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Telltale Games and the lure of the cliff edge

Disastrous studio collapses are a fixture of the industry - and that won't change until we stop celebrating the brinksmanship of executives

That what has happened to the staff of Telltale Games is shameful and indefensible is well-established at this point. A great many words have been written about the treatment of the developers, many of them heartfelt and sensible.

Question marks remain over whether the failure to retain adequate funds for severance payments or to inform staff of the firm's condition prior to their sudden layoffs were merely morally abhorrent or actually illegal, but the message of this whole messy, sad affair remains the same regardless. Development staff, no matter how skilled and valuable, are in the same boat as any other employee - a long way down the priority list of company bosses when things get tough.

This isn't a new message. As Brendan observed in his op-ed yesterday, this is a pattern we've seen over and over again in the games industry; perhaps this time we have truly been pushed closer to the tipping point of actual, genuine change in labour relations and working conditions, but it's not because the Telltale incident is genuinely new or lacking precedent. 'Studio goes to the wall, turns out not to have enough cash to pay severance, employees seriously screwed over' is a story that's popped up with wearying regularity on this site for over 15 years, and in other industry publications for decades before that.

"Development staff, no matter how skilled and valuable, are a long way down the priority list of company bosses when things get tough"

We could talk about the drive for unionisation, or the industry's strong efforts to avoid it; about the push-back against abusive work cultures and the industry's masochistic embrace of bad work-life balance as a virtue; or even about the general sense, especially in Anglo nations like the USA and UK, that employees are disposable and low-priority. We could and should talk about all of those things - but for today, let's talk instead about the intrinsic dysfunction that has led studio bosses for decade after decade to make the kind of awful, ego-driven miscalculation that results in this kind of studio implosion in the first place.

There is a culture that exists on the management end of the games industry - and in other industries too, it's far from being exclusive to this corner of the business world - which actively promotes this kind of outcome. It's a celebration of high-risk brinksmanship, a deeply flawed belief in the 'hero story' of the company that skates right up to the edge of disaster and is saved by a last-minute, Hail-Mary intervention by a brilliant manager or executive. Such stories - the tale of the time when it wasn't clear if the lights would still be on by Monday, but a miracle deal came together on Sunday night - are the bread and butter of get-togethers between managers and executives around the industry.

Here's the thing about hero stories - the great ones, the really heroic stories, are tales of selflessness and sacrifice for the good of others, not about putting others at risk for the satisfaction of your ego. Parts of the business world have become convinced, however, that stories of improbable odds and skirting the cliff edge of disaster are also hero stories, worthy of raised glasses and macho back-slapping.

"When handled intelligently and responsibly, the end of a company doesn't need to blow up the lives of everyone around it"

These aren't hero stories; they're self-selected survivor stories. The story is only told because it has a good ending, as like as not by dumb luck. Stories about companies being pushed to the edge by failure and hubris, then collapsing in the most damaging, ruinous way possible don't make for great bar tales, after all.

This is the dysfunction at the heart of every single case of a studio collapse - and to be clear, "collapse" is a specific term here. Studios shut down all the time without collapsing; business has gone bad, but they pay their bills, look after their staff, help them get into new jobs where they can, handle the disposal of assets and IP as best they can, and wind the business down with as little drama and damage as possible. It's still an emotional and unpleasant experience for everyone involved, but when handled intelligently and responsibly, the end of a company doesn't need to blow up the lives of everyone around it.

Collapse, on the other hand, is disastrous for everyone. The knock-on of a firm that can't pay its bills is hundreds of staff who also face unpayable bills and immense stress and disruption to their lives, caused by an employer that was no doubt willing to wax lyrical about loyalty and passion when it came to requesting overtime during crunch, but conveniently forgot all about those concepts when it came to looking after their staff.

As detail has emerged from the Telltale collapse, it has become clear that the whole story - this time like every other - rides on a single, dumb thought: 'Sure we're financially circling the drain, but if we can just pull off this one great deal everything will be rosy'. Put in those simple terms it's easily recognisable; it's not the statement of a slick executive who's about to get a standing ovation for his business nous, it's the despairing plea of a gambling addict who's about to get his legs broken in a back alley by loan sharks.

