8 ms·

Star Citizen is likely in financial trouble

80 points by r721 9y ago

spraak 9y ago
Well, I feel a little better about my small personal debt in comparison.
madamelic 9y ago
Who could've guessed? The game designer suddenly gets $150m and rather than iterating, he goes for the dream. I looked him up and he apparently has produced AAA games before so what's the deal here? Shooting for the moon on the first go in any software development processes is a recipe for disaster.
- TulliusCicero 9y ago
  > I looked him up and he apparently has produced AAA games before so what's the deal here? The deal is that he's one of those guys who makes you go, "Oh, that's why publishers exist."
- ethbro 9y ago
  > I looked him up I'm guessing you haven't played a little series called Wing Commander?
  - EpicEng 9y ago
    That's true for most of the world's population.
    - ethbro 9y ago
      Most of the world's population isn't posting comments in English on a computer-oriented site. I'd expect most people commenting on games could at least name some of the major 90s studios. Origin was kind of a big deal.
- antisthenes 9y ago
  Yeah, better to shoot for the dream than to make iterative garbage like COD or ME:Andromeda IMO.
TulliusCicero 9y ago
Not very surprised, the game has been a trainwreck in the making from the beginning. Total scope was just way too overambitious, and people weren't going to plow hundreds and thousands of dollars into spaceship jpegs forever.
- norswap 9y ago
  Precisely, and this has been painfully obvious for a long time. Not even to me (I don't really follow the game) but to a few people whose opinion I respect, including multiple video game journalists.
- shadowmint 9y ago
  Care to qualify that? I'm not following this at all, but I can't see anything particularly obvious that's a 'train wreck'. They have a game. It's playable, if not particularly good. Some people are playing it (or something? Someone is posting gameplay videos anyway). I have zero investment in it so I don't really get it; I see a lot of unhappy people making :( faces. Games take time and money to make. They're making it. It's not done yet. They're keeping in touch with people and releasing regular updates. I mean, what do you want them to do? Not make it? Make it faster? Communicate more? Communicate differently? That's really good compared to some crowd funding people... isn't it? ...? Where's the drama?
  - strathmeyer 9y ago
    The problem comes with advertising and selling products that they haven't made yet.
  - quakenul 9y ago
    The drama basically arises from where common people are a good source of funds but actually terrible investors, giving personal money by impulse, usually without being equipped with the industry insight to evaluate the risks, or fully accepting there are risks because they are too emotionally invested in the product.
    - 9y ago
problems 9y ago
Seems like incredibly poor budgeting given that they had $150M and couldn't deliver even a limited version of the game. Maybe I'm underestimating the costs somehow, but you could easily pay pretty high salaries for 100+ people's time over a few years of development with that kind of money. I wonder what they did with it?
- ohyes 9y ago
  I'm guessing this will involve unaffordable office space.
  - ohyes 9y ago
    Yeah so I did some research, there's 250+ employees at the subsidiary foundry 42, which would indicate far more than 100 employees to pay for cloud imperium. If it's 400 people or something working at that company, burning through 150 million starts to sound more possible. Also 4 nice offices in non-cheap locals.
    - ethbro 9y ago
      I also think this is amusing because I expect this looks a lot like how the sausage gets made in normal publishing -- except it's all behind closed doors. This time, the Internet is invited to opine, and they're shocked (shocked!) that the business of game development requires dodgy financial deals a lot of the time.
    - funnyfacts365 9y ago
      Locations or locales isn't the same as locals
      - ohyes 9y ago
        Thanks
    - w_t_payne 9y ago
      Manchester isn't that expensive.
umdobchob 9y ago
It's not nearly as bad as they make it seem. Loans/debt are a completely healthy source of financing.
- norswap 9y ago
  Excepted it wasn't planned like that.
  - troynt 9y ago
    Source? Not all loans are bad, it wouldn't make sense to plan on never taking a loan.
    - norswap 9y ago
      I'm pretty sure they blew through most of their estimates. The projects was always hailed as one of the big crowdfunding break and nothing indicates they considered borrowing to finance the project given the massive amount of money they got and the time estimates they posted. By all means, check for yourself.
      - adrusi 9y ago
        It would be irresponsible to operate entirely off of crowdfunded cash because that money could go a lot farther if properly invested. If you invest, then sometimes you need more cash that you have on hand. You could sell some of your assets, but if you can reliably anticipate they'd sell for significantly more at some future time (relative to interest rates), then you're better off taking a loan and then paying it off when you sell assets later.
      - troynt 9y ago
        Why would you assume a company would never use a loan? Apple takes out loans and they have billions. There could be tax incentive to take out loans.
        9y ago
adrenalinelol 9y ago
I know SC initial funding is unprecedented, but is taking out what amounts to a line of credit really that uncommon? It doesn't necessarily mean the initial 150M has dried up -> thus the sky just may not be falling?
- mrmcd 9y ago
  The terms of the loan we're really, really unfavorable. They essentially pledged every piece of IP they have to get the loan. It's not the kind of loan you take if your company is healthy and has easy access to financing.
  - Klathmon 9y ago
    IP which is basically worthless if the game doesn't ever release. A bank that gives out loans to a failing company with collateral that is worthless if the company fails doesn't seem that smart.
    - funnyfacts365 9y ago
      But the queen banks with them! /s
redm 9y ago
