UPDATED: What's going on at Silicon Knights?

I’ve actually been working on a larger blog post that’s taking me a lot longer to formulate than I thought but I wanted to comment on another emerging story as it hits a little closer to home for me.

It was widely reported yesterday that St. Catharines, Ontario developer Silicon Knights has apparently shed about three quarters of its staff. In the video game industry, a move like this is almost always followed shortly after by the bankruptcy and usually, shuttering of the company in question. Aside from not wanting to see yet another developer go under and the triple-A industry shrink a bit further, there’s a more important question this time around.

Silicon Knights has a very interesting history dating back to 1992 which is ancient as far as game developers go, especially independent ones. They made some beloved and historically significant titles like Legacy of Kain: Blood Omen and Eternal Darkness but the latest generation of consoles has not been kind to them. In 2008 they released Too Human, an auteur project of very outspoken company President Dennis Dyack that started development on the PS1 and was rebooted several times (including once to change from Epic’s Unreal Engine to a proprietary one, something which sparked a very public lawsuit that still hasn’t been stated as resolved) before coming out exclusively on the Xbox 360. It was a very flawed game that I actually liked but it was savaged in reviews and between that and Dyack’s public spars with the gaming press, it bombed. Their latest (and only) release since then is X-Men: Destiny for Activision. I played this game as well and it was pretty much just plain bad all around. Activision has to release a certain number of Marvel property based titles a year to keep their license to do so and while they want to hang on to that license, they clearly don’t care enough to give those games decent budgets, schedules or marketing. This title was also destroyed in the press and sold like crap.

In an industry where one failed triple-A title can be enough to sink even a successful independent developer, I would normally not be surprised to see Silicon Knights on the end of its rope after two in a row. They were also supposed to be working on another unannounced game for Sega that quietly vanished into the ether and beyond the sudden announcement of X-Men: Destiny, they had been press dark for some time. However, they last year the Province of Ontario gave them a grant of $4,000,000 and this year they got another $3,000,000. The goal of both of these grants was to allow them to greatly expand, to develop a new triple-A publisher and also become a publisher, something which really raised an eyebrow for me. Grants from various arms of the Canadian government to the video game industry have proven to be very lucrative for the taxpayer in the end so I actually thought these were a good idea at the time. However, if the rumours are true (and these layoffs are unconfirmed by Silicon Knights, though the guy who broke the story is not known for being wrong), they seem to have taken this money and run.

I admit that I’m not a businessman and don’t have inside information on how Silicon Knights’ dealing with my government are being handled but I would think grants of $7,000,000 would be getting spent on that expansion and that suddenly contracting your staff by three quarters is not in the spirit of what the funds were intended for. Too Human being Dyack’s baby was one thing but X-Men: Destiny was a low budget licensed title that had no marketing support. When you start it up, you even see “Silicon Knights Licensed Group” as the developer, implying that they wanted to distance the main company’s reputation from the title. Dyack’s been in business for a long time, he had to know that title wasn’t going to sell big and couldn’t have bet the company’s future on it doing well. You don’t have the ability to secure huge government grants while simultaneously making stupid mistakes like that. Right?

Video games are a huge industry that will only get bigger and I want to see Canada continue to take and maintain its leadership role in it. I also want to see governments other than Quebec investing in the industry’s future and getting more studios started up in other parts of the country. I don’t want to see Silicon Knights fail as despite some recent missteps, they have a rich history and the roster of independent triple-A studios is getting terrifyingly small. As far as I know, they’re the only game development studio in St. Catharines and their failure will leave a lot of displaced talent. However, if they have in fact cut most of their staff after taking big taxpayer funded grants, something stinks big time. From my limited perspective, this looks like their strategy was with dependent on X-Men: Destiny being a huge success which was a dumb choice or they took government money and fumbled it in short order which is either inept or fraudulent. This sudden waste of my money and the egg it could put on the face of the newly re-elected minority Liberal government will surely have a significant impact on their decisions regarding future grants. Maybe Silicon Knights lost their lawsuit against Epic Games and had to pony up a bunch of cash to them but since such judgements would be public record, word of that would have already made it out were that the case and moreover, this lawsuit was filed long before Silicon Knights received any government money so that would have been part of any discussions related to that.

My ultimate hope is that these rumours are untrue but if they are true, I want to know what this company did with $7,000,000 of my money. My. Dyack, you can’t make a triple-A title and publish it yourself with only 25 people. What’s going on? Your public investors want to know.

UPDATE: Kotaku is reporting that while big layoffs did indeed take place at Silicon Knights due to an unspecified publisher yanking funding, the number is far less than reported with only 43 let go. That still cuts the company in half but they claim that development on the title is still continuing while they find another partner and that they are refocusing their effort on development one of “their most requested titles” for the next generation. I would be very surprised if that’s a Too Human sequel since as much as a small group liked it, that group is indeed small. I’m hoping it might be a sequel to Eternal Darkness for the WiiU which could be the title that actually makes me invest in one of those machines. Interestingly, the spokesperson also said that the government grants are tied to performance targets to be met over the next 5 years which they say they will. It’s unclear whether that means they only get the money doled out in milestones or if failure to meet the targets just means the government gets a refund. I presume the former since even Dalton McGuinty’s government is capable of understanding that not meeting performance targets in the triple-A business generally means you go out of it. I’m sad to see the company gutted so much but at least they’re still kicking and I do truly hope they can get their act together and put together something really special for the next generation of consoles. Best of luck Silicon Knights!

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