Sources: Despite Huge Sales, Borderlands 3 Developers Are Getting Stiffed On Bonuses

The video game Borderlands 3 was a big sales success when it launched last spring, according to its publisher, 2K, which described it as “a billion-dollar global brand.” That’s why it was shocking to employees at Gearbox, the developer of the game, when the studio’s CEO, Randy Pitchford, told them yesterday that they would not receive the significant royalty bonuses they expected.

Employees at the studio will get small bonus checks, but nothing close to the tens of thousands or even hundreds of thousands that many had expected. This account is based on conversations with six people close to Gearbox, all speaking anonymously because they were not authorised to talk about what happened. Some said it was crushing news that has upended their financial plans for the future.

Gearbox, based in Plano, Texas, offers its employees below-average salaries for the video game industry, according to more than a dozen current and former Gearbox staff who have spoken to Kotaku over the years. To make up for that, the studio offers something unique: profit-sharing. Royalties from all of the developer’s games are split 60/40, with 60% going back into the company (and its owners) while 40% is distributed to employees in the form of quarterly bonuses. This system has been in place since Gearbox’s inception, and when the company has big hits, it can be lucrative. When 2012's massive Borderlands 2 came out, many Gearbox workers made enough money to buy houses—a fact that the studio often touted while recruiting new employees.

Since then, however, Gearbox has been struggling, failing to find much financial success with flops like Aliens: Colonial Marines (2013) and Battleborn (2016). As a result, quarterly bonuses have been smaller in recent years. In 2020, that was supposed to change. Several Gearbox employees told Kotaku that company management promised them six-figure bonuses following the launch of Borderlands 3. The more years they’d been with the company, the larger the check. This vision of financial success helped Gearbox’s developers get through many long nights and weekends working on the game.

Then, in a meeting yesterday, Gearbox boss Randy Pitchford told employees that Borderlands 3 bonus checks would be significantly lower than they hoped, according to three people who were present. He said the game had been more expensive than expected, the company had grown significantly larger than it had been in the past (it now operates a second studio in Quebec, Canada), and that their sales projections had been off-base.

The game had sold very well—“We expect lifetime unit sales to be a record for the series,” said Strauss Zelnick, CEO of 2K parent company Take-Two, on an earnings call in February—but it cost way too much to make. One large factor was a technology swap midway through development, from the Unreal Engine 3 to Unreal Engine 4, which added a great deal of time to the project. In addition, before Gearbox could receive any royalties from publisher 2K, Borderlands 3 would have to recoup not just the game’s entire budget (around $155 million) but also the budget for all of the downloadable content (for a sum closer to $228 million), thanks to a contract that the two companies had signed.

Pitchford also told Gearbox developers that if they weren’t happy with the royalty system, they were welcome to quit, according to those who were in the meeting. He did not attribute the diminished bonuses to the coronavirus pandemic, which has led to economic uncertainty and pay cuts in many other fields. He did say that he hoped to get more money to employees as an advance from 2K on future royalties.

When asked for comment, Gearbox sent over the following statement:

Borderlands 3 represents an incredible value to gamers and an incredible achievement by the team at Gearbox Software. Our studio is talent-led and we believe strongly in everyone sharing in profitability. The talent at Gearbox enjoys participation in the upside of our games – to our knowledge, the most generous royalty bonus system in AAA. Since this program began, Gearbox talent has earned over $US100M in royalty bonuses above and beyond traditional compensation.

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. Additionally, a forecast update was given to the talent at Gearbox that participates in the royalty bonus to set expectations for the coming quarters. Gearbox is a private company that does not issue forward looking statements to the public, but we do practice transparency within our own family.

Last year, former Gearbox lawyer Wade Callender became entangled in an ugly set of lawsuits with the studio. In one suit, he alleged that Pitchford had taken a $US12 ($20) million bonus in 2016, when development started on Borderlands 3. The bonus did exist, according to two people with knowledge of what happened, but it came out of the company’s 60%, not the 40% of profits that were meant to go to employees.