This story reminds me of ION Storm [1], John Romero's cash rich baby that failed miserably with Daikatana. [2] [1] https://en.wikipedia.org/wiki/Ion_Storm https://en.wikipedia.org/wiki/Ion_Storm [2] https://en.wikipedia.org/wiki/Daikatana https://en.wikipedia.org/wiki/Daikatana
- ethbro 9y ago
  To be fair, they also released Deus Ex the same year as Daikatana. Although the moral there is Warren Spector is a far better game creator than John Romero.
- dmix 9y ago
  > Porter became CEO of ION Storm and the Dallas Observer said "He turned down a deal with Compaq computers that would have paid ION 75 cents to $1 for every Compaq computer sold with Dominion already installed, and would have guaranteed ION a minimum of $1.5 million." It's funny to think that selling your game for $1/each is a standard thing these days for mobile games. They only ended up selling very few of the games in retail and obviously should have took this deal. Thanks for the link, interesting story. I would love an office with a 'crash room' to have power naps in. That's the main thing I miss from working at home.
  - sbierwagen 9y ago
    I've seen a fair few law offices with nap rooms.
whatever_dude 9y ago
Not surprised. The whole enterprise seemed fishy from the start. I contributed to the Kickstarter but basically gave up on it once they moved to their new campaign website and their business model became so complicated I didn't know what they were offering or I was buying anymore. Endless offers and perks with no have in sight didn't help. Weird that Roberts didn't know better.
git-pull 9y ago
You have to admit, they made really good commercials for in-game content. They stayed in character, too. A few hand-picked favorites: - Imagine: Star Citizen: https://www.youtube.com/watch?v=lJJ9TcGxhNY https://www.youtube.com/watch?v=lJJ9TcGxhNY - Star Citizen - MISC Freelancer Commercial: https://www.youtube.com/watch?v=vO7RxsZpcKc https://www.youtube.com/watch?v=vO7RxsZpcKc - Star Citizen: Consolidated Outland Mustang Commercial : https://www.youtube.com/watch?v=BR07oZC0QHU https://www.youtube.com/watch?v=BR07oZC0QHU - Introducing the 2944 Aurora: https://www.youtube.com/watch?v=UvDs7RDKCag https://www.youtube.com/watch?v=UvDs7RDKCag Full playlist: https://www.youtube.com/playlist?list=PLVct2QDhDrB0QRjv9oN02f8mGsml8tcK9 https://www.youtube.com/playlist?list=PLVct2QDhDrB0QRjv9oN02...
- ferongr 9y ago
  My suspension of disbelief is destroyed every time I see missiles without proximity detonators.
  - Mithaldu 9y ago
    The entire game design and physics of SC is built around "World War 2, BUT IN SPACE". I mean damn, they even have actual cockpit windows with no appreciable polarization (note the freighter pilot blinded by a simple laser scanner in the second video). That said, missiles with proximity detonation only make sense if they're actually built to be fragmentation weapons, not pure explosive-based, due to explosion shockwaves being useless in space thanks to a lack of medium to travel in. And even for fragmentation they'd need to get really close due to inverse square law.
    - qbrass 9y ago
      FWIW, the proximity fuse was a World War 2 invention.
- mistersquid 9y ago
  In the first video the barrel roll [0] followed by a person in an EVA suit in the interior of a (different) vessel [1] made me wonder about zero-gravity spatial relationships. (Before continuing, please excuse my ignorance in the subjects of gravitational physics and aeronautical nomenclature. Also, I do not intend to troll. I'm honestly wondering. I'm also a little embarrassed at the brainteaser-like character of my question.) Presume a human being is inside a vertically asymmetrical vessel with no interior atmosphere. The vessel is at rest with regard to a nearby (< 1 million kilometers) planetary system (similar to ours) and the vessel is in (essentially) zero-gravity. If the vessel accelerates around the axis that runs stem to stern (executes a barrel roll) will the occupant spin with the vessel or will the vessel spin around the occupant? [0] https://youtu.be/lJJ9TcGxhNY?t=106 https://youtu.be/lJJ9TcGxhNY?t=106 [1] https://youtu.be/lJJ9TcGxhNY?t=116 https://youtu.be/lJJ9TcGxhNY?t=116 EDIT: Change "subject" to "subjects".
hackerfakenews 9y ago
The fact that any bank considered lending to a tiny company like this with no revenue stream is actually a positive sign. As for pledging all their "assets", that is completely standard. They have no assets to speak of - their "IP" is 100% worthless without future sales, which will never happen if the game doesn't get released. And further, because the money was raised from crowdfunding, the only equity holders that might suffer are the creators. It's really important to understand finance if you want to understand the world and it's not that hard. /thread
- macspoofing 9y ago
  Debt financing is tricky. If they stumble, they'll end up with nothing - and all they've done is stumble.
- shmerl 9y ago
  Who will suffer are backers who supported this project.
  - valarauca1 9y ago
    There is no scenario where Crowd Funding backers profit. I don't know why people who Crowd Fund act like they are owed anything. Funding a business via Crowd Funding is in most scenarios the dumbest economic decision you can make. Comparable to throwing money out the window in terms of ROI.
    - shmerl 9y ago
      People who crowdfund are investors in the project. If it succeeds - they get the benefit they backed it for. And if it fails, they lose. Not every benefit is supposed to be measured in profits. So there is clearly ROI there, but not the way you described it (monetary gain).
- nunez 9y ago
  how can i get better at understanding finance beyond basic money management?
Merad 9y ago
Ahhh Star Citizen. The first crowdfunding campaign I ever backed, and I backed it to the tune of $120-150 (I don't even remember). I figured it was a gamble, but their demos were and continue to be extremely impressive, and what's life without a little risk? I doubt all the other backers will be so forgiving, however. Things are likely to get pretty ugly if the company folds.
Belphemur 9y ago