"A story of a company that skirts the edge of the cliff but is pulled back isn't a story of executive brilliance"

They've already drained their kids' college funds and quietly stopped paying the family's healthcare premiums six months ago. That's when the One Big Win - or the One Great Deal - actually needed to come in. That's when there could still have been a soft landing; severance paid, company wound down sensibly, all that was salvageable, salvaged.

When people celebrate and lionise this kind of back-from-the-brink story, it's worth remembering exactly what they're talking about. This isn't Daniel sticking his head into the jaws of the lion; wealthy execs are gambling with the severance pay, healthcare and career options of their staff. A story of a company that skirts the edge of the cliff but is pulled back isn't a story of executive brilliance; it's a story of absolute irresponsibility bordering on malfeasance, a Lifetime movie about a gambling addict who almost destroys everything around him, given a fake veneer of happy ending by sheer luck.

That's why the brakes should have been hit long before this happened - at Telltale, at every other company in the past few decades where it happened, and at every other company where it's inevitably going to happen again over the coming years. It's going to keep happening over and over again for as long as studio bosses and company executives can trot out stories about "that time we weren't sure we could even keep the lights on, right up until the last minute." By the time you aren't sure if you can keep the lights on, you've already screwed over everyone that depends on you, regardless of whether that irresponsibility gets covered up by a last-minute deal. These stories shouldn't be treated as heroic snatching of victory from the jaws of defeat. These stories should be greeted with silent horror and condemnation.

"But what's the alternative," you may ask, "just throwing in the towel?" - to which the answer is, precisely that. A decent business owner or manager throws in the towel while there's still a towel to throw, because a decent businessperson looks around their studio and understands that those aren't "assets" sitting at the desks, they're human beings to whom they owe a degree of responsibility and, yes, loyalty.

Letting things go right to cliff edge may appeal to the ego far more than calling a halt while the brakes still work, but it's the moral duty of any good manager to take stock of their own situation, take on board the professional advice they are receiving - and let the passengers get out before the cliff edge arrives, and it's already too late.

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Latest comments (6)

Nicholas Lovell Founder, Gamesbrief20 days ago
I'd love to agree with you, Rob, but I can't.

Firstly, many studios, particularly work-for-hire studios, live on this knife-edge *all the time*. Most contracts can be cancelled with only a few months notice. Few businesses can keep paying staff for months. So the rational - even the "right" - thing to do is to secure a new contract.

But contracts take time. New partners are wary. A sniff of insecurity, of uncertainty, and the deal won't happen. Or if key team members leave, the partner worries about the stability and talent of the studio.

Or a single person is suddenly over-ruled by the boss, whether it is being blindside by Bob Iger suddenly announcing that Disney won't make games anymore or a more pragmatic trimming of the budget line. Suddenly the "done deal" becomes a "gone deal".

There is a shareholder value issue here. Legally, directors have a duty to attempt to maximise shareholder value. When a deal looks promising, they have a duty to pursue it.

The real wrinkle is in insolvency law though. Companies are insolvent if they are unable "to meet their debts when they fall due". The phrase "when they fall due" is important. Few companies have enough resources to pay all of their staff for several months with zero income. Their liabilities (long-term commitments to their staff) are matched by their cashflows (the promise of future contract payments), not by actual assets. If those cashflows evaporate, there is often not a lot of time to recover. And the prospect of "if I can just sign one more deal" or "if I can just get this senior exec to approve my internal project" is hard to let go from.

I've been in this situation. I was CFO and wasn't allowed to tell staff how precarious the situation was. Eventually, I realised the only way to get the message out was to resign, which I did. But the logic is far from as black/white as you claim.

I feel terrible for the staff. Separately (and unrelated to Telltale), I support increased unionisation in the game industry. But any industry when many companies are dependent on a handful of massive contracts will see this pattern regularly.
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Rule one and the only rule - Cash flow, is king
Whatever the size and scale of the biz

If you have a healthy war chest great, of if you wanna...get bought out...that works too
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@Nicholas Lovell:

Sure, work-for-hire companies, not just in games but also advertising, marketing, consulting etc. and also many service companies from small auto repair shop to local bakery live from gig to gig. And developers in game outsourcing company do understand that it is from payment-to-payment for their employer.

