Several sources have now reported that development veterans Stormfront Studios have shut their doors and gone out of business. GameCyte has learned, however, of potential light at the end of the tunnel, and had the opportunity to hear new details from the highest source. While Stormfront’s operations have been suspended due to financial hardship, ongoing negotiations may see the studio remain open, and its employees may yet be called back to work.
We spoke with Don Daglow, Stormfront’s founder and CEO, earlier today over the phone. He informed us that Stormfront is still in the process of negotiating with publishers about potential games based on original IP.
GameCyte: Mr. Daglow, thank you for taking the time to speak with us. I can only imagine how busy you’ve been, with the recent news…
Don Daglow: It becomes a very busy time… we did have some ongoing discussions about our original IPs, that when we suspended operations—those discussions have continued and, ironically, new discussions have actually started, so we are exploring the possibility that maybe people will be able to be called back, but there’s no certainty of that at this point. We’re exploring all options, and one of those options would be that we would end up shutting down.
GC: But Stormfront is not, in fact, “shut down” at this point.
DD: I think the best way to put it is to say that we’ve suspended operations. We’ve sent virtually everybody home. The discussions that are going on—we were very close to having some things signed, and sometimes it just works out that way. You get to a point where you’re in a position where you’re not going to be able to pay people, and you do not want to have them working under that situation. That’s why we sent people home and suspended operations, and said, hey, the possibility of these things coming through exists, and we’re going to follow that possibility. If it does, we’re going to call you, and if it doesn’t, then that’s the way things go.
GC: The stories that are out now simply say that Stormfront has up and closed with no warning, that people were completely dismissed outright, with no severance. In your own words, how much of that has truth to it?
DD: At this point, when we suspended operations, people did not receive severance, and I’ll explain to you why that’s the case, but that’s accurate.
GC: Can you give us, from start to finish, the story on how this happened?
DD: I’ll give you the abbreviated version. For any team, when you finish one project and you’re working forward onto the next one, that’s always a point of greater vulnerability. We had been working on two original IPs for an extended period of time, and had made a significant investment in those. What’s cool is that both of those IPs got very strong reactions from publishers, but we did not have them signed. With all of the merger and acquisition activity that’s going on right now, we had one project that we were working on that was canceled as a result of the various “big deals” that are going on right now.
You have a series of situations like that, and you find yourself with products in advanced stages of discussion with publishers, but you don’t actually have a deal. Routinely, for us, over 20 years, in those situations—and that does happen periodically to developers—we had been able to get bridge loans, and it’s not an issue; you keep working. That had been a fairly routine process for us. What happened this time was we added the extra element of not only having lost a project to the acquisitions with the publishers, not only having things come at a time when we were between projects, not only having invested in two original IPs that we were close to signing but hadn’t signed, and then you add the final phase of the perfect storm: What’s happened to the economy and the stock market.
We were in a situation where it was not at all unreasonable to believe that either the signings would happen in time and everything would be just fine, or else we’d have the bridge financing and that should be all right. And then you follow up that strand and come to the point where you see, we’re going to need to invoke the financing, and it’s not there. I don’t think it’s appropriate to go into all the details, but if you allow for the fact that it looked like we would have the deals signed and it wouldn’t matter, but you pick up a little bit of delay on your deals, and that delay is just long enough that you need your bridge financing, and then it turns out that, to your surprise, the bridge financing is not there… you go very quickly from “Hey, it looks like things are going to be fine…” The number of days it takes to go from there to not being able to pay people is not very many, in that situation.
GC: Goodness. So, this was basically everything that could be done to avoid shutting the studio entirely?
DD: Yeah, and I think the only reason we have not just said, “Hey, it’s a shutdown,” is because we had, and we have, those mature discussions that are going on, and in fact, the publication of the news has triggered some additional discussions. We have to see if those can move forward. Obviously, the fact that we have suspended development is also a factor in those discussions, and realistically we realize that can affect things. We just have to follow through on this strand and see where it leads.
GC: If you had to give a ballpark estimate as to the odds of being able to hire back your staff…
DD: I think whenever any company suspends operations like this, every single day that passes, you’re going to have fewer people you can get back. The better your team, the faster that effect of people not being available to come back will be. Having been in business as long as we have, and having people who have been here for many years, we probably have some advantages in that, but it would be naïve to think that the team will not end up scattering fairly rapidly.
GC: By the same token, Stormfront’s impressive reputation and support from the community might provide good fortune in, if not gaining back your old team, finding their replacements.
