The following story is spun out of an episode of the Hit The Limit Break podcast. For the full conversation, check out the the video below.
You can also find the interview on Apple Podcasts, Spotify, Amazon Music, and Pocket Casts.
When the COVID-19 pandemic happened, like many other game developers, Obsidian Entertainment was faced with some difficult choices. “To be honest, we were kind of a crappy developer for about a year, a year and a half. There was talk of, ‘Do we scrap Outer Worlds 2 and just throw everyone on Avowed ? [Should we scrap] Grounded ? Because it wasn’t in early access yet. It sucked,” studio head Feargus Urquhart tells me.
Fortunately, Obsidian was able to weather the storm, and now, the developer has several promising projects in the works, including the upcoming RPG Avowed, releasing in February 2025. The pandemic ended up, initially, being an incredible boon for the gaming industry, since everyone was stuck at home and needed something to do.
The growth in the industry during that crappy year, year and a half that Urquhart described, was immense. And combined with low interest rates, a lot of money was flowing into the pockets of developers and publishers. However, in the years since, as interest rates have risen and growth has slowed dramatically, with people no longer quarantining, the gaming industry has been dealt a hefty blow that has seen record setting job losses in the tens of thousands and numerous studio closures in just a matter of months.
This isn’t the first disaster the gaming industry has experienced, and since Urquhart has been a part of it for over three decades, I asked the seasoned developer what moment in his mind competes with the last couple of years for the most turbulent time in the industry.
“The one that was the scariest to me, and it resolved itself somehow, was in the early 2000s and the death of PC gaming,” says Urquhart. “I remember a conversation I had with [cofounder of BioWare] Greg Zeschuk. We were in Edmonton, walking down the street from BioWare, thinking, ‘Are all these games we are going to be making, are we just… not anymore?’ This is not to take away from everything going on in the industry right now and all the people that have lost their jobs, but that was a pretty existential [moment]. Even at Interplay, I was sat down by the heads of the company, and they went, ‘You’re mostly, distinctly a PC group, and… [shrugs].’ It was pretty scary. It was pretty scary for a lot of us, particularly if you were in PC gaming.”
Despite how bleak things are currently in the industry, Urquhart is confident in Obsidian’s ability to not only survive, but thrive, over the coming years.
“Going through all this, I took a look at Obsidian, I took a look at what we were doing, how we were running our business. We’re always making sure that we’re a successful business and that we always have a long runway of games. We basically presented Microsoft in June 2023 with our slate through 2031, 2032. Are we making smart decisions? Are we making products that are going to make money? That’s what it comes down to, and that’s a very harsh thing to say to a lot of people. We have to be making things that make money.”
Having a slate of projects to carry you through into the early years of the next decade is a great, and in many ways, privileged place to be in as a developer. Many of these projects are also happening simultaneously, as Obsidian continues to update its survival game Grounded, is on the precipice of releasing Avowed, and has been deep in development on a sequel to its 2019 sci-fi RPG The Outer Worlds for several years. How is Obsidian able to juggle so many projects?
“A lot of it is a focus on content versus lots of technology,“ says Urquhart. “Grounded is a great example of that. It shipped with 13 people, and the reason it was able to do that was because we couldn’t go and rewrite all this stuff in Unreal [Engine]. We had to go with what Unreal does. That goes back to focusing on content for a majority of our teams. 70%, maybe 80%, of our teams are focused on content. That’s a lot of people making content.”
Obsidian is also fortunate to have a relatively large pool of talent that has worked in the industry, and even just at Obsidian in particular, for a relatively long time. A lack of retention, and the loss of talent thanks to widespread layoffs, is something that many developers have pointed to as a major pain point in the industry.
When asked about the importance of retaining talent, Urquhart has the following to say: “We probably see the worst retention when we’re not being clear about what we’re making. When there’s no clarity on, ‘It’s going to have seven companions, and it’s going to be six regions, and we’re going to do animation this way, etc.’ I think that has added to frustration in people in the industry, even at Obsidian, where there’s just [a lack of clarity]. It has hurt our retention at times, and it’s definitely something I’ve been looking at.”
This sentiment echoes a lot of what some developers have said about studios that have either let go staff, shut down completely, or have even just take an inordinate amount of time to put out a game. Sometimes teams will spend months working on something that they don’t have the full scope of, and then in some cases, gets completely scrapped when a new idea comes into the heads of leadership.
