A hot potato: Gearbox developers got an unpleasant surprise on Tuesday when they were informed that their royalty bonuses for Borderlands 3 would be far lower than expected. Apparently, the game cost the company more to make than anticipated and so the bonuses are reflecting that.
Gearbox Software employees have the opportunity to participate in profit sharing with the company. The current royalty split is 60-40, with 60 percent going back to the company and 40 percent split among employees based on tenure with the studio. These checks come quarterly and can be quite substantial. The bonuses from the 2012 release of Borderlands 2 allowed many employees to buy houses.
The first bonuses are about to arrive on Borderlands 3, which employees were led to believe would be in the five- and six-figure range. Anonymous sources who attended a meeting with CEO Randy Pitchford yesterday told Kotaku, the royalties are going to be "significantly" lower than this mark.
"The talent at Gearbox enjoys participation in the upside of our games - to our knowledge, the most generous royalty bonus system in AAA."
Pitchford said that Borderlands 3 had been more expensive to produce than projected. Part of this expense came from the studio deciding to switch from Unreal Engine 3 to Unreal Engine 4 right in the middle of development. Additionally, as per the terms of the profit-sharing deal, 2K Games has to recoup the entire budget for the game, including all DLC, before royalties are issued. This sum amounts to about $140 million, all totaled.
Several employees were dismayed at the reveal as the expected returns were the driving force by all their long nights and hard hours working on the shooter. Many had already made financial plans for the money. Granted, it's not wise to count your chickens before they hatch, but Pitchford's alleged response to outcry was somewhat harsh.
"[Pitchford] told developers that if they weren't happy with the royalty system, they were welcome to quit," said insiders who attended the meeting. They added that they would not be surprised to see an "exodus" of employees soon.
Shortly after the game's release, 2K parent company Take-Two Interactive announced the franchise as a "billion-dollar global brand," with Borderlands 3 breaking multiple records and becoming "the fastest-selling [title] in 2K's history." Then, in a February earnings call, Take-Two CEO Strauss Zelnick said, "We expect lifetime unit sales to be a record for the series."
When asked for comment, Gearbox said in a statement that it believes its royalty system is the most generous in the AAA industry.
"Gearbox talent has earned over $100M in royalty bonuses above and beyond traditional compensation," said a spokesperson. "In the most recent pay period, Gearbox talent enjoyed news that Borderlands 3, having earned revenue exceeding the largest investment ever made by the company into a single video game, had officially become a profitable video game, and the talent at Gearbox that participates in the royalty bonus system has now earned their first royalty bonus on that profit."
The statement made no mention of Pitchford's meeting with employees nor what may have been said. However, if the sources' claims are valid, it is easy to see why it did not sit well with employees in the current economic climate, especially following a very public dispute in January over Pitchford taking a $12 million secret advance bonus on projected profits.