Why Telltale Games Died

Before I begin, it's important to note that I have no inside knowledge of Telltale Games, other than what has been published. My opinions are just based on observation of the company and the game market. Keep that in mind as you read this -- there may be factors at play I know nothing about.

I was saddened to hear about the fall of Telltale Games. The company isn't quite dead yet, maintaining a crew of 25, but it seems the end is near from their public statements. Apparently the suddenness of the demise was due to a failed investment round. When that fell through, the company didn't have the revenues to go forward. Still, though, either the CEO shouldn't have been playing hardball in the negotiations, or should have had a viable plan B for the employee's sake if things fell through. The company must have been in bad shape financially for some time, and had to keep the employees on board in order to land the investment (who would invest if the staff was gone?) -- so couldn't give the staff any warning of potential impending doom. I understand why that was the thinking, but that puts the employee's welfare completely out of strategy entirely, which is obviously wrong. Or it should be obvious, anyway.

The bottom line is that Telltale should have been aware of its problems and trying to fix them years earlier. There were plenty of warning signs.

First of all, I'll point out the widespread stories that Telltale apparently operated in continuous crunch mode, demanding employees work 50, 60, 70 hours a week or more to complete episodes on time. That essentially says you don't have enough people on the project. And when you do that for every project, all the time, you're not properly allocating resources. Your budget for the project says $X on paper, but your really spending much more than $X... so the product is going to be that much less profitable.

According to some of the press reports, only Game of Thrones and Minecraft were profitable for Telltale, among their recent games. The conclusion is clear -- either they needed to create larger audiences for their games, or reduce the cost to create them, or find more ways to generate revenue from those games.

Part of the problem is inherent in the design of the games. Basically, they are stories with some branching. There's no opportunity there for multiple players or character customization (since your character is part of the story and can't be changed), which means there's no reason for virtual goods. Why customize your character's look if no one else sees it -- and it really isn't your unique character, anyway? Taking away virtual item sales means foregoing a major source of revenue in this day and age.

Another problem for Telltale was licensing. Their whole portfolio of games is built on licensed properties -- they have no company-owned IP. Now, licenses, properly used, can be great. A well-chosen license can get you a vast audience at a low acquisition cost, though of course you now have licensing costs on top of your usual costs. The trick is to find ways to profit from that new audience. Usually, the obvious thing is to create a game using in-house IP that can sell well to the audience you gathered for the licensed game. (Note that many publishers use this strategy, like Jam City, Electronic Arts, Activision, and others.)

For instance, if you've sold millions of a Game of Thrones game, why not create your own fantasy setting and build interactive stories for that? Sure, the audience would be smaller than for Game of Thrones... but you wouldn't have the licensing costs. But Telltale never used this obvious strategy.

I suppose that makes sense when your games weren't profitable anyway. This points to what they should have been doing -- finding a way to either sell their games to a bigger audience (through better marketing), or change the game design to be less expensive to produce and have more opportunities for profit (a design that made virtual items a reasonable thing to create).

All that said, I think interactive stories are fun, and Telltale had plenty of great ones (their numerous awards can testify to that). Telltale just hadn't figured out how to make them profitably. That's an important lesson for any game company. Yes, you have to create a fun experience for players -- but you have to make sure you have a way to make a profit, too.

Update: A lawsuit has just been filed against Telltale for breaking laws in its abrupt layoffs.

Further Information: More than just the problems I outlined above, Telltale had basic problems with its engine that it never solved, as detailed in this article.