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Catalyst monetary trouble rumor gets official reply

March 18th, 2010: Allan Sugarbaker says...
Catalyst monetary trouble rumor gets official reply

For most of us, it started two days ago when a former freelancer for Catalyst Game Labs, going by the login “Frank Trollman”, posted his take on recent rumors concerning CGL’s future. In Trollman’s post (copied below, after the jump), “reliable sources” claimed that approximately $850,000 had been discovered to be “missing outright” from the company’s coffers. While this rumor may have initially been spread due growing frustration from multiple freelancers over unpaid work, subsequent to this rumor breaking out into the wild, it was revealed that Jennifer Harding (Shadowrun Assistant Line Developer and CGL Office Manager), Adam Jury (CGL layout & design powerhouse), and possibly another employee, had announced their resignations (though not due to being fired or forced out). This official statement was issued by Catalyst late Tuesday:

Catalyst Game Labs recently completed a detailed financial review of the company. We learned that over the past several years the company has achieved dramatic growth in terms of demand, increased total revenues and strong sales with an increasing market share in the gaming industry, despite a lackluster economy. We are thrilled by that news and are eager to move forward with our upcoming original game Leviathans, along with our other new casual games. We also remain committed to plans for our beloved licensed games: Shadowrun, BattleTech, Eclipse Phase, and CthuluTech.

While we wish the review had only uncovered positive news, we also discovered our accounting procedures had not been updated as the company continued to grow. The result was that business funds had been co-mingled with the personal funds of one of the owners. We believe the missing funds were the result of bad habits that began alongside the creation of the company, which was initially a small hobby group. Upon further investigation, in which the owner has willingly participated, the owner in question now owes the company a significant balance and is working to help rectify the situation.

The current group of owners was presented with this information on Monday. Administrative organization for the company is under review, and accounting procedures have been restructured, to correct the situation and provide more stringent oversight. We feel the management team at Catalyst did the responsible thing by seeking this financial review and we will continue to restructure as needed. We are in discussions with our partners and freelancers to remedy any back payments that may also be due as a result of this review.

We are embarrassed that this situation did occur but we hope our eagerness to make these changes, along with our reputation for making great games, will encourage you to stand by us. We understand that for a few employees the news was too stressful and we wish them all the best in their new endeavors. However, the majority of the team remains and will continue to bring great entertainment to you all. We appreciate the support our friends, freelancers, and fans have provided us in the past and look forward to a successful future.

Speculation over Catalyst’s future will undoubtedly continue, with some seeing the press release as mere spin tactics, but some fans have been encouraged by the forthright company response and admission of problems. Gamers may want to keep watch for any news of the Shadowrun and BattleTech licenses lapsing and getting reeled in by Topps, or news of publisher changes for Cthulhutech (WildFire) or Eclipse Phase (Posthuman Studios) – any of which could be signs of more trouble at Catalyst.


Dumpshock forum post made by “Frank Trollman”:

[Editor’s note: While the post below claims to have reliable sources, until this information is confirmed, it should be considered as rumor.]

OK, as you may well have been able to surmise from release schedules, Catalyst Game Labs is in a bit of a financial pickle, and it is somewhat unlikely that they will retain the license to make Shadowrun products. This is not because Shadowrun hasn’t been selling enough to cover expenses, but merely because a significant quantity of money is missing outright. Reliable sources put this figure at roughly $850,000. Which sounds like a lot, and it is. It is roughly 40% of Catalyst’s entire sales for last year, missing over a three year period. There will of course be lawsuits, and there are already people drawing up legal documents accusing Loren Coleman of having hired people to construct an extension on his house through the company as “freelance writers” and somehow reporting an estimated $100,000 of convention sales as $6,000. Whether that is actually true or not is – of course – a matter for the courts to decide. And decide they presumably will.

