This past Christmas week brought sales, denial of service attacks, and the arrest of everyone’s favorite affluenza victim, but for the employees at Red5 Studios the holidays brought with it a check that many found they just couldn’t cash. Rumors surfaced over the past weekend that the Firefall developer was unable to pay its employees, which were later verified by numerous news sources, and now it’s been confirmed that none of the eighty employees who still call the company home were paid over the past weekend.
There are three important factors we should look at with this news: First, the idea that the company was reliant on investors enough that it can’t pay its 80 employees using the revenue from Firefall, even after significant layoffs going back to November. The management has confirmed that the main culprit points to potential investments that fell through, but from whom? Are these new investors? Why isn’t The9, Red5’s parent company, swooping in to protect its investments?
The second, that Red5 allegedly didn’t bother to inform the majority of employees that they weren’t getting paid, instead allowing them to watch as their direct deposit was sent and then subsequently cancelled. According to staff, only a handful of employees received a notice days in advance of payday that they wouldn’t be receiving a check, with the rest left to discover it once it leaked onto the net. In addition, it’s been noted that on the previous payday, employees were handed paper checks rather than direct deposit in what management claimed to be a bank error.
And finally, the meeting to discuss keeping Red5 afloat involves transitioning the pay period to once per month rather than every other week. A month is a long time to gather the funds to pay your employees, or rather it gives a lot of time to wind things down from a management perspective while still assuring that employees will be paid before the company declares itself insolvent. As someone who has worked for businesses as they go through the process of insolvency, Red5 is essentially following in all steps. In the last few months, you see paychecks start bouncing or not being distributed at all, payday is pushed further back and with larger gaps, and employees are mostly left out of the loop.
Red5 is, naturally, denying that they are in a bad financial situation, as well as claiming that several facts presented in the coverage of this are inaccurate, however they are presently not explaining what is wrong or how they can be in good finances while not having the money to pay their employees. By comparison, Real Time Worlds was assuring the press that they were still focused on All Points Bulletin 100% and despite layoffs and restructuring, the game was still going strong with 100,000 active players. That was August 16th, by September 10th the next month the game was shutting down, Realtime Worlds was bankrupt, and the people who assured us everything was fine were unemployed.
As far as Red5 goes, I think it’s a bit early to call certain doom, but unless they have an ace hidden up their sleeve the situation isn’t as bright and cheery as they’d like us to think.