Still, yesterday’s news combined with word of Pitchford’s hefty bonus has upset a number of Gearbox employees, some of whom say they expect an exodus in the near future. Those who made financial plans based on the expectations set by the company’s management may now find themselves in tough spots.

Gearbox, which is privately owned, has been seeking to go public, according to two people familiar with the company’s plans. It remains to be seen how this news will impact that.


Comments

    There's a reason I didn't buy BL3, and Randy Pitchford being an asshole is the prime one.

    Pitchford gonna Pitchford.

    Dude is a cancer on the games industry.

    Enh. Sometimes that's a factor that influences me when it's uncommonly and specifically outrageous (eg: Blizzard). But pretty much every AAA game being made today has a colossal fucking douchebag at the helm. It's not the cream that rises to the top in big organisations. If I didn't want some of my money going to wastes of skin and air who make the world a worse place than if they didn't exist, there's not much produced on this earth that I'd be able to buy. I'd have to live in a commune.

    That said, I didn't buy BL3 either. Though in my case it was mostly because it looked... well... kinda boring. I didn't see much from anyone to convince me otherwise.

      That was meant to be a reply to @camm.

        Oh definitely, but Pitchford is a special kind of scum that makes even 2K execs look positively ethical.

      That said, I didn't buy BL3 either. Though in my case it was mostly because it looked... well... kinda boring. I didn't see much from anyone to convince me otherwise.

      The reason i didn't buy it because the main villains come off as extremely cringeworthy.

      Gameplay looks decent, just everyone needs to STFU.

    Bonuses can’t be paid based on turnover. They’d have to be paid based on profit.

    Earnings are up, but so are expenses. So there’s less to go around.

    The biggest issue here, besides Pitchford’s attitude, is the lack of transparency. It seems pretty clear they dangled the bonus carrot to incentivise the workforce, knowing full well that bonuses would never be as large as they used to be.

    The additional costs incurred by the company opening a studio in that frozen wasteland to the north should not be a factor in determining the employees' share. In any event, I think I have bought my last game from this studio.

    Randy Pitchford blew it all on coke again huh?

    So im guessing most of the money from the Epic deal went to Take 2 Interactive/2k then theres been some Hollywood Accounting going on

      Also free support and use of the Unreal Engine is one of the perks for developers that epic gives out in exchange for exclusivity, so there is definately some Hollywood Accounting fuckery going on between T2i/2k and Gearbox

      From what I've seen, the Epic payments are an advance, not a bonus. So need to get paid back. Which becomes an expense, while I expect the advance would be counted as profit elsewhere, rather than revenue to 2k. Enter the potential Hollywood Accounting scenario.

      Thats how the Hollywood Accounting works - it moves money around so the real moneymakers are shown to make next to nothing. Or a loss. If there was a $100m advance from Epic, that would take $100m out of revenue, and add it to costs, meaning a net $200m difference in the bottom line they reported.

      To use random numbers.

      If it really cost $300m to make, and they really sold $1b in sales, theres a $700m profit. Thats what it should be. But that advance means it now costs $400m on paper, while only taking $900m in sales - the first $100m sales doesnt get counted, but siphoned off to 'pay' that debt. So only a $500m profit. Thats how they get away with it.

      Not saying that is or isnt the case here (and those numbers are certainly wrong), but theres certainly the opportunity for it to happen with whatever the numbers really are.

        In general, you don't have to pay back an advance. You don't earn any royalties until they exceed the value of the advance, but there isn't any penalty if the work sells poorly (other than it lowering the chance that people will pay you an advance in future). That's the risk that the publisher is taking in exchange for the right to distribute the work.

        The advance doesn't reduce revenue: it just means that it has been booked earlier.

          You've missed what I was saying. Its an accounting trick to move the revenue from one place to another. To use the numbers I did, it means the $100m advance doesnt get credited to Gearbox, but somewhere else in the 2k group. But as a cost, it still counts against Gearbox.