But what that means for Catalyst as a company is pretty bad. It costs several dollars to print a book even when the pdfs are finished and ready for publication. A print run of say, 50,000 books (like the print run of Runner Havens) would cost somewhere between $150,000 and $250,000 to print and ship to distributors. And while it eventually sold to distributors at ~$15 a book (a total take home of $750,000), it did so over a period of three years, during which time they were paying interest on loans and paying for storage, and advertisement and so on and so forth. A book like that isn’t actually taking home half a million in profits. Which is a bad thing, because it means that even if there was a complete book printed and ready to sell, even a total and rapid sell through would not pull the company out of the financial hole it is in – and the shortfall means that it does not have the cash on hand to start the ball rolling with a new major printing.

The tiny amount of drachmas that are left in the coffers are being used to print up tiny print runs of books that have sold through – another 3,000 books of Runner’s Companion for example (~$15,000 to start up, maybe $30-40k towards paying creditors if it sells out). There simply is not the startup cash to bring upcoming books like the SR4 sixth world almanac or corporate guide forward. The writing is there, but the printing costs are not. Beyond that, the freelancers have not been paid, and some of them are withholding copyright until they are – meaning that even a tiny print run of these new materials is simply not possible.

Many SR writers are quitting, have already quit, or have handed in notices contingent on demands which – word on the street – will not be met. And CGL does not even own Shadowrun, it leases the intellectual property from Topps. It seems unlikely that they will be able to make their licensing payment when the contract comes up for renewal – in a couple of months. At that time, CGL will cease being able to print Shadowrun or Battletech materials (they would presumably keep the license to Cthulhutech and Eclipse Phase for at least a little while longer, because those are separate contracts).

So what does this mean for the future of Shadowrun? It probably means that someone else will create a company and start making Shadowrun again. After all, freelancers work for very little, and a well selling book can bring in tens of thousands of dollars in profits. $850,000 of embezzlement is seemingly enough to sink the company (whoever ended up with the credsticks), but I must point out that there was indeed eight hundred and fifty thousand dollars to steal, so Shadowrun is not – as a concept – insoluble. And I also point out that something similar happened to Shadowrun before. Indeed, twice before, as both FanPro and FASA before it collapsed under the weight of people not paying debts and having bags with dollar bill signs vanish mysteriously in the middle of the night. It’s somewhat… poetic considering the subject matter of the game itself.

It is entirely probable indeed that when a new company comes to take the licence, many familiar faces will appear in the new company as if they had never left. Certainly back when FanPro collapsed back when I was working for the company, I simply started working for the new company as if nothing had changed. This happened back when FASA collapsed as well – those members of the team that were not extracted by Microsoft simply started turning in writing assignments to the new boss.

And yeah, I regularly go on shadowruns against Catalyst to find out what new releases are in store. Don’t you?

-Frank

11 Comments »

11 comments

  1. Asylos says:

    I could have used this information before I emailed Adam Judy with a question about Shadowrun 😛

    Frank sounds like a disgruntled employee.

  2. Zac says:

    Its funny to see you post a press release and an unattributed piece of rumormongering on the same page. If you have to add a caveat to the “post” to indicate that you think its a rumour then why are you even posting it in the first place?

    It has no sources, it has nothing to back up the comments in it and yet its getting posted across the net as if it was a news release.

    I find it sad that there are such lack standards on sites that purport to post news

  3. Tim says:

    Zac,

    I think you’re being a bit harsh. The Catalyst press release was posted in response to the rumors of missing money. The forum post is clearly marked as rumor, and gives the rest of the piece context. I see no harm.

  4. Patty says:

    “reliable sources” sure. Would these “reliable sources” be disgruntled ex-employees by any chance?

  5. Adam Jury says:

    I am happy to state for the record that I have not spoken to Frank Trollman in well over a year, and to the best of my recollection (and a quick search of my mailbox…) not since 2007.

  6. We waited to post anything until there was an official statement from Catalyst. Other sites didn’t wait, posting what they had heard so far. For the most part, everyone has made it clear what was rumor and what wasn’t.