DD: That’s what you hope for. One of the ways I look at things is there are certain things in life that other people should say about you, rather than you say about yourself. My focus right now is on trying to do the best I can in any of these scenarios—do the best I can for the team. When you’re in a position where you have to suspend operations like this, you don’t have all the cards in your hand, and you can’t do all the things you want to do to help and support the team. You just have to do the best you can. I would hope that what you’re saying is accurate, but I have to leave that for other people to say about us, and I have to try every day to go through all of these processes, and see what we can make happen to try to earn that from people.
GC: Stormfront’s key philosophy has always been an emphasis on quality over quantity. You’re on record as being “religious” about developing no more than two “world-class” titles simultaneously. Has this been difficult to maintain from a budgetary standpoint?
DD: Boy, I could give you two hours on that. The best concise answer I can give you is that I think being too large, for any studio of any kind, creates obstacles to quality. It’s not that they cannot be overcome, it just makes it harder, because the more balls you’re juggling at the same time, or the more different issues there are, the greater the number of totally quality-driven people you need in order to make it all work. I think there is also an economy of scale to our industry, and if you are too small, it also makes it harder. What is that right space in between? I think with different eras of game history, the sweet spot has gradually changed over time. And I think there are times when there can be two sweet spots. If you did a graph of optimum team size for developers, it might look like twin peaks in San Francisco, where there might be a smaller model and a larger model, both of which work pretty well and have their own bell curve.
GC: That speaks to the history that Stormfront has had. You’ve certainly seen the landscape of gaming shift during your over 35 years in gaming, and you’ve watched developers come and go. Is this the first time that you’ve been personally involved in a circumstance like this one?
DD: No. The circumstances were different, but in 1983 when we had the video game crash—and I’m delighted to say this is a different sort of thing—the industry went from having many thousands of development jobs to having maybe, at best, a few hundred within the period of 6 or 8 months. When Atari had its problems, of which I think E.T. is considered to be kind of the poster child, and obviously it was much more complex than that—it spread across the entire industry. I was working as director of game development for Intellivision, and I had a team of 52 people at the height of it. Whether it was Intellivision, whether it was Atari, whether it was Colecovision, Activision… all of these companies had massive, massive layoffs, and in most cases ceased to exist.
At Mattel, when the electronics division started working on Intellivision in-house, there were 35 people in the group, and there were five Intellivision programmers, and I was one of the five. Electronics built up to 1,200 employees at the height of the first wave of video games, and when they sold off the tattered remains after the crash, I believe four jobs went with the sale, when the IPs and the rights were sold off. Over a period of four years, you went from 35 jobs to 1,200 to 4. All the companies in the space were facing those sorts of situations. I think, in that case, you’re looking at something that was an industry-wide effect. I think there are a lot of pressures on both developers and publishers right now, but they are isolated to different categories of games, to different target machines, to different scales of operations. I think there’s a variety of issues people face, rather than having the sky fall the way it did in 1983-84.
GC: In more recent years—you mentioned you’d been looking to advance discussions with your original IP. Stormfront has worked on so many licensed properties over the years; was this a recent decision to work on original IP?
DD: Probably two years ago is when we reached the decision, and there were two reasons behind it. Number one is, licensed properties can be a lot of fun to build for many reasons, but original IPs can be incredibly fun and fulfilling. It’s simply work we wanted to do, purely for the joy of it. The second factor is that, while original IPs are harder to sell, if you can succeed at selling them, the financial upside is greater. It was a case where we looked at it and said, if we do really high-quality licensed work—projects we really want to do—and then we gradually phase in our original IP work, and we have both, that’ll be a portfolio strategy where we’re spreading our risk. We’d also be doing a variety of kinds of work for the fun of it, and our hearts and our heads are operating on the same wavelength.
GC: Do you think the added risk of attempting to work on original IP contributed to this event?
DD: I think there’s no question it did, but I wouldn’t over-interpret that. What I’ve heard a number of other people who have gone through things like this say is, what happened is kind of a perfect storm. It’s the equivalent of, if you’re rolling a 100-sided die, every so often, you’re going to get some really bad numbers or some really good numbers all in a row. Stormfront had a fairly normal, tolerable distribution of our die rolls for 20 years. If you roll dice for 20 years, eventually you will get some really bad ones all in a row, and we managed to get enough in a row where, by a factor of days, we reached this point. But when you reach it, you have to admit it, and you don’t want to go on from there, because if you act on hope at a moment when you cannot pay people, that’s just not right, because what if your hope is not right?
GC: On the dice metaphor—is that something you had considered for Stormfront? Stormfront largely made its name on Neverwinter Nights, lauded as one of the first graphical MMORPGs. Given the hot property that MMORPGS have become today, have you given any thought to another such title?