To quote a reddit comment : I should point out that this is not necessarily a bad thing, nor is it clear what the loan is for. What this tells us is that money has been loaned and secured against assets owned by CIG - this is fairly common practice in the case of commercial loans. To bank with Coutts you must have at least £1,000,000 in tangible assets and in any event they are selective about their clientele; which implies CIG is doing well. To be honest as much as the terms are huge, they didn't go to a loan shark neither a shitty bank. It's the bank that manage the assets of the Queen. I don't think they give loan that easily hence the huge collaterals.
- Normal_gaussian 9y ago
  Yeah probably just some cashflow issue due to mistiming how the remainder of the $141m is invested
- headmelted 9y ago
  "they didn't go to a loan shark neither a shitty bank. It's the bank that manage the assets of the Queen. I don't think they give loan that easily hence the huge collaterals." Irrelevant. Why would they care which bank the money comes from? It would be careless to take any deal on less favourable terms than you could get elsewhere, which implies this Coutts deal was the best they could get. It could easily be a deal on a REALLY good rate to extend their runway well into the release cycle of a finished game, but the lack of disclosure implies otherwise. Anyone here old enough to remember the original boo.com? That was also an emperor-has-no-clothes fiasco of epic proportions. Which is ironic, because their problem was that they couldn't sell any of the mountains of clothes they had in storage.
  - Belphemur 9y ago
    I guess to make conclusion we would need a disclosure from the studio. The reputation of the bank and the way they approve client is relevant. It doesn't reduce the fact they took money, but again without a break down of the term we can only speculate the reason. Saying "they'll fail" because of this loan is making a hasty conclusion.
  - 9y ago
carterschonwald 9y ago
One way to think about this is: bank software dev is incredibly delivery / customer oriented. Maybe that will transfer over to this game dev ? ;)
ngold 9y ago
Wouldn't we all love a breakdown on how someone spends that kind of money. So far the game is solid. But I wonder if someone had their eyes on another WOW killer.
- adrenalinelol 9y ago
  Is being a "WOW killer" worth it anymore? Activision doesn't even release the subscription numbers anymore (most likely because they've fallen so much since WotLK).
- SXX 9y ago
  $150M isn't that much of money if you consider their studious locations, game scale and quality of their marketing materials. I guess they spent a lot more money on marketing and communications with community since it's the only reason they managed to get so much money through crowdfunding. For instance one of best and largest games recently produced is Witcher 3. It's cost about $81M [1] (half budget is marketing and probably localization, not sure what is source on this) and more than 250 [2] in-home developers (and 1500+ [3] people in total include localization) worked on it. And this is developers from Poland with significantly lower salaries and overall burn rate. Now for instance about year ago Chris Roberts announced [4] they have following studios working on game: Frankfurt (50), Manchester (180), Los Angeles (60) and Austin (50). So it's about 350 developers and even if you take something like $80,000 burn rate per employee it's going to be a lot of money and actual number likely higher than that. [1] https://www.gamespot.com/articles/this-is-how-much-the-witcher-3-cost-to-make/1100-6430409/ https://www.gamespot.com/articles/this-is-how-much-the-witch... [2] https://www.develop-online.net/interview/the-wild-road-to-the-witcher-3/0207553 https://www.develop-online.net/interview/the-wild-road-to-th... [3] https://www.vg247.com/2016/01/13/over-1500-people-worked-on-the-witcher-3-wild-hunt/ https://www.vg247.com/2016/01/13/over-1500-people-worked-on-... [4] https://www.youtube.com/watch?v=w9T48l7Oq0Q&feature=youtu.be&t=6m45s https://www.youtube.com/watch?v=w9T48l7Oq0Q&feature=youtu.be...
  - wlesieutre 9y ago
    Minor correction, the communication with the community is funded by "community subscribers" separate from the game development crowdfunding.
mter 9y ago
Most interesting thing about SC is Amazon has a game publishing arm and star citizen is using lumberyard. I hope that AGS has an interest in keeping it's most high profile client alive. Some of my most nostalgic childhood memories are playing privateer with my brother. Having someone who could say no to chris would probably be an overall win for everyone.
jimnotgym 9y ago
EVERYBODY PAUSE! This is not abnormal at all (in itself). If you were going to lend money to a software company, what else would you take as security other than IP? A floating charge is just there to establish the bank as a preferential creditor in case they default. Otherwise if the company became insolvent, the bank would only be entitled to its share of what is left of the assets in proportion to what they had lent. If the bank expected them to default then they would not have lent them any money! A floating charge does not mean necessarily that the bank would be entitled to those assets, if they were of a higher value than what the bank had lent them, for instance. I just took a look at the December 2015 accounts and they show that they burnt £1m in the year, and had £1.1m left. Again, the bank will know their provisional 2016 numbers and their forecast by now, and would not have lent them money that they didn't have the cashflows to repay. The game may be rubbish, the project may be a failure, but a registration of a charge is not a cause for concern in itself. Maybe for instance, the company saw an opportunity that needed more cash?
- wlesieutre 9y ago
  I'd expect the loan is effectively borrowing against anticipated Squadron 42 sales (the single player game) to keep development moving faster. God forbid they delay that again. Once that's out they can pay the money back and continue work on Star Citizen's persistent universe. As to the ongoing debate over whether the project is "a train wreck", it would be prudent to wait another month or two for alpha 3.0 to land. This contains the first procedural moons, landing locations, significant overhauls to networking, more fleshed out NPCs/missions, initial version of cargo hauling, and more. If they can't deliver on that then by all means get all doom-and-gloom. But it's not that far off to wait. Official schedule still has it targeted for July, but a slip back to August won't surprise anyone.
