Hollow Earth

Gamecock and SouthPeak


The story of what happened with Cyan Worlds and others is finally coming to light. In an article on Joystiq, Ludwig Kietzmann reports that Gamecock, the company with which Cyan was doing testing work, suddenly found itself short on cash and over-tasked with releasing big indie games, forcing Gamecock to find a new investor, and fast.

Enter SouthPeak, which bought up Gamecock as well as all its liabilities, the debt it owed to a whole host of companies, which former Gamecock CEO Mike Wilson described in detail “These ranged from our testing house, Cyan Worlds, who ended up doing huge layoffs because of non-payment, to the big magazine and website publishers, to the smallest of companies and individuals hired for webwork, video production, packaging, you name it. 800 dollars to 800,000 dollars, they were all given essentially the same treatment.”

What “treatment” is that, you ask? The treatment of not being paid. And, at least according to an annonymous Gamecock producer, being lied to about payment– with the cliche “the check is in the mail” apparently actually being used. All of this, too, defended by SouthPeak saying that it is debt because of the acquisition of Gamecock. And yet, their own financial statements tell a different story.

February 18th, the site GamesIndustry.biz reported that, in the fourth quarter of 2008 (during and after the acquisition), SouthPeak’s income rose to $17.3 million, up from $4.2 million the year before. Their net income, their profit, was up to $1.2 million compared with just $281,000 of profit the year before– a 76% jump.

Or again just three months later, May 18th, Gamasutra reported the company had revenues of $13.5 million. While the article did not mention profits it did say SouthPeak was going to dramatically increase its investment in IP and game development. This payment would be to the tune of $14 million, more than their revenues.

So what do we make of this? Workers not being paid, yet profits up more than 76%, revenues in the millions, and dramatic boosts to future game development using up more than aforementioned revenue. No small wonder then, perhaps, that the company’s stock is down more than 45% this year.

The story is becoming clearer and yet is still obscured. Why did SouthPeak stop the contract with Cyan Test when, according at the very least to comments in the Gamasutra article, Cyan Test was an exemplary group? Why did they try to negotiate to not pay and/or pay only “half or less” of contracts or essentially take the attitude of “screw off, sue us” with their contracts when they appear to have had ample revenue with which to pay them? All unanswered.

There is more to this story, of course, and I encourage anyone who is curious to check out the articles I have linked to here, including the interview with Gamecock’s former CEO to get a glimpse of what may have happened. In the end, it would appear that SouthPeak gets to join Ubisoft.

Correction: SouthPeak’s 2008 4th quarter profit was up 76%, not its income. Their income was up more than 130%.

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Filed under: Gaming

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All posts are my opinion only and do not necessarily reflect the opinions of others.
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