But as Rob wrote, it is not healthy business if you are always on the brink with empty bank account, so much so that without securing the next deal you cannot hold your legal responsibilities towards your employees. C-level people who drive a company into such of an situation are not good at their job. Plain and simple.

And with a large company like Telltale, it is especially bad management to run a company with that kind of an pedigree off the cliff. It is not good for the shareholders either. You mention maximising shareholder value. This fiasco ruined share holder value. It would have been far better, for everyone, to scale the studio back, lay off some people and try to get on the right track again.
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Show all comments (6)
Certainly I agree with Nicholas that it isn't so black and white, but is typically more nuanced than described above. It's not just that "wealthy execs" are gambling with the future of employees, but many are taking big financial risks as well gambling their own financial future in the process.

I think many entrepreneur-minded leaders and executives are rather optimistic about chances of landing the next deal rather than starting to downsize the minute, when they realize that there is a possibility of things going south during the next six months. I would guess that most companies with some available cash would invest in new concepts and prototypes rather than making redundancies immediately when seeing a potential problems as it would certainly have a damaging effect on the company morale.

Sometimes it might be impossible to predict that your biggest contract is being cancelled and your cash flow is dried up immediately. There were rumors of a huge deal Telltale was suppose to be closing that fell through. If that is the case, I think it would have been really hard for the management to downsize months earlier at the same time that they know that they would need everyone in a few months time to work on several new projects. We won't know what was the case, so it's pretty hard to assess how badly the management did, when we have incomplete information about the whole situation.
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Steve Peterson Marketing Consultant 15 days ago
I'll agree with Nicholas, but there is a significant difference between the studio that survives primarily on contract work and a company like Telltale that's publishing their own games. Telltale should have been looking for solutions to their problems long before reaching a crisis point. If, as reports indicate, the only games that were profitable in recent years were Game of Thrones and Minecraft, that points to a major problem. If the company felt that employees needed to work on crunch time as a standard operating procedure, that's a huge problem. Clearly the company either didn't sell enough copies of most of their products, or they spent too much to produce them. The constant crunch signifies management didn't properly allocate resources to projects (and didn't care enough about employees to fix it).

Telltale should have been experimenting with ways to increase sales and reduce costs for years. For instance, perhaps making a non-licensed fantasy game to sell to that massive audience you found for Game of Thrones, thus saving licensing costs. Or perhaps trying a game that had much less spent on graphic presentation, and seeing how that sold.

I understand full well why the top execs and the board didn't want to tell employees their jobs were in danger -- if they had, many people would have bailed out, and deals that depended on the company being a going concern would have been imperiled. However, that's not an ethical position to take -- they should have taken a deal earlier before the "we can't pay severance" point was reached, or cut way back months previously and looked for a buyer at a lower price because the company was smaller.
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Joonas Laakso Production Lead, Next Games15 days ago
I don't know if it's possible to run many/most game companies in a sustainable, ethical manner. So many small to mid size studios only have enough money to make bankroll for a couple of months if the cash flow dries up. That's not really a failure of management, it's just the way the hit driven, low to negative margin at other times business is, but a couple of things we could learn here:

1) Be more transparent about the way the business works to your staff. Newcomers should understand that this is a very high risk creative industry, where there is typically no back up plan if plan A fails. Don't come in expecting safety, because that's typically just not in the cards, no matter how successful your new studio has been, historically.

2) Studios should consider fighting the urge to expand and instead grow slowly, reducing risk and spreading any excess money on a safety net. To me it looks like we too often default to "we could afford to grow", neglecting to see how that makes our risks even bigger.

3) We should learn from studios who've been at this for decades. Except that my hunch is that their histories are all full of "barely made it" moments, where management went without pay for months while flying all over the world to try and secure a deal before it's lights out.
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