    In this situation, Catalyst’s financial circumstances had already been hinted at, and important employees had resigned, all before an official statement was made. Would the company have made a public statement as quickly if there wasn’t a post floating around several websites they needed to address? Hard to say. The effect that a rumor on the web can have these days is hard to deny.

    Zac: I’m sorry you find OgreCave’s standards to be “lack”. I think we’ve shown restraint over the years. We were the *only* site to double check some rumors that other sites posted as fact (anyone remember John Wick’s death? Gaming Report was all over that one). While I agree that posting a rumor as news is poor form, we haven’t done that here – the rumor serves to inform the official statement, but is still *rumor* until confirmed somehow (which seems unlikely – exact amounts of debt are rarely revealed in this industry).

    We will always try to make it clear what is fact and what is rumor. But when a rumor gets big enough or out of control enough to provoke a statement from the company, we sometimes point it out to our readers so they can decide for themselves.

  7. dar says:

    From rpg.net at http://forum.rpg.net/showpost.php?p=11872231&postcount=233

    I think Jason MH is the Shandowrun line developer?

    “I really hate to do two posts in a row in a thread, but I just got a statement from Catalyst management about the ICV2.com story, so I thought it should be shared here. The statement follows in its entirety:

    >>>
    In Response To ICV2.com’s News Item, 03/19/2010 09:34pm

    ICV2 is a great website that rapidly compiles information across the width and breadth of the gaming industry, as it occurs, and tries to provide a single source for all such news. However, there recent report contained some factual inaccuracies.

    First, there has been no halt to sales of any CthulhuTech products. We’re are in negotiations with our friends at WildFire for how best to move forward, ensuring this great book line continues to grow. As such, neither Catalyst Game Labs, nor WildFire, have put a stop to any books from being sold.

    Second, the stoppage of a small, select list of Shadowrun books has nothing to do with the license for Shadowrun, which Catalyst still holds. Instead, the halt to sales is due to on going negotiations between Catalyst and its freelancers. We’re moving quickly and thoroughly to resolve this situation to mutual satisfaction, so the community can have access to these great Shadowrun books in short order once more.
    >>>

    Jason H.”

  8. Thanks for the posts, dar. Yes, Jason Hardy is the Shadowrun Line Developer – he took over the position after Adam Jury, I believe.

    The part of ICv2’s story where Randall Bills of CGL is quoted sheds some light on things:

    “Catalyst Game Labs has contacted distributors and given them a list of Shadowrun game products produced by CGL that can no longer be sold effective immediately. […] the reason for the halt in the sales of the select group of Shadowrun products was ‘due to on-going negotiations between Catalyst and its freelancers,’ and not to any problems with the rights to the property, which is still licensed to CGL.”

    Since this has nothing to do with the license, it almost jibes with Frank Trollman’s post stating that “freelancers have not been paid, and some of them are withholding copyright until they are”. However, if the Shadowrun products no longer available for sale are products that were sold previously – well, I’m not sure what’s going on there. Maybe freelancers that *could have* asserted their rights but were being nice before, have now decided to make a stand.

    Oh look, ICv2 reported the rumor, too. Anyone going to call their standards “lack”? … yeah, I didn’t think so. It’s standard practice to site rumors that might inform the situation, folks – as long as you admit they’re just rumors.

  9. Asylos says:

    Don’t worry Allan, it was perfectly clear in your post that it was rumour. I don’t think this Zac (with no website!) read it properly to begin with.

  10. Adam Jury says:

    To be clear about my role as Shadowrun Line Developer — when Peter Taylor left the company last spring, myself, John Dunn, and Jennifer Harding split the developer duties between ourselves, each of us handling specific products, until Jason Hardy was hired at Gen Con.

    Seattle 2072 — written by Steve Kenson with fiction contributions from a whole bunch of people — was my main project in that timeframe, although there are multiple books and other things that were all part of my initial 20th Anniversary Celebration proposal that have yet to fully materialize…

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