DD: We have thought about it. There’s certainly a lot of money out there to go in that way. One thing about operating for 20 years is that you tend to migrate what you do based upon the passions of the team. Early in our history, because I had been involved in online… I produced the first graphical game for America Online when the company had about 40 employees, and was working directly with Steve Case on the project. When I founded Stormfront, that led to other games, which in turn led to Neverwinter.
When AOL went through their huge growth cycle, where all the stories in the press in the early ‘90s were about, “Will AOL fail because they can’t install modems fast enough to keep up with demand for their product?” At that point, at first AOL terminated all game developers, except Stormfront. We were the only ones working on games for them for a while. After that, they then suspended all game development altogether, because they had all hands on deck doing nothing but support the growth, and trying to respond to the customer growth. Steve Case called me and said, we should be sequelling Neverwinter Nights right now, and I just called to tell you we can’t, because we just got every hand pinned down, dealing with these growth issues, and rather than have us just mysteriously not do things we ought to be doing, I just figured I’d call you up and just tell you why, and acknowledge the fact that we’re leaving money on the table—we’re missing an opportunity by not doing more sequels and building on the system. That was the relationship we always had with AOL, was that kind of honesty.
Subsequent to that, we were already working on a lot of different kinds of games, including some of the early EA Sports titles, so we ended up migrating away from online games, and into doing other things. As the team migrated in that direction, we recognized it was something we could go back to, we had team members with a lot of expertise in the area of online and multiplayer. It simply turned out that other opportunities pulled us in that direction.
GC: With the migration that Stormfront made to so many licensed properties, be they D&D or movie-based, was it difficult to work for licenses that might not have been well-received in other forms? The critical reception for games you created for The Two Towers, Eragon, and The Spiderwick Chronicles seems to have matched the general reception of the films. Was it difficult to try and release a high-quality game for a franchise which was not, itself, considered high-quality?
DD: I think one of the things we learned, and one of the things that inspired our desire to mix & match licensed titles with original IPs, was that the economic success you would have with a licensed title—especially one tied to a film—was, as you say, very often most highly determined by the success of the movie. There was also a secondary effect, which was the quality of the game, but it didn’t impact as much as did the success of the film. We certainly tried to be very selective about the films we chose; some of those bets worked out better than others, but we tried to be selective about it. At the time at which we signed up for each of these films, we had every reason to believe that they were going to be truly high-quality, principal releases from the studios, that were going to get full support and have a real shot at being hits—every expectation that they would be viewed as quality themselves.
GC: Was that what prompted a greater shift towards original IP?
DD: It was one of the factors, along with the desire for variability, and the fun factor as well.
GC: You also stated in a previous interview that you viewed the prospect of working on original IP with the same outlook you held on all of your games, which is that it would have to be something you and the team cared enough about, and would have enough market, to do the numbers you expect of yourselves. Did this make it difficult to get the process going—were there several ideas that were shot down because they weren’t received well enough?
DD: I think that anyone who’s doing original IP in any phase of creative work or the entertainment industry, who doesn’t tell you that tons of stuff gets shot down, isn’t focused on quality. Because if you say, “Hey, guys, let’s have three ideas and then we’re going to build one of them, we’ll have a one-hour meeting and then we’ll proceed,” that’s not the way it works. There’s an evolutionary process that has to happen, by which true cream does rise to the top, gets recognized by the team as that cream, and then—and only then—do you proceed to do something with it.
In retrospect, you can go back and say, you know what, if we had started a few months sooner, it looks like everything would have been cool, and obviously we didn’t, and so we got the result we did. But, each of the two original IPs which were the principal things we were focused on talking about with publishers, as of last Monday, were in the green-light process at more than one major publisher. Each one was at an advanced stage of that process, where many, many have already died and you’re down to a few that get serious consideration. Whether or not those games will, in fact, end up getting picked up, remains to be seen, and as I mentioned, Monday’s events—suspending operations—clearly influenced that. But we had independent validation from the publishers that what we were bringing to them was of a high quality level. You don’t get that deep in the process with that many people unless they respect and like the work you’re doing.
GC: Worst-case scenario: God forbid, the discussions stall indefinitely, and Stormfront does have to close. What’s next for you? You’ve been in gaming for 35 years; you have any number of titles which can be cited as defining the genre that would come after them. Do you intend to stay in gaming regardless, or have you given any thought to other options?
DD: This is the only thing I know how to do; this is the only thing I love doing. It’s the only thing I’ve ever conceived of with my life since it came along, since it became an industry. Yeah, I think I’m committed to gaming. Sometimes you look in the mirror and you say, “Is there anything else you want to do?” And the voice says back to you, “No, not really.”