As the industry goes through a dramatic metamorphosis, Urquhart reflects back on what has changed over the years since he first started working on games: “I think it’s that the stakes just seem a little higher. I think back to when we were working on Fallout , and it seems bad to say in some ways, but that was just a game we were working on. Then we were gonna make another game, and then another game, and then another game, and we did it in 18 to 24 month cycles, [sometimes] 12 to 24 month cycles. And we didn’t know what we didn’t know. Today, the games are just so expensive to make in the AAA space.”
This rising cost in game development, particularly at the AAA level, has seemingly left some of the largest studios in the industry fearful, in many ways, to develop new IP and instead, to continuously utilize reliable, pre existing franchises. It’s easy to forget in this day and age the humble beginnings of many of these series, but one that had a massive surge in popularity this year was Fallout, which spawned a TV show that dropped in February that was so popular, it propelled nearly every release of the title to the top of the sales charts.
Fallout was a franchisee that Feargus Urquhart was a part of in its earliest days. I asked whether he thought, if it were to be something that was created today, would it reach the same successful heights? He had the following to say: “I think it’s harder now. I liken it to when someone talks to me about starting a dev studio. If you want to make a studio that’s like us, that makes these big games, that’s super hard. You’ve gotta get funding, you’ve got to be known, because you’ve got to go get 100 million dollars, right? And that’s a big ask. That’s what it’s like to go make a new IP.
“On the flip side, one of the reasons I think Fallout happened… Yes, the stakes were much smaller back then, but Brian [Fargo] trusted Tim [Cain] and trusted those people to go off and do something. It’s sort of like Xbox and us. We can go to them and say, ‘We’re going to go do this thing,’ and they trust us. As long as we can sell it from the standpoint of a game you understand [how it works]. I do think the opportunity is there. You see some opportunities with Unreal and Unity. We didn’t have those technologies back then. It was a pain in the ass! So it’s harder but it’s different. I think there are opportunities and I think there are teams that are trusted to go and create new IP. It does take someone to push that boulder up the hill though!”
Another way big developers have previously found reliable ways to make money is by adapting series that have existed outside of video games such as movies or comic books. However, it seems that that path is becoming increasingly more difficult to navigate to reach the pot of gold at the end of it. For example, Electronic Arts announced it is stepping away from adapting big outside franchises in order to focus more on its own IP, due to increased cost associated with licensing. And from the unfortunate Insomniac leaks that happened earlier this year, we’re learning that the studio, and in turn its owner Sony, is having a harder time turning a profit than before, despite having sold over 10 million copies of Spider-Man 2 since its release last October.
Urquhart and Obsidian have been working on in-house IP exclusively for a while now, but the seasoned developer had certainly dealt with it before, most notably perhaps with Star Wars and the Knights of the Old Republic II. These were Urquhart’s thoughts on the current state of franchise licensing, in turn revealing the cost of development for the very first Baldur’s Gate: ”I think the initial contract we did [at publisher Interplay] on Baldur’s Gate for BioWare was for 550,000 dollars, and then I think maybe it [ended up being] a million, 1.1 million to get it done. That can go on to sell a couple of million copies, and since the amount we put into it was so much smaller, we could pay Wizards of the Coast for a licensing fee and the money all works.
“Now , if you spend 200 million dollars on a game, and then there’s marketing, and it ends up being 400 million, you have to sell 10 million copies just to break even, but your licensor wants to make 10 percent on that 400 million before you make any money… Yeah, that’s kind of scary.
“When it comes to IP, either you believe you are going to sell more units using the IP or you don’t. Oh, and the licensor can’t ask for, like, 50%, because then that’s even more units. Most of the time, I still think the math works. Let’s take Spider-Man, but it’s not a dude that shoots webs, he shoots other stuff. Does that game sell the same number of units as Spider-Man? Insomniac’s awesome! But probably not.”
The math must still work out for Insomniac, which is in the middle of development on a Wolverine game, and if its upcoming slate of leaked titles comes to fruition, more Spider-Man and X-Men titles. And despite the rumors of EA canceling a Mandalorian game over franchise costs, its developer Respawn will almost assuredly create another entry in the Star Wars Jedi series.
Speaking of franchises, one of the projects that infamously failed to materialize at Obsidian was a game set in the Snow White franchise. “We had this really cool game that we were working on with Disney called Dwarfs,” says Urquhart. “I don’t know, we thought it was going well. Disney felt differently. It’s ok. It’s what happens in the industry at times.”
While the Dwarfs project was something previously known, Urquhart reveals more about the title: “It was this precursor [to Snow White], and the idea behind it (this wasn’t our idea, this was how it was pitched to us) was that you ended up exiling the antagonist in the game to the mirror, and that was the guy in the mirror in Snow White.”
After remembering back to development on the game, Urquhart ponders on an alternate reality in which