EVE Evolved: EVE Online’s CCP Games is gambling with the livelihoods of employees

Last week we broke the story that EVE Online developer CCP Games is backing out of the virtual reality games market, closing its Altanta office and selling its VR-focused Newcastle studio. The long-held Atlanta office was acquired in the merger with White Wolf in 2006 and has been hit with several rounds of layoffs over the years, with a major hit in 2011 after the Monoclegate disaster and another 2014 when the World of Darkness MMO was cancelled. The Newcastle studio was the development house responsible for CCP’s VR dogfighter EVE: Valkyrie, and both Valkyrie and CCP’s new VR game Sparc will now be maintained by the London office.

Around 100 staff were laid off in the restructuring, roughly 30 of whom worked in CCP’s headquarters in Reykjavik, Iceland. Though we were informed at the time that these changes would not impact the development of EVE Online, it since became apparent that more than a few non-development staff were cut. In addition to the EVE PR staff and others that were stationed in Atlanta, all but two members of the EVE community team in Reykjavik have also been let go. There are reports that several GMs and the localisation manager for EVE have departed too, and the mood on twitter from staff in Reykjavik recently is best described as sombre and a little shaken.

In this extra edition of EVE Evolved, I dig into CCP Games’s history of taking risks with staff’s jobs, look at some of those affected by the layoffs, and ask whether there is more fallout to come.

The early history of CCP Games

In the early years of the MMO boom, when dozens of studios were desperately trying to beat World of Warcraft at its own game, EVE Online seemed untouchable in its sci-fi sandbox niche. From 2004 when I started playing to mid 2011, EVE experienced consistent playerbase growth and smashed through peak concurrent player records year-on-year, unmoved by the release of new titles. CCP Games merged with White Wolf in 2006 to acquire an Atlanta studio that began developing a World of Darkness MMO and opened an office in Shanghai that would develop the console first-person shooter DUST 514.

From its humble beginnings in an Icelandic studio with a small family of ambitious staff, CCP Games rapidly grew into a global company with hundreds of employees worldwide. That growth came on the back of the solid revenue stream from steadily rising EVE Online subscriptions, and CCP gained a reputation for stability in an ever-more chaotic industry. This stability unfortunately faltered around 2009 as the global trend for MMO subscriptions flatlined and free-to-play business models with microtransaction-supported games began to gain wider acceptance with western gamers.

The invisible cost of layoffs

With EVE subscription growth stagnating and three major projects in development (EVE Online, DUST 514 and World of Darkness), CCP’s financial resources were stretched paper thin from 2009 to 2011. When the company’s microtransaction plans were derailed and a percentage of EVE players unexpectedly quit following the 2011 “Monoclegate” scandal, CCP was left with a hole in its books and had to lay off 20% of its staff worldwide to close it. It became evident that CCP didn’t have a financial buffer to protect its staff when forced to make cuts and hadn’t planned for this kind of worst-case scenario.

We heard through someone with inside knowledge at the time that this round of layoffs caught a lot of staff off-guard, as people considered their jobs to be secure. Many had reportedly never felt the need to keep their resumes up to date or look outside the company for new opportunities, and the invisible cost of that round of layoffs was to shake staff out of that complacency. This may have played a role in some of EVE‘s top talent leaving the company in the years that followed, the most well-known example being CCP Soundwave, CCP Zulu, CCP Navigator, CCP Dolan, CCP Bro, and mad scientist CCP Veritas all joining Riot Games within the space of 6 months.

Gambling with people’s livelihoods

In many ways, CCP’s story has been of a small company growing up and learning some harsh lessons about business. CCP learned the hard way that not even the unshakable monolith that is EVE Online is safe from changing market trends, and that every new project is a gamble. I wrote in wake of the Monoclegate layoffs that I hoped CCP would never again bet the livelihoods of hundreds of staff on that gamble, and perhaps that was naive of me. Since then we’ve seen a major round of layoffs following the cancellation of DUST 514 and World of Darkness, and now another major round following CCP pulling out of VR.

Game development projects fail or are cancelled frequently in this industry, and it’s not surprising that staff working on them are often let go as a result. CCP’s making the strategic decision to pull out of VR development and getting rid of the Sparc and Valkyrie teams is just a business decision, and it’s not an unusual one. What makes this latest round of layoffs so difficult to swallow is that it involves people who had nothing to do with the projects being canned and who seemed (from the outside at least) to be in essential roles. The damning thing isn’t that CCP’s gamble on VR didn’t pay off but that it appears the company once again bet the livelihoods of its existing people on a new project and didn’t plan for failure.