- dang 9y ago
  Please don't use uppercase for emphasis. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
- wlesieutre 9y ago
  Official clarification from CIG if anyone still finds their way into these comments: https://robertsspaceindustries.com/spectrum/community/SC/forum/1/thread/re-uk-tax-rebate-advance-for-foundry-42/277779 https://robertsspaceindustries.com/spectrum/community/SC/for... tl;dr It's an advance on a tax rebate (for SQ42 development) and avoiding currency conversions. The collateral specifically excludes Star Citizen. The primary collateral is the tax rebate which the UK government probably isn't going to default on.
bananicorn 9y ago
Should kickstarter have a clause for failed software projects to be open sourced/the source code/assets be given to the backers? (Not sure what the non-technical users could do with it, but at least they could get what work has been done so far) Of course I'm not implying Star Citizen has failed, this is just a general thought
DavidTWco 9y ago
CIG have just released a statement regarding this (https://robertsspaceindustries.com/spectrum/community/SC/forum/1/thread/re-uk-tax-rebate-advance-for-foundry-42/277779 https://robertsspaceindustries.com/spectrum/community/SC/for...). Pasted below for those who can't or won't visit the previous link: Ortwin: We have noticed the speculations created by a posting on the website of UK’s Company House with respect to Coutt’s security for our UK Tax Rebate advance, and we would like to provide you with the following insight to help prevent some of the misinformation we have seen. Our UK companies are entitled to a Government Game tax credit rebate which we earn every month on the Squadron 42 development. These rebates are payable by the UK Government in the fall of the next following year when we file our tax returns. Foundry 42 and its parent company Cloud Imperium Games UK Ltd. have elected to partner with Coutts, a highly regarded, very selective, and specialized UK banking institution, to obtain a regular advance against this rebate, which will allow us to avoid converting unnecessarily other currencies into GBP. We obviously incur a significant part of our expenditures in GBP while our collections are mostly in USD and EUR. Given today's low interest rates versus the ongoing and uncertain currency fluctuations, this is simply a smart money management move, which we implemented upon recommendation of our financial advisors. The collateral granted in connection with this discounting loan is absolutely standard and pertains to our UK operation only, which develops Squadron 42. As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes “Star Citizen.” The UK Government rebate entitlement, which is audited and certified by our outside auditors on a quarterly basis, is the prime collateral. Per standard procedure in banking, our UK companies of course stand behind the loan and guarantee repayment which, however, given the reliability of the discounted asset (a UK Government payment) is a formality and nothing else. This security does not affect our UK companies’ ownership and control of their assets. Obviously, the UK Government will not default on its rebate obligations which will be used for repayment, and even then the UK companies have ample assets to repay the loan, even in such an eventuality which is of course unthinkable. This should clarify the matter. Thank you.
- ino 9y ago
  You can format the text in a more readable way.
- 9y ago
screecwe 9y ago
Just more FUD. Here's the explanation. https://i.redd.it/3yddemsdku5z.jpg https://i.redd.it/3yddemsdku5z.jpg "We have noticed the speculations created by a posting on the website of UK’s Company House with respect to Coutt’s security for our UK Tax Rebate advance, and we would like to provide you with the following insight to help prevent some of the misinformation we have seen. Our UK companies are entitled to a Government Game tax credit rebate which we earn every month on the Squadron 42 development. These rebates are payable by the UK Government in the fall of the next following year when we file our tax returns. Foundry 42 and its parent company Cloud Imperium Games UK Ltd. have elected to partner with Coutts, a highly regarded, very selective, and specialized UK banking institution, to obtain a regular advance against this rebate, which will allow us to avoid converting unnecessarily other currencies into GBP. We obviously incur a significant part of our expenditures in GBP while our collections are mostly in USD and EUR. Given today's low interest rates versus the ongoing and uncertain currency fluctuations, this is simply a smart money management move, which we implemented upon recommendation of our financial advisors. The collateral granted in connection with this discounting loan is absolutely standard and pertains to our UK operation only, which develops Squadron 42. As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes “Star Citizen.” The UK Government rebate entitlement, which is audited and certified by our outside auditors on a quarterly basis, is the prime collateral. Per standard procedure in banking, our UK companies of course stand behind the loan and guarantee repayment which, however, given the reliability of the discounted asset (a UK Government payment) is a formality and nothing else. This security does not affect our UK companies’ ownership and control of their assets. Obviously, the UK Government will not default on its rebate obligations which will be used for repayment, and even then the UK companies have ample assets to repay the loan, even in such an eventuality which is of course unthinkable. This should clarify the matter. Thank you. "
Cynosaur 9y ago
Funny how everyone loves to jump on the hate wagon against this game and company, even on HN - you get a clickbaity sketchy article from neogaf and suddenly everyone is a banking expert? They already released a response, but it's kinda sad that they have to justify stuff like this to "journalists" all the time. https://robertsspaceindustries.com/spectrum/community/SC/forum/1/thread/re-uk-tax-rebate-advance-for-foundry-42/277779 https://robertsspaceindustries.com/spectrum/community/SC/for...

