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Cevat Yerli: Crytek is "absolutely" safe

Cevat Yerli: Crytek is "absolutely" safe

Fri 08 Aug 2014 10:20am GMT / 6:20am EDT / 3:20am PDT
Publisher

CEO discusses the price his company paid for a "painful" transition

Cevat Yerli has spoken at length to GamesIndustry.biz sister site Eurogamer about Crytek's recent woes and restructuring, talking openly about the difficulties of the company's ongoing transition to free-to-play and games as a service, as well as the details of downsizing and the rumours of missing staff payments.

Last month rumours began to circulate about trouble at the international publisher, with particular focus resting on Nottingham's Crytek UK studio, which was working on Homefront 2 for Koch Media. Elsewhere, job losses and missing salary payments were discussed, with several high-profile staff abandoning the company. For some time, Crytek appeared to be in freefall.

Then, the Yerli brothers struck a deal. An investor had been found, injecting a significant quantity of cash into the business and rescuing it from its death spiral. Who that investor is remains a secret, and one Yerli would not be drawn on in the interview, but he did confirm that he believes the company to be "absolutely" safe.

"The shift from retail products towards a game service, that's the one we are undergoing. As a result of this we have adjusted our entire strategy across the board for each game"

Still, the episode has left deep wounds. Crytek UK was sold off to Koch Media, along with the Homefront IP. Crytek's offices in Austin were downsized considerably, with the development of Hunt: Horrors of the Gilded Age transferred back to the company headquarters in Frankfurt. Headcount across the publisher has been reduced from around 950 to 700.

"We have been undergoing a transformation, just like the whole game industry," Yerli explained to Eurogamer. "Part of the transformation was of a financial nature, part of it was of a strategy nature, and part of it was of a reorganisation nature. The shift from retail products towards a game service, that's the one we are undergoing. As a result of this we have adjusted our entire strategy across the board for each game. We evaluated the games and looked at which do not fit in this strategy. This required additional investment, which led to temporarily diminished capital resources. But we are today fully prepared to deliver a game service. From a strategy perspective we are financially equipped towards that. And we have restructured the studios so we focus on Frankfurt, Sofia, Kiev, our Asian operations, and Budapest, towards delivering our strategy.

"Regards to Austin, we have downsized Austin to be our US hub for the engine business, and brought over Hunt to Frankfurt. Then in the UK we sold the Homefront IP as well as the Homefront team, which was pretty much the majority of the team, to Koch Media. That helped us in two ways: it was a strategic sell as well as downsizing costs so we are better equipped towards a future of games as a service."

According to Yerli, the root cause of the financial difficulties that ravaged Crytek was an ongoing attempt to move away from traditional boxed retail and embrace free-to-play, games as a service. However, when you have several AAA franchises on the go at once, something has to give.

"The primary cause was the transformation," said Yerli, when asked what touched off the crisis. "We're observing where the industry is going. We knew free-to-play or games as a service - online services in general - will become the future of gaming. We've known this for a while. But we were finishing up our retail games or still had them in development, with Homefront for example.

"There is never a not troubled development. Let's be realistic. Far Cry was troubled. Crysis was troubled. Every game that wants to say it's a high quality product will have challenges"

"But that shift required a whole different capitalisation, as well as additional talent pool and different types of spending and forecasting. All of that caused temporarily diminished capital resource, which we have now overcome. This was the main cause of the situation - the whole transformation of Crytek."

Yerli goes on to discuss the unexpectedly high costs of development in the US, saying that initial estimates were "off by a high margin," but that it wasn't a purely financial decision to move Hunt development to Frankfurt, but also a way to bring the game under closer supervision by the core engine team at headquarters.

Addressing the issue of staff payments, Yerli is keen to point out that all missed salaries have now been made up, clarifying that these issues affected management as well as developers. He also denies ever telling staff that they were 'lucky' to get paid in the first place.

"You have two choices, right? Either you delay payments - again delay... it's not that they didn't get paid, they got delayed - delay payments and salvage the company. Or, you push your cash flow directly to the studios and you file for insolvency. Both options are really bad. So you have to make the better of the two bad decisions.

"However, like we had promised to everybody - and we said the company is not at a big risk, not a danger, it just needs more time to salvage it and that's what we did. Now, everybody got paid plus inconvenience payments additionally to that, like we promised everybody," the CEO continued.

"Some people were very impatient and got angry at the smallest delay. Also, there was a critique of us not being proactive in communication, which we don't understand, because we had been frequently in the UK as well as every other studio, talking about potentially rough times. And we had even shared with people how they should maybe work with different banks at a personal level to prepare. Or, if not, they could make a choice to resign and look for other jobs.

