Posted Thu, May 07, 2009 by Ethec
Welcome to the 1,074th Edition of Loading...
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Richard Garriott is suing NCSoft for a cool $24 million. Has he unwittingly announced his retirement from games development too? We'll walk you through the financial speak and legalese to get to the heart of the matter, and consider the long term effect on both Garriott and NCSoft in Loading... Garriott's Gambit.
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Before I go any farther, I've bumped into Richard Garriott twice now and during our brief chats he seemed like a really nice guy and was obviously really passionate about games. He is known for his rock star antics, whether the showy parties at his Austin, Texas castle or for the casual trip into space, but I couldn't detect a flash of arrogance either of the two times we spoke with him. He puts me a little in mind of Gambit from X-Men Origins: Wolverine - flamboyant but cool and calculating, flashing his ideas of logos like psionically enhanced cards. As for the panache, the games industry is bigger than Hollywood at this point but doesn't act like it. We could do for a little more prestige-enhancing star power, just in general.
But Garriott's $24 million suit against NCSoft came to light yesterday and quickly caught fire across the Interwebs. Game Politics used their bar association connections (I'm assuming) to get a hold of the complaint, and we find that Garriott was given a hefty number of stock options as all or part of his compensation for working on and having his name tied to the game. Stock options are a common, performance-based way to pay key people - for a full explanation check out How Stuff Works. In this instance, if the Tabula Rasa succeeds, the stock soars, and Garriott can buy the stock at an artificially low price, sell high, and purchase his space shuttle. But, of course, that wasn't quite what happened.
Garriott contends that he was compelled to unload these stock options in the worst trading environment in recent history. Why? He claims NCSoft "internally recharacterized" (love the legalese) his discharge as voluntary (rather than involuntary, as Garriott contends), and that in turn forced him to activate the options within 90 days or lose them. That Garriott did activate these options shows that he thought using them would be more beneficial than losing them, and it's worth noting that activating a stock option only requires you to buy the stock at a set price. You don't have to sell it; you can sit and wait for what you think is the most advantageous time to sell. If you do do that instead of selling immediately, you have to pony up a fraction of the cash and claim the difference between the strike price and market value as income for tax purposes. So that could end up being fairly pricey.
From NCSoft's perspective, whether won or lost, lawsuits like this can seriously impact a company. While the lawsuit is pending, you have to disclose it on your financial statements and you usually must make some monetary provision against losing the suit if you feel it has the remotest chance of succeeding. The news has yet to hit the Korean stock market, where Reuters just reported that NCSoft stock was doing well thanks to some positive mojo from the Aion trial in China. Poor stock performance obviously limits your ability to finance upcoming projects, which obviously would hurt a game developer more than, say, a toothpick manufacturer.
The prevailing attitude of the Internet is that Richard Garriott broke Tabula Rasa and now he's trying to break NCSoft too. I don't know what or who broke Tabula Rasa other than it was mostly a single player game in a massively online environment, and that tends to feel pretty lonely. Players of all stripes had been crying for more solo content for years, so maybe we're to blame too. As for insider opinions on what happened to the game, we've made attempts to contact NCSoft and former devs on the subject, and the cone of silence has descended; no one's interested in talking yet. Too soon.
If Garriott is, as he recently said, is interested in making games again, he probably did himself a serious disservice on the career front. Biting the hand that once fed you is a pretty serious sin, perhaps unforgivable in an industry as (dare I say) incestuous as games development. There's always the chance you'll run into a Buffalo willing to pick up your Terrell Owens, but your name and its baggage doesn't go away. But if this is about justice rather than more showboating, than so be it. Like antarious says in our epic thread, what a strange final chapter to the Tabula Rasa story.
Was Garriott's Gambit well-considered? If you were in his shoes, what would you do? Comments welcome in the Loading... forum, continue the discussion on who failed Tabula Rasa the most in today's epic thread, or send me an email!
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