80 points by r721 9y ago

Well, I feel a little better about my small personal debt in comparison.

Who could've guessed? The game designer suddenly gets $150m and rather than iterating, he goes for the dream. I looked him up and he apparently has produced AAA games before so what's the deal here? Shooting for the moon on the first go in any software development processes is a recipe for disaster.

TulliusCicero 9y ago
> I looked him up and he apparently has produced AAA games before so what's the deal here? The deal is that he's one of those guys who makes you go, "Oh, that's why publishers exist."
ethbro 9y ago
> I looked him up I'm guessing you haven't played a little series called Wing Commander?
- EpicEng 9y ago
  That's true for most of the world's population.
  - ethbro 9y ago
    Most of the world's population isn't posting comments in English on a computer-oriented site. I'd expect most people commenting on games could at least name some of the major 90s studios. Origin was kind of a big deal.
antisthenes 9y ago
Yeah, better to shoot for the dream than to make iterative garbage like COD or ME:Andromeda IMO.

TulliusCicero 9y ago

Not very surprised, the game has been a trainwreck in the making from the beginning. Total scope was just way too overambitious, and people weren't going to plow hundreds and thousands of dollars into spaceship jpegs forever.

norswap 9y ago
Precisely, and this has been painfully obvious for a long time. Not even to me (I don't really follow the game) but to a few people whose opinion I respect, including multiple video game journalists.
shadowmint 9y ago
Care to qualify that? I'm not following this at all, but I can't see anything particularly obvious that's a 'train wreck'. They have a game. It's playable, if not particularly good. Some people are playing it (or something? Someone is posting gameplay videos anyway). I have zero investment in it so I don't really get it; I see a lot of unhappy people making :( faces. Games take time and money to make. They're making it. It's not done yet. They're keeping in touch with people and releasing regular updates. I mean, what do you want them to do? Not make it? Make it faster? Communicate more? Communicate differently? That's really good compared to some crowd funding people... isn't it? ...? Where's the drama?
- strathmeyer 9y ago
  The problem comes with advertising and selling products that they haven't made yet.
- quakenul 9y ago
  The drama basically arises from where common people are a good source of funds but actually terrible investors, giving personal money by impulse, usually without being equipped with the industry insight to evaluate the risks, or fully accepting there are risks because they are too emotionally invested in the product.
  - 9y ago

problems 9y ago

Seems like incredibly poor budgeting given that they had $150M and couldn't deliver even a limited version of the game. Maybe I'm underestimating the costs somehow, but you could easily pay pretty high salaries for 100+ people's time over a few years of development with that kind of money. I wonder what they did with it?

ohyes 9y ago
I'm guessing this will involve unaffordable office space.
- ohyes 9y ago
  Yeah so I did some research, there's 250+ employees at the subsidiary foundry 42, which would indicate far more than 100 employees to pay for cloud imperium. If it's 400 people or something working at that company, burning through 150 million starts to sound more possible. Also 4 nice offices in non-cheap locals.
  - ethbro 9y ago
    I also think this is amusing because I expect this looks a lot like how the sausage gets made in normal publishing -- except it's all behind closed doors. This time, the Internet is invited to opine, and they're shocked (shocked!) that the business of game development requires dodgy financial deals a lot of the time.
  - funnyfacts365 9y ago
    Locations or locales isn't the same as locals
    - ohyes 9y ago
      Thanks
  - w_t_payne 9y ago
    Manchester isn't that expensive.

umdobchob 9y ago

It's not nearly as bad as they make it seem. Loans/debt are a completely healthy source of financing.

norswap 9y ago
Excepted it wasn't planned like that.
- troynt 9y ago
  Source? Not all loans are bad, it wouldn't make sense to plan on never taking a loan.
  - norswap 9y ago
    I'm pretty sure they blew through most of their estimates. The projects was always hailed as one of the big crowdfunding break and nothing indicates they considered borrowing to finance the project given the massive amount of money they got and the time estimates they posted. By all means, check for yourself.
    - adrusi 9y ago
      It would be irresponsible to operate entirely off of crowdfunded cash because that money could go a lot farther if properly invested. If you invest, then sometimes you need more cash that you have on hand. You could sell some of your assets, but if you can reliably anticipate they'd sell for significantly more at some future time (relative to interest rates), then you're better off taking a loan and then paying it off when you sell assets later.
    - troynt 9y ago
      Why would you assume a company would never use a loan? Apple takes out loans and they have billions. There could be tax incentive to take out loans.
      - 9y ago

adrenalinelol 9y ago

I know SC initial funding is unprecedented, but is taking out what amounts to a line of credit really that uncommon? It doesn't necessarily mean the initial 150M has dried up -> thus the sky just may not be falling?

