames wanted to buy public shares and turn Atari into a privately held company, but it wasn’t until 2008 that the offer was accepted. (Believe it or not, this is still a truncated rundown: the amount of paper generated by Atari’s various deals must be enough to cover a small nation.) The 2000s were really when Atari struggled. Their profits went down by millions and millions each year, and it seemed evident the company was on its way to extinction.
After pioneering so much of the gaming landscape and weathering so much
change, the end of Atari seemed particularly, bitterly ironic. Any time a giant
collapses, the industry mourns — and few companies can compare to Atari’s legacy.
However, after filing for bankruptcy relief in 2013, Atari and its associated
companies came out the other side more or less intact. They plan to focus on
casino gaming and have stated that they’re aiming to tap into new markets.
Time will tell if Atari ends up succumbing to its dreaded end, or if they will manage to hold on and stay on top of the market. One thing’s for sure, though — it hasn’t been a boring ride.
This article was originally posted on remeshed.com in August 2016.