GC: (laughs)
DD: So that’s the answer to that. As far as what comes next, because of the way this timing worked, that we, within days, went from, “hey, there’s some risk, but it ought to be okay,” which is a very common position for independent developers to be in… because we went from there to, “oh my god, we had three unexpected bad things happen in a row, and we’ve got an issue here.” I have not had a chance to think about what I’m going to do next because the way that the die rolls went, one after the other so rapidly, that produced this, I have been focused entirely on doing the company’s business, and on the team, and not focused on anything else. Once we were at that point, I became focused on the fallout from being at that point. So at some point, I have to take a deep breath, and say, what am I going to do next? And I have not had a chance to take that breath, but games is the only place, realistically, that my heart will let me go.
GC: If you could change any one decision that you made over the last five years, what would it be?
DD: You know, I don’t have a snap answer to that because I probably will end up, regardless of how this goes, doing a lot of thinking about it. When things go right, you want to do a postmortem and think about why they went right, and the parts that went wrong within that good picture. When things go wrong, you want to go back and have a long, hard conversation with yourself and say, what do I need to learn from this? There is no one thing that emerges, obviously, but I think that the core thing is that it’s all about the talent on the team. That’s not something I would do differently; that’s actually something I’ve thought, all along, is that the most important thing is the talent on the team and the people you’re working with. I believed that 25 years ago and I haven’t seen anything in the last 25 years that changes my mind about that. I think it’s the most central key issue that I think about on any project and in any situation.
GC: To all the people out there who are now writing Stormfront off as having shut for good, end of story—what is the one thing you’d like to tell them? Give us your “current status.”
DD: Boy. I’m trying to figure out how to not give a technical-sounding answer, because that’s a question that has both “head” and “heart” elements to it.
GC: We’d love to hear both.
DD: On the “head” part, which is what’s going to happen next, we don’t know. We’re simply exploring all avenues and we just have to play out what’s going to happen, and we’ll see. Over the next few weeks, we’ll see, and then we’ll be able to share with people what’s going on.
On the “heart” piece, I’ve had so many wonderful phone calls, and wonderful emails, from people either expressing support for me and what I’m doing, or admiration and respect for the team and what they’ve done. What’s going on right now is, there’s no word to describe it other than “sad” and “difficult,” and it absolutely is those things. But those phone calls and those emails and those messages… I wish that there was some effective way that every single team member could hear what people in the community are saying about the company. Because it isn’t me; I’ve had the privilege of being the CEO and the founder, so I’m maybe the name people think of first, but it’s been the entire group of people at Stormfront, and I would want all of them to hear all those wonderful messages that people have sent us. They’re the ones who earned them; they’re the ones who made that possible.
We will be checking in on Don and Stormfront as this situation develops—watch for updates on this story.
Don Daglow: It becomes a very busy time… we did have some ongoing discussions about our original IPs, that when we suspended operations—those discussions have continued and, ironically, new discussions have actually started, so we are exploring the possibility that maybe people will be able to be called back, but there’s no certainty of that at this point. We’re exploring all options, and one of those options would be that we would end up shutting down.
DD: No. The circumstances were different, but in 1983 when we had the video game crash—and I’m delighted to say this is a different sort of thing—the industry went from having many thousands of development jobs to having maybe, at best, a few hundred within the period of 6 or 8 months. When Atari had its problems, of which I think E.T. is considered to be kind of the poster child, and obviously it was much more complex than that—it spread across the entire industry. I was working as director of game development for Intellivision, and I had a team of 52 people at the height of it. Whether it was Intellivision, whether it was Atari, whether it was Colecovision, Activision… all of these companies had massive, massive layoffs, and in most cases ceased to exist.
When AOL went through their huge growth cycle, where all the stories in the press in the early ‘90s were about, “Will AOL fail because they can’t install modems fast enough to keep up with demand for their product?” At that point, at first AOL terminated all game developers, except Stormfront. We were the only ones working on games for them for a while. After that, they then suspended all game development altogether, because they had all hands on deck doing nothing but support the growth, and trying to respond to the customer growth. Steve Case called me and said, we should be sequelling Neverwinter Nights right now, and I just called to tell you we can’t, because we just got every hand pinned down, dealing with these growth issues, and rather than have us just mysteriously not do things we ought to be doing, I just figured I’d call you up and just tell you why, and acknowledge the fact that we’re leaving money on the table—we’re missing an opportunity by not doing more sequels and building on the system. That was the relationship we always had with AOL, was that kind of honesty.
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