The Australian video game industry is in crisis, with one development company falling into liquidation and another reportedly laying off approximately 30 staff.
According to documents lodged with the Australian Securities and Investments Commission, Melbourne-based development studio Transmission Games fell into liquidation earlier this week.
An update to ASIC indicates the company today lodged a “Notification of Resolution Winding Up The Company”, with Ken Sellers and Mat Muldoon of BRI Ferrier now acting as joint liquidators.
According to the minutes of a meeting held on Wednesday, 21 October, the majority of shareholders voted the company be wound up voluntarily, with chief executive Mike Fegan signing off on the decision.
Company director Ben Palmer and managing director of asset management company Lotons, George Schooneveldt, were also in attendance.
Transmission, which developed for the Wii, Playstation 3, Xbox 360 and PC platforms, created titles including Ashes Cricket 2009 and WWII game Heroes Over Europe. It also gained recognition for its popular AFL titles and became one of the larger Melbourne studios with over 135 employees at its peak late last year.
The company began in 1996 as IR Gurus, and recently achieved moderate success with its Ashes Cricket 2009 title topping charts in Britain.
But the company has clearly been struggling. Earlier this month it laid off about 30 staff, due to the cancellation of a potential title with George Lucas’s entertainment company Lucas Arts.
Earlier this year the company also reportedly ran into payment difficulties with publishing company Red Mile regarding its Heroes Over Europe title. Publishing giant Ubisoft picked up the publishing duties, but the subsequent Lucas Arts cancellation is understood to have been a massive blow to the company.
The company was in such financial difficulty that Fegan reportedly told staff salaries would be paid on a fortnightly basis.
“Cash still remains very tight as we work to secure payments from publishers and new sources of income,” he allegedly wrote in an internal email.
He said the company didn’t “have available cash to sustain the current burn rate of the studio so we now have to implement some major cost cutting”.
During the recent round of redundancies Transmission is understood to have laid off the remaining 50 staff. It is also believed the company was developing another two games when it fell into liquidation.
Sources within the company said employees returned yesterday to “tie up loose ends”, but chief executive Mike Fegan is not expected to return to the business.
Fegan, who has worked in the industry for over 33 years, was formerly the managing director of Acclaim Entertainment Australia.
The company refused to make an official statement.
According to the documents lodged with ASIC, the company also submitted a “notification by officeholder of resignation or retirement” notice on 12 October, but it is unknown to whom this refers.
Game Developers’ Association of Australia chief operating officer Mike McNabb says Transmission Games was forced to shut down due to bad financial circumstances.
“Even though these companies are members of the association, they don’t often talk to you about what’s happening behind the scenes. All we really know is that they ran into financial difficulties, and it got to a point where they just couldn’t keep going forward.”
“Then they tried to make it through by laying off about 20 or 30 staff, but the other deals didn’t carry them through and it obviously got to a breaking point. There’s a few jobs around for the developers but for all of them I don’t know what’s going to happen.”
Meanwhile, Melbourne studio RedTribe has reportedly laid off approximately 20 developers earlier this week due to similar financial difficulties. Smaller than
Transmission, it has released just two titles for the Xbox 360, Playstation 3 and Wii platforms.
The company did not return calls before publication.
The developments come as the video game industry is only beginning to recover from the downturn. While video game sales overall have risen over the past year, many smaller game developers have struggled to survive as many publishers give out work to the larger, more established studios.
Steve Fawkner, chief executive of Melbourne development studio Infinite Interactive, says the industry is feeling the aftermath of the global financial crisis.
“I think our industry is in no more trouble than any other industry, we’re just seeing a little subset of what’s going on everywhere else. It was easy to find money for 2009 because projects were all stacked up, but finding work for 2010 was the hard thing and we all knew that was going to happen.”
“Being in Australia, the money gets tied up overseas and it really affects the mid-tier companies. The only thing that will fix it is when the capital starts flowing through the system.”
The Federal Government has attempted to rescue the industry, with Screen Australia offering a $75,000 grant for prototypes of digital media projects.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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