‘Subnautica 2' leaders say Krafton sabotaged game over payout

The Star

3 days ago

The ousted leadership of video-game developer Unknown Worlds said parent company Krafton Inc fired them after the executives presented the company with upbeat revenue projections that would have triggered most, if not all, of a US$250mil (RM1.06bil) bonus payment, according to a copy of their lawsuit which was unsealed July 16.
Former Unknown Worlds chief executive officer Ted Gill and founders Charlie Cleveland and Max McGuire said Krafton sought to delay the release of their new game, Subnautica 2, after realising they would have to pay that large a sum, according to their complaint. The South Korean game publisher offered the executives a lower payout before terminating their employment earlier this month, the lawsuit alleges.
Gill, Cleveland and McGuire filed a lawsuit for breach of contract on July 10. A representative for Krafton declined to comment on the suit. In a statement to press last week, Krafton said the three studio leaders had "abandoned the responsibilities entrusted to them' and that "the absence of core leadership has resulted in repeated confusion in direction and significant delays in the overall project schedule'.
Krafton purchased Unknown Worlds in 2021 for US$500mil (RM2.12bil), with as much as US$250mil (RM1.06bil) more due to be paid in 2026 if the company hit certain revenue targets. The complaint argues that all was well between the two sides until a series of meetings in early 2025 when Gill was negotiating with Krafton about paying bonuses to employees who weren't eligible under the original acquisition terms. About 40 people employed by Unknown Worlds at the time of the sale were told they would receive payouts, mostly in the six-or-seven-figures, but the executives also wanted to offer bonuses to those who had joined later.
During those meetings, Gill said that their revenue projections for the coming year had been conservative and that with the upcoming releases of the original Subnautica on mobile and Switch 2, they were expecting significantly higher numbers. Subnautica 2 was also expected to be a big hit, with nearly 2.5 million people adding the game to their wishlists on the PC platform Steam.
"After Krafton's leaders reviewed Gill's projections and evaluated the anticipated revenue and earnout numbers, everything changed,' they said in their complaint.
The leadership group said that in subsequent meetings, Krafton began pushing for Unknown Worlds to delay Subnautica 2. In the weeks that followed, Krafton employees told Gill they believed the company was trying to get out of paying the earnout, the complaint alleges.
During one lunch meeting, according to the complaint, Krafton chief executive officer Changhan Kim told Cleveland that releasing the game in 2025 "could be disastrous financially and hugely embarrassing' for the company. Krafton later said that had been a mistranslation.
Throughout May and June, the two sides continued to battle as Krafton halted publishing duties such as marketing and adapting the game for local markets, as well as paying vendors, according to the complaint. The former leadership team said that the publisher refused to support the game's imminent summer release and that Unknown Worlds missed out on "highly valuable' promotional opportunities because Krafton didn't respond to emails. Gill said he was told by one of Krafton's top executives that "pulling these resources was a permissible way for Krafton to avoid supporting the earnout', according to the complaint.
By the end of June, the relationship had deteriorated. During various meetings, Krafton asked the leadership group to accept a lower earnout, according to the complaint. Around the same time, Kim wrote a letter to the leaders, reviewed by Bloomberg, accusing them of "failing to fulfill the responsibilities with which you were entrusted' and saying that Subnautica 2 had faced "slow and underwhelming progress'.
On July 1, Krafton fired the three studio leaders, who are now seeking damages "in an amount to be determined at trial', according to their suit. Krafton has said it will extend the bonus period until next year, with Unknown Worlds employees able to share in a US$25mil (RM106.13mil) payout if revenue targets are hit.
One main point of contention between the founders and Krafton was whether the game was ready for release this year under the company's early access model, which allows outsiders to play the game and submit feedback. Presentation slides from Krafton reviewed by Bloomberg, which included quotes from the company's internal testers, argued that Subnautica 2 lacked content and didn't feel innovative enough.
The lawsuit alleges otherwise. Pre-release tests involving hundreds of users "drew high marks and confirmed that the game was ready to meet those lofty expectations", it said.
Developers at Unknown Worlds speaking to Bloomberg said they believed the game was in good shape, as did some external parties, who asked to not be identified. One developer at a separate company who played Subnautica 2 and requested anonymity because they signed a non-disclosure agreement told Bloomberg they enjoyed the game and that it "seemed way more robust' than other titles in early access.
The other point of contention was the roles that Cleveland and McGuire played at the studio. In public statements and in documentation reviewed by Bloomberg, Krafton accused the two founders of neglecting their duties because they were minimally involved with the development of Subnautica 2.
In their suit, the founders said that Krafton was aware of their new roles and that Cleveland had spent a large amount of time working on a Subnautica film, which Krafton had asked the studio to develop. – Bloomberg