mrmcd 9y ago
The terms of the loan we're really, really unfavorable. They essentially pledged every piece of IP they have to get the loan. It's not the kind of loan you take if your company is healthy and has easy access to financing.
- Klathmon 9y ago
  IP which is basically worthless if the game doesn't ever release. A bank that gives out loans to a failing company with collateral that is worthless if the company fails doesn't seem that smart.
  - funnyfacts365 9y ago
    But the queen banks with them! /s

redm 9y ago

This story reminds me of ION Storm [1], John Romero's cash rich baby that failed miserably with Daikatana. [2] [1] https://en.wikipedia.org/wiki/Ion_Storm https://en.wikipedia.org/wiki/Ion_Storm [2] https://en.wikipedia.org/wiki/Daikatana https://en.wikipedia.org/wiki/Daikatana

ethbro 9y ago
To be fair, they also released Deus Ex the same year as Daikatana. Although the moral there is Warren Spector is a far better game creator than John Romero.
dmix 9y ago
> Porter became CEO of ION Storm and the Dallas Observer said "He turned down a deal with Compaq computers that would have paid ION 75 cents to $1 for every Compaq computer sold with Dominion already installed, and would have guaranteed ION a minimum of $1.5 million." It's funny to think that selling your game for $1/each is a standard thing these days for mobile games. They only ended up selling very few of the games in retail and obviously should have took this deal. Thanks for the link, interesting story. I would love an office with a 'crash room' to have power naps in. That's the main thing I miss from working at home.
- sbierwagen 9y ago
  I've seen a fair few law offices with nap rooms.

whatever_dude 9y ago

Not surprised. The whole enterprise seemed fishy from the start. I contributed to the Kickstarter but basically gave up on it once they moved to their new campaign website and their business model became so complicated I didn't know what they were offering or I was buying anymore. Endless offers and perks with no have in sight didn't help. Weird that Roberts didn't know better.

git-pull 9y ago

You have to admit, they made really good commercials for in-game content. They stayed in character, too. A few hand-picked favorites: - Imagine: Star Citizen: https://www.youtube.com/watch?v=lJJ9TcGxhNY https://www.youtube.com/watch?v=lJJ9TcGxhNY - Star Citizen - MISC Freelancer Commercial: https://www.youtube.com/watch?v=vO7RxsZpcKc https://www.youtube.com/watch?v=vO7RxsZpcKc - Star Citizen: Consolidated Outland Mustang Commercial : https://www.youtube.com/watch?v=BR07oZC0QHU https://www.youtube.com/watch?v=BR07oZC0QHU - Introducing the 2944 Aurora: https://www.youtube.com/watch?v=UvDs7RDKCag https://www.youtube.com/watch?v=UvDs7RDKCag Full playlist: https://www.youtube.com/playlist?list=PLVct2QDhDrB0QRjv9oN02f8mGsml8tcK9 https://www.youtube.com/playlist?list=PLVct2QDhDrB0QRjv9oN02...

ferongr 9y ago
My suspension of disbelief is destroyed every time I see missiles without proximity detonators.
- Mithaldu 9y ago
  The entire game design and physics of SC is built around "World War 2, BUT IN SPACE". I mean damn, they even have actual cockpit windows with no appreciable polarization (note the freighter pilot blinded by a simple laser scanner in the second video). That said, missiles with proximity detonation only make sense if they're actually built to be fragmentation weapons, not pure explosive-based, due to explosion shockwaves being useless in space thanks to a lack of medium to travel in. And even for fragmentation they'd need to get really close due to inverse square law.
  - qbrass 9y ago
    FWIW, the proximity fuse was a World War 2 invention.
mistersquid 9y ago
In the first video the barrel roll [0] followed by a person in an EVA suit in the interior of a (different) vessel [1] made me wonder about zero-gravity spatial relationships. (Before continuing, please excuse my ignorance in the subjects of gravitational physics and aeronautical nomenclature. Also, I do not intend to troll. I'm honestly wondering. I'm also a little embarrassed at the brainteaser-like character of my question.) Presume a human being is inside a vertically asymmetrical vessel with no interior atmosphere. The vessel is at rest with regard to a nearby (< 1 million kilometers) planetary system (similar to ours) and the vessel is in (essentially) zero-gravity. If the vessel accelerates around the axis that runs stem to stern (executes a barrel roll) will the occupant spin with the vessel or will the vessel spin around the occupant? [0] https://youtu.be/lJJ9TcGxhNY?t=106 https://youtu.be/lJJ9TcGxhNY?t=106 [1] https://youtu.be/lJJ9TcGxhNY?t=116 https://youtu.be/lJJ9TcGxhNY?t=116 EDIT: Change "subject" to "subjects".

hackerfakenews 9y ago

The fact that any bank considered lending to a tiny company like this with no revenue stream is actually a positive sign. As for pledging all their "assets", that is completely standard. They have no assets to speak of - their "IP" is 100% worthless without future sales, which will never happen if the game doesn't get released. And further, because the money was raised from crowdfunding, the only equity holders that might suffer are the creators. It's really important to understand finance if you want to understand the world and it's not that hard. /thread

macspoofing 9y ago
Debt financing is tricky. If they stumble, they'll end up with nothing - and all they've done is stumble.
shmerl 9y ago
Who will suffer are backers who supported this project.
- valarauca1 9y ago
  There is no scenario where Crowd Funding backers profit. I don't know why people who Crowd Fund act like they are owed anything. Funding a business via Crowd Funding is in most scenarios the dumbest economic decision you can make. Comparable to throwing money out the window in terms of ROI.
  - shmerl 9y ago
    People who crowdfund are investors in the project. If it succeeds - they get the benefit they backed it for. And if it fails, they lose. Not every benefit is supposed to be measured in profits. So there is clearly ROI there, but not the way you described it (monetary gain).
nunez 9y ago
how can i get better at understanding finance beyond basic money management?