"That transformation was painful. We paid the price. Now we come out of it much stronger"

"But our priority was to not downsize the company. Our priority was to not let anybody lose their jobs at that point. Because if a company gets into a difficult situation and you know the outcome is going to be bad, you have the choice to downsize everything. But we haven't done that because we wanted to keep everybody tied together as a team.

"I was surprised and upset a little bit that the intention of us keeping together everybody upset a few of them. But I understand that situation. Some people live in very tight financial planning. That's their own privacy. They can do whatever they want. Those guys, when they get under pressure it can become emotional. We tried to individually help out. Like if somebody gets in trouble they can talk to us directly so they don't get under pressure. We tried whatever we could do. But you can't make it right for everybody."

Crytek was never in danger of going out of business, Yerli maintains, and he has high hopes for the future.

"Surely it will to some degree," he replied, when asked if the last few months have damaged Crytek's reputation. "But I hope through communication we will have more frequently people and gamers will understand through our words and actions we have the best interests of PC gamers. At Gamescom we will show off our games. With online services we will be equipped to better react than ever before to communities and gamer demands. That's ultimately what we want to build - the best experiences driven by the community.

"That transformation was painful. We paid the price. Now we come out of it much stronger. I hope people will see through our games these are not just empty words."

Read the full interview over at Eurogamer.

18 Comments

Helen Merete Simm
Senior UI Artist

48 249 5.2
Popular Comment
"Some people were very impatient and got angry at the smallest delay."
Yes. Because normal people need money every month to pay their bills.
And 2 months isn't a small delay...

Posted:A month ago

#1

Neil Young
Programmer

296 372 1.3
Still, the episode has left deep wounds. Crytek UK was sold off to Koch Media, along with the Homeworld IP
Homefront, surely?

Posted:A month ago

#2

Dan Pearson
European Editor

103 253 2.5
@Neil - yep. Sorry. :)

Posted:A month ago

#3

Joe Winkler
trained retail salesman

169 4 0.0
I don't think that cuts in payment are better than cuts in human ressources (especially it the payments are 2 moths late).
And it is still quite harsh to say that the Company was not in danger if they had to sell out big parts of their U.K. devision and the attached IP.
But otherwise what would you do if your Company was nearly dying?
Don't spread Panic and try to look positive in the future- therefore Yerli just did and said, what every other good CEO would have done. Trying to keep the mood positive. Good luck!

Posted:A month ago

#4

Chris Payne
Associate Lead Programmer

47 147 3.1
Popular Comment
If the choice was between delaying wages and filing for insolvency, how was Crytek "never in danger"?
It clearly WAS in danger of bankruptcy, so they bought the company more time by borrowing money from the staff without asking. Nice.

Posted:A month ago

#5

Richard Browne
EVP Gaming and Interactive

99 114 1.2
I don't think Yerli is doing himself any favors here at all, a simple "we overspent, got in trouble, didn't line up capital in time and we had to lean on our employees to get through. For that we are sorry but we have made it up to those affected by giving them interest on their late wages and major stock grants for sticking through it with us ; now we are prepared to take over the World again . . " would have gone down a bit better.

Posted:A month ago

#6
its a interesting venture to go full on F2P...as they say in Tropic Thunder, you dont go full all the way :)

Posted:A month ago

#7
Popular Comment
"Some people were very impatient and got angry at the smallest delay. Also, there was a critique of us not being proactive in communication, which we don't understand, because we had been frequently in the UK as well as every other studio, talking about potentially rough times. And we had even shared with people how they should maybe work with different banks at a personal level to prepare. Or, if not, they could make a choice to resign and look for other jobs."

This guy is a piece of work.

They should prepare that the job they have will stop paying them at any point so they should just leave and give up on any redundancy payment they're owed?

If they don't then too bad.

Here's the thing, as an employer you have a responsibility to be able to pay your staff in full and on time. If you are running out of money you have a responsibility to your staff to make them redundant whenever you still have enough money to pay them what they are owed in redundancy and holidays etc.

What you don't do is simply stop paying them and hope they don't complain and if they do say, no big deal you can leave if you want.

They obviously still don't have enough money to pay for a PR department.

Posted:A month ago

#8

Roland Austinat
roland austinat media productions|consulting

129 72 0.6
A wise friend once told me: save enough money so you can live for three to six months without income. This is good advice.

