Business of Gaming - Lawsuits and Layoffs

By Dog of Thunder, 3 years ago
While the eyes of the gaming world were on E3 last week, that does not mean that all of the action was relegated to downtown LA. First up, we're going to hop in the wayback machine and discuss a lawsuit that was filed back in April, but takes on new meaning in light of a second lawsuit, filed just last week.

Gearbox and SEGA sued over Aliens: Colonial Marines

Edelson, a law firm in Northern California, filed a lawsuit on April 29th on behalf of an individual plaintiff who is suing Gearbox and SEGA over mis-representing the game Aliens: Colonial Marines. The lawsuit alleges that Gearbox and SEGA purposely misled the gaming public with "actual gameplay demos" which were not representative of the game itself. Singled out is the 2012 E3 video which showcased gameplay not found in the game along with hi-res graphics superior to what the buying public saw after they purchased Aliens: Colonial Marines. The review embargo, which did not expire until the day of release, is also being highlighted as an action taken by both SEGA and Gearbox in an attempt to mislead the buying public.

Given the allegations being tossed around regarding E3 last week, and how most of the games from every company were actually running on high-end PCs and not the advertised systems, if this lawsuit moves forward it will have an effect on the industry regarding how they create public presentations. Gearbox's second lawsuit is not as simple as an allegation of being purposefully misleading.

Gearbox sued by 3D Realms over Duke Nukem Forever royalties

Strap in, this is about to get real complicated, real fast.

3D Realms is the original developer of Duke Nukem Forever, which as we all know, had a development cycle long enough that the Saturn was still being sold in stores. Gearbox stepped in and offered to take over devlopment of Duke Nukem Forever, the title Duke Begins and also the rights to develop future Duke Nukem titles. In exchange, 3D Realms would receive royalty payments on the sales of all Duke Nukem games and Gearbox would take over "certain liabilities" incurred during 3D Realms development of Duke Nukem Forever.

One of those liabilities is a rather large $2.9 million dollar loan that 3D Realms owed to another developer for undisclosed reasons. The key point of contention in this lawsuit is that 3D Realms alleges Gearbox is using the royalties earned by Duke Nukem Forever to pay off the $2.9 million dollar loan before paying royalties to 3D Realms. According to the document filed last week by 3D Realms, Gearbox made $4.5 million off of the sales of Duke Nukem Forever and thus should be paying 3D Realms $1.3 million in royalties. By paying the loan first, 3D Realms alleges that Gearbox owes 3D Realms an additional $800,000 in addition to the $1.3 million from retail sales. The third number is an additional $50,000 to $500,000 based off of "advance sales".

All told, 3D Realms is asking for at least $2.2 million dollars in damages from Gearbox.

What makes this story extra-interesting, besides the fact that Duke Nukem Forever made an incredible amount of money, is that Randy Pitchford, CEO of Gearbox, used to work for 3D Realms and is a long-time friend of both Scott Miller and George Broussard, the heads of 3D Realms. This point is mentioned in the court filing, along with an email exchange between the parties in which 3D Realms claims that Randy Pitchford agreed that 3D Realms share of the Duke Nukem Forever royalties would not be used to pay off the $2.9 million loan.

While these quotes will not be published here in this article, the entire document is readable under the "External Link" section at the bottom of this article, just before you get to the comments.

EA continues to re-structure, lays off more staff, and begins to regret buying PopCap

In a quick bit of news, EA made some more cuts to their staff recently and let go another twenty employees. While twenty may not seem to be a large number, this represented an entire analyst department. EA has undergone significant re-structuring in the past few months, with a new console generation and new leadership at the top of the corporation, EA is actively looking to change their image. Moving forward, it would appear EA will be less quick to buy out smaller development studios and will be more likely to simply publish games for third-parties.

One of the decisions of the previous regime included purchasing PopCap, the developer of such digital crack as Peggle, Plants vs. Zombies and Bejeweled 2. AS part of a statement to investors, EA informed stockholders that PopCap is unlikly to return even 1/5th of the $550 million EA spent in acquiring the studio.

IO Interactive decides to focus solely on the Hitman franchise

The text in bold really does sum up this bit of news, as IO Interactive laid off everyone not involved in the development of the Hitman franchise. This means that almost exactly half the staff was let go and every non-Hitman related project was cancelled. While this is good news for fans of the franchise, we here at TrueAchievements wish nothing but the best for those that lost their jobs over this decision.

That wraps it up for this installment. Hopefully, someday I'll get to discuss good news when talking about how the sausage gets made in the gaming industry.