Merad 9y ago

Ahhh Star Citizen. The first crowdfunding campaign I ever backed, and I backed it to the tune of $120-150 (I don't even remember). I figured it was a gamble, but their demos were and continue to be extremely impressive, and what's life without a little risk? I doubt all the other backers will be so forgiving, however. Things are likely to get pretty ugly if the company folds.

Belphemur 9y ago

To quote a reddit comment : I should point out that this is not necessarily a bad thing, nor is it clear what the loan is for. What this tells us is that money has been loaned and secured against assets owned by CIG - this is fairly common practice in the case of commercial loans. To bank with Coutts you must have at least £1,000,000 in tangible assets and in any event they are selective about their clientele; which implies CIG is doing well. To be honest as much as the terms are huge, they didn't go to a loan shark neither a shitty bank. It's the bank that manage the assets of the Queen. I don't think they give loan that easily hence the huge collaterals.

Normal_gaussian 9y ago
Yeah probably just some cashflow issue due to mistiming how the remainder of the $141m is invested
headmelted 9y ago
"they didn't go to a loan shark neither a shitty bank. It's the bank that manage the assets of the Queen. I don't think they give loan that easily hence the huge collaterals." Irrelevant. Why would they care which bank the money comes from? It would be careless to take any deal on less favourable terms than you could get elsewhere, which implies this Coutts deal was the best they could get. It could easily be a deal on a REALLY good rate to extend their runway well into the release cycle of a finished game, but the lack of disclosure implies otherwise. Anyone here old enough to remember the original boo.com? That was also an emperor-has-no-clothes fiasco of epic proportions. Which is ironic, because their problem was that they couldn't sell any of the mountains of clothes they had in storage.
- Belphemur 9y ago
  I guess to make conclusion we would need a disclosure from the studio. The reputation of the bank and the way they approve client is relevant. It doesn't reduce the fact they took money, but again without a break down of the term we can only speculate the reason. Saying "they'll fail" because of this loan is making a hasty conclusion.
- 9y ago

carterschonwald 9y ago

One way to think about this is: bank software dev is incredibly delivery / customer oriented. Maybe that will transfer over to this game dev ? ;)

ngold 9y ago

Wouldn't we all love a breakdown on how someone spends that kind of money. So far the game is solid. But I wonder if someone had their eyes on another WOW killer.

adrenalinelol 9y ago
Is being a "WOW killer" worth it anymore? Activision doesn't even release the subscription numbers anymore (most likely because they've fallen so much since WotLK).
SXX 9y ago
$150M isn't that much of money if you consider their studious locations, game scale and quality of their marketing materials. I guess they spent a lot more money on marketing and communications with community since it's the only reason they managed to get so much money through crowdfunding. For instance one of best and largest games recently produced is Witcher 3. It's cost about $81M [1] (half budget is marketing and probably localization, not sure what is source on this) and more than 250 [2] in-home developers (and 1500+ [3] people in total include localization) worked on it. And this is developers from Poland with significantly lower salaries and overall burn rate. Now for instance about year ago Chris Roberts announced [4] they have following studios working on game: Frankfurt (50), Manchester (180), Los Angeles (60) and Austin (50). So it's about 350 developers and even if you take something like $80,000 burn rate per employee it's going to be a lot of money and actual number likely higher than that. [1] https://www.gamespot.com/articles/this-is-how-much-the-witcher-3-cost-to-make/1100-6430409/ https://www.gamespot.com/articles/this-is-how-much-the-witch... [2] https://www.develop-online.net/interview/the-wild-road-to-the-witcher-3/0207553 https://www.develop-online.net/interview/the-wild-road-to-th... [3] https://www.vg247.com/2016/01/13/over-1500-people-worked-on-the-witcher-3-wild-hunt/ https://www.vg247.com/2016/01/13/over-1500-people-worked-on-... [4] https://www.youtube.com/watch?v=w9T48l7Oq0Q&feature=youtu.be&t=6m45s https://www.youtube.com/watch?v=w9T48l7Oq0Q&feature=youtu.be...
- wlesieutre 9y ago
  Minor correction, the communication with the community is funded by "community subscribers" separate from the game development crowdfunding.

mter 9y ago

Most interesting thing about SC is Amazon has a game publishing arm and star citizen is using lumberyard. I hope that AGS has an interest in keeping it's most high profile client alive. Some of my most nostalgic childhood memories are playing privateer with my brother. Having someone who could say no to chris would probably be an overall win for everyone.

jimnotgym 9y ago

EVERYBODY PAUSE! This is not abnormal at all (in itself). If you were going to lend money to a software company, what else would you take as security other than IP? A floating charge is just there to establish the bank as a preferential creditor in case they default. Otherwise if the company became insolvent, the bank would only be entitled to its share of what is left of the assets in proportion to what they had lent. If the bank expected them to default then they would not have lent them any money! A floating charge does not mean necessarily that the bank would be entitled to those assets, if they were of a higher value than what the bank had lent them, for instance. I just took a look at the December 2015 accounts and they show that they burnt £1m in the year, and had £1.1m left. Again, the bank will know their provisional 2016 numbers and their forecast by now, and would not have lent them money that they didn't have the cashflows to repay. The game may be rubbish, the project may be a failure, but a registration of a charge is not a cause for concern in itself. Maybe for instance, the company saw an opportunity that needed more cash?