Posted:A month ago

#9

Charles Ellis
CEO & Lead Developer

9 4 0.4
@John
They should prepare that the job they have will stop paying them at any point so they should just leave and give up on any redundancy payment they're owed?
Kind of? Not trying to defend Crytek's decision here, and maybe I'm biased because I've only lived in the US where employment anywhere is generally seen as being entirely conditional on the employer's needs. But traditionally personal finance advice has strongly emphasized preparing for the worst -- even if your employer can still pay you, what would happen to your family if you should end up imprisoned, for example?
Here's the thing, as an employer you have a responsibility to be able to pay your staff in full and on time. If you are running out of money you have a responsibility to your staff to make them redundant whenever you still have enough money to pay them what they are owed in redundancy and holidays etc.
I fully agree with this, and as CEO of my own small game studio it's hard to imagine a scenario in which I would not make employees' paychecks the top fiscal priority. At the same time, I can't exactly see myself running a company the size of Crytek either!
I think it's also worth considering that the games industry in particular is very keen on making redundancies even when things are going well. It's kind of refreshing to see someone in management acknowledge that up-sizing and downsizing your staff levels frequently in direct relation to financial conditions can be a huge drain on motivation. It can also lose you a lot in terms of "intangible values", like having a team that works incredibly well together because they haven't been switching jobs every 2 years. It's unfortunate that they decided the best plan for keeping everyone together was to defer wages for months.

Edited 1 times. Last edit by Charles Ellis on 9th August 2014 3:44am

Posted:A month ago

#10

James Robertson
Founder

8 15 1.9
Not to mention the oft forgotten fact that not paying someone their salary or paying it late is a breach of contract. In the UK (and I suspect the rest of Europe at least) it is technically known as Unlawful Deduction From Wages. The first word being the operative one here, I think.

Posted:A month ago

#11
@ Charles

That's the problem right there. The industry expects their staff to act as contractors when it suits them and full time staff when it suits them.

It's the main reason why people with greater responsibilities, older staff and woman are put off working in the industry.

If you hire people on full time contracts you have a responsibility to treat them as such.

Although this was even worse than normal "industry practice". Not having the money to fully meet your staff obligations is just wrong.

Edited 1 times. Last edit by John Owens on 10th August 2014 2:07pm

Posted:A month ago

#12

Gary LaRochelle
Digital Artist/Game Designer

60 52 0.9
"The Titanic is unsinkable."

Posted:A month ago

#13

Jeff Kleist
Writer, Marketing, Licensing

329 185 0.6
@James in my state, if they miss a paycheck they automatically owe you a 50% penalty. Given that they missed many many paychecks, I hope the workers at Crytek know their rights.

Posted:A month ago

#14

Klaus Preisinger
Freelance Writing

1,098 1,061 1.0
25% of all staff gone, two studios gone in the process, one almost finished game gone in the process, one key technology guy lost to Bethesda. Especially keep that last guy in mind for the next paragraph.

The legal situation in Germany concerning your paychecks are roughly as follows. You may only stop going to work, if you are being owed three months of pay. Before that, you may threaten your company with a deadline, although most "or else" scenarios highly depend on you really finding another job that fast. If this results in you quitting, you are still entitled to severance pay, interest and other damages. Nasty picture, right?

Posted:A month ago

#15

Adam Campbell
Associate Producer

1,166 949 0.8
Shocking.

Posted:A month ago

#16

Joel Hruska
Analyst/Journalist

13 67 5.2
I love that quote. "Some people were very impatient."

Paying someone for their work isn't a minor point. It's an utter necessity. People didn't work for Crytek because it was a tiny plucky startup.

Posted:A month ago

#17

Kingman Cheng
Illustrator and Animator

952 180 0.2
"Some people were very impatient and got angry at the smallest delay. Also, there was a critique of us not being proactive in communication, which we don't understand, because we had been frequently in the UK as well as every other studio, talking about potentially rough times. And we had even shared with people how they should maybe work with different banks at a personal level to prepare. Or, if not, they could make a choice to resign and look for other jobs."
Most comments here have covered my sentiments. It's unbelievable they can say things like that.

Cevat Yerli may not have to worry about money as much, but the people who work for them do. There are workers in there trying to pay their bills, rent, mortgages etc. Leaving your workers holding their dicks for a couple of months isn't 'nothing'. Free Radical were a fantastic developer, to have dedicated staff leaving a company they've had such a long history with because they see no other way out is very sad. This is all wrong on many levels.

Once again my heart goes out to everyone there, regardless of if you're still with Crytek or not.

Posted:A month ago

#18

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