EVE Vegas and the timing of the layoffs

The timing of the layoffs has left a bitter taste in the mouths of both the community and those developers affected. There was not even a hint of a shift away from VR or company restructuring at the annual EVE Vegas event was just a few weeks ago, where the Sparc and Valkyrie developers proudly talked about the future of their games. The lead developer on Valkyrie even said to me that “if it weren’t making money, then [CCP] wouldn’t still be developing it,” words spoken in a hopeful tone that proved to be dismally prophetic. If anyone at EVE Vegas knew that this round of layoffs was coming ahead of time, it certainly didn’t show.

The timing also seems a little odd, given that CEO Hilmar Veigar Pétursson attended EVE Vegas for the first time this year but caught a flight home soon after his opening speech. This has led me to speculate that Hilmar may have been called away to a meeting with investors and that someone (possibly the big VR investor) may have unexpectedly pulled out. CCP secured $30 million in investment in 2015 specifically to develop VR games but had only barely broken even on that investment as of March 2017, which certainly isn’t an attractive outlook for an investor who wants a good return. This is all idle speculation however, and ultimately we may never know why the decision was made to withdraw from VR or why certain unrelated staff were eliminated in the process.

EVE Online doesn’t emerge unscathed

If I were making a list of people who are integral to the way EVE runs today, some of them would be on the list of staff who were cut. Ned Coker (CCP Manifest) from the Atlanta office was a veteran PR rep with over 10 years at CCP, and community team member Nataliia Dmytriievska (CCP Leeloo) seemed to be the vital link to EVE‘s impenetrable Russian community. CCP Shadowcat and CCP Phantom reportedly helped localise the game into French and German, and CCP Logibro was instrumental in the running of the CSM and the Alliance Tournament. Trimming the fat when in financial difficulties is expected, but these particular layoffs feel more like gouging muscle.

Last week Nataliia Dmytriievska posted a lengthy response on social media (now gone) after finding out she was being cut. It detailed how she left her family and life in the Ukraine behind and took a large pay cut to move to a frozen rock in the Arctic circle because EVE Online was her dream. She even expected to be let go one day but thought that her co-workers in the community team would be able to carry on, noting that even after the team was slashed to a skeleton crew in 2014 they persevered. Nataliia warned that “it is absolutely impossible to do anything with just two people” and worries that “throwing out the whole EVE Community Team might be the single biggest mistake this company has ever made.”

The buck stops with Hilmar

Ultimately it’s CEO Hilmar Veigar Pétursson who bears responsibility for any missteps the company makes. Former developer CCP Zinfandel even recently claimed that the Incarna pricing disaster was a direct result of Hilmar’s interference. Pétursson allegedly told Zinfandel that he “has no balls” and then multiplied all his prices by a factor of ten just before the expansion’s release. It was then CCP Zinfandel and CCP Zulu who bore a significant amount of the backlash from that decision. Certainly it looked to me as if the prices were off by a factor of ten, and anyone with experience of pricing strategies in other MMOs would have said the same.

If this claim is accurate, then Pétursson appeared to have disabused himself of that arrogance by EVE Fanfest 2012, at which he admitted that CCP had been “too liberal” about risking the current business and seemed humbled by the whole experience. CCP did start to get more ambitious again and take big risks when it ploughed $30 million into the largely untested VR market, but we had cause for optimism here as it was investor money and we didn’t expect failure to negatively impact on EVE Online. Recent actions have given me cause for concern that Pétursson has once again stretched CCP’s financials too thin and not planned for failure, in the process gambling with the livelihoods of employees.

CCP Games has had two record revenue years in 2015 and 2016 thanks to developing new games such as Valkyrie and Gunjack, adding new microtransactions such as skill injectors to EVE, and other sources such as the sale of World of Darkness. This has put CCP in a very good position on paper, but the studio still doesn’t seem to keep a large enough financial buffer to fall back on if a worst-case scenario occurs. We don’t know for sure what triggered the recent VR withdrawal and restructuring, but it feels like it came out of nowhere and EVE Online has not emerged unscathed.

All but two of the community team were reportedly let go (just CCP Guard and CCP Falcon remain), and there are now huge question marks hanging over official events such as next year’s EVE Fanfest. CCP Falcon even recently announced ambitious plans to run additional official fanfest events around the world in 2019, but many of those who helped run events are no longer with the company. It remains to be seen whether there will be any additional fallout from the layoffs and whether Nataliia Dmytriievska’s words of warning about cutting the community team will prove to be prophetic. We can only hope that they are not.