wlesieutre 9y ago
I'd expect the loan is effectively borrowing against anticipated Squadron 42 sales (the single player game) to keep development moving faster. God forbid they delay that again. Once that's out they can pay the money back and continue work on Star Citizen's persistent universe. As to the ongoing debate over whether the project is "a train wreck", it would be prudent to wait another month or two for alpha 3.0 to land. This contains the first procedural moons, landing locations, significant overhauls to networking, more fleshed out NPCs/missions, initial version of cargo hauling, and more. If they can't deliver on that then by all means get all doom-and-gloom. But it's not that far off to wait. Official schedule still has it targeted for July, but a slip back to August won't surprise anyone.
dang 9y ago
Please don't use uppercase for emphasis. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
wlesieutre 9y ago
Official clarification from CIG if anyone still finds their way into these comments: https://robertsspaceindustries.com/spectrum/community/SC/forum/1/thread/re-uk-tax-rebate-advance-for-foundry-42/277779 https://robertsspaceindustries.com/spectrum/community/SC/for... tl;dr It's an advance on a tax rebate (for SQ42 development) and avoiding currency conversions. The collateral specifically excludes Star Citizen. The primary collateral is the tax rebate which the UK government probably isn't going to default on.

bananicorn 9y ago

Should kickstarter have a clause for failed software projects to be open sourced/the source code/assets be given to the backers? (Not sure what the non-technical users could do with it, but at least they could get what work has been done so far) Of course I'm not implying Star Citizen has failed, this is just a general thought

DavidTWco 9y ago

CIG have just released a statement regarding this (https://robertsspaceindustries.com/spectrum/community/SC/forum/1/thread/re-uk-tax-rebate-advance-for-foundry-42/277779 https://robertsspaceindustries.com/spectrum/community/SC/for...). Pasted below for those who can't or won't visit the previous link: Ortwin: We have noticed the speculations created by a posting on the website of UK’s Company House with respect to Coutt’s security for our UK Tax Rebate advance, and we would like to provide you with the following insight to help prevent some of the misinformation we have seen. Our UK companies are entitled to a Government Game tax credit rebate which we earn every month on the Squadron 42 development. These rebates are payable by the UK Government in the fall of the next following year when we file our tax returns. Foundry 42 and its parent company Cloud Imperium Games UK Ltd. have elected to partner with Coutts, a highly regarded, very selective, and specialized UK banking institution, to obtain a regular advance against this rebate, which will allow us to avoid converting unnecessarily other currencies into GBP. We obviously incur a significant part of our expenditures in GBP while our collections are mostly in USD and EUR. Given today's low interest rates versus the ongoing and uncertain currency fluctuations, this is simply a smart money management move, which we implemented upon recommendation of our financial advisors. The collateral granted in connection with this discounting loan is absolutely standard and pertains to our UK operation only, which develops Squadron 42. As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes “Star Citizen.” The UK Government rebate entitlement, which is audited and certified by our outside auditors on a quarterly basis, is the prime collateral. Per standard procedure in banking, our UK companies of course stand behind the loan and guarantee repayment which, however, given the reliability of the discounted asset (a UK Government payment) is a formality and nothing else. This security does not affect our UK companies’ ownership and control of their assets. Obviously, the UK Government will not default on its rebate obligations which will be used for repayment, and even then the UK companies have ample assets to repay the loan, even in such an eventuality which is of course unthinkable. This should clarify the matter. Thank you.

ino 9y ago
You can format the text in a more readable way.
9y ago

screecwe 9y ago

Just more FUD. Here's the explanation. https://i.redd.it/3yddemsdku5z.jpg https://i.redd.it/3yddemsdku5z.jpg "We have noticed the speculations created by a posting on the website of UK’s Company House with respect to Coutt’s security for our UK Tax Rebate advance, and we would like to provide you with the following insight to help prevent some of the misinformation we have seen. Our UK companies are entitled to a Government Game tax credit rebate which we earn every month on the Squadron 42 development. These rebates are payable by the UK Government in the fall of the next following year when we file our tax returns. Foundry 42 and its parent company Cloud Imperium Games UK Ltd. have elected to partner with Coutts, a highly regarded, very selective, and specialized UK banking institution, to obtain a regular advance against this rebate, which will allow us to avoid converting unnecessarily other currencies into GBP. We obviously incur a significant part of our expenditures in GBP while our collections are mostly in USD and EUR. Given today's low interest rates versus the ongoing and uncertain currency fluctuations, this is simply a smart money management move, which we implemented upon recommendation of our financial advisors. The collateral granted in connection with this discounting loan is absolutely standard and pertains to our UK operation only, which develops Squadron 42. As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes “Star Citizen.” The UK Government rebate entitlement, which is audited and certified by our outside auditors on a quarterly basis, is the prime collateral. Per standard procedure in banking, our UK companies of course stand behind the loan and guarantee repayment which, however, given the reliability of the discounted asset (a UK Government payment) is a formality and nothing else. This security does not affect our UK companies’ ownership and control of their assets. Obviously, the UK Government will not default on its rebate obligations which will be used for repayment, and even then the UK companies have ample assets to repay the loan, even in such an eventuality which is of course unthinkable. This should clarify the matter. Thank you. "

Cynosaur 9y ago

Funny how everyone loves to jump on the hate wagon against this game and company, even on HN - you get a clickbaity sketchy article from neogaf and suddenly everyone is a banking expert? They already released a response, but it's kinda sad that they have to justify stuff like this to "journalists" all the time. https://robertsspaceindustries.com/spectrum/community/SC/forum/1/thread/re-uk-tax-rebate-advance-for-foundry-42/277779 https://robertsspaceindustries.com/spectrum/community/SC/for...