          Yes, the advance doesnt need to be paid back if the game fails, but thats not relevant here. The game sold squillions and made a profit. Just not as big a profit for Gearbox specifically because of this accounting trick.

          Again, its how Hollywood Accounting works and is nothing new. The net result doesnt change, its still revenue somewhere, but the profit/loss of Gearbox does, which is what the employee bonuses are based off. And thats the important part of all this - the sole effect this has is to reduce how much the company has to pay its employees. So, more profit to the shareholders instead.

          Its a dirty trick (as you say below) designed to put profit into the owners and not the people that should be getting it, but theres not much that can be done about it. Want a read?

          https://www.theatlantic.com/business/archive/2011/09/how-hollywood-accounting-can-make-a-450-million-movie-unprofitable/245134/

    Gearbox doing something scummy... is it even a surprise anymore?

    I smell a massive class action suit coming and Gearbox's name forever smeared which is a shame because all they need to do is fuck off Randy Pitchford.

    Wow, I can't believe Randy Pitchford is a piece of shit.
    Wait, of course I can, I've been saying that for years. Somewhere between pretending DNF was going to be good, utterly lying about Alien: Colonial Marines and putting the money they got to make A:CM towards Borderlands 2 instead.
    Not to mention all that weird shit about the child pornography.

    So many negative comments. its a BONUS. these people are still getting paid their wage. if PROFIT isnt up, the BONUS cant be up.
    you all acting like these people are working for free.
    yep commence the downvotes.

      The wages they're payed are below the average, we don't know exactly how much the bonus is, but for all we know the wages and bonus combined could end up being less than they would get with a normal wage.

      A bonus is Not a bonus when it's baked into the remuneration package as a projected profit share (It's a bonus if it's based on arbitrary KPIs). They were sold long hours and lower base salaries on promises the upper management couldn't or didn't deliver... without warning, accountability, or significant reasoning in the eyes of the employees.

      It also doesn't help that marketing and finance has been blowing the damage trumpets about how well Borderlands 3 has been going... then to turn around and suddenly say "oops profits are down" is a shock.

      So... you mean to tell me that if your manager promised you a "big bonus" after a big project only if you work 100+ hour weeks 7 days a week for months on end and then at the end they go "thanks for your hard work and sacrifice but there's no big bonus" that you'd wont be pissed off.

        Even with the article playing fear monger, it still reports there was a bonus. but in the end if youre only doing the work for a bonus then maybe consider a different job? a teenager isnt going to work at mcdonalds just because theres a chance a customer might drop a dollar on the floor.

      Sadly the problem is that the working wages for Devs are so poor in texas, that most of not all the employees were probably relying on this bonus.
      Imagine if it was you. Your pays rubbish, your boss is a jerk, you are on a salary so no matter how much overtime your asked to do you make the same amount of money (and you have to do overtime every day AND work weekends for months).
      You stick it out because at the end you know that if you release a great game, you get a piece of the rewards (because honestly the pay isn't worth it). It will make up for all the unpaid overtime and all the sacrifices you have had to make.
      Then the jerk of a boss (who's has had a bonus of 12 million or so in the lady few years mind) tells you oh "sorry even though the game smashed sales and was a huge Success, yeah, no bonus for you. Don't like that then quit".

      If gearbox was an Aussie company Randy would be in jail.

    This is the kind of dirty trick a company can only pull on its employees once. Presumably they'll have more trouble getting talented developers to accept under-market salaries from now on.

    I wonder how many millions RP got out of the BL3 profits, supposedly from the company's 60%...? Even if he burns all the employees, shareholders & customers after this, he's set up for life - why TF would he care? That's how CEOs & Capitalism work boyz n girlz. :)

    Despite what they say, I'd hazard that the fact that employees facing uncertain job security due to CoVID-19 was a fairly large factor in management's decision to betray them.

      largest factor is simply Randy Pitchford, the guy is an underhanded piece of shit. He has fucked over a tonne of people time and time again.

      And for Randy's latest magic trick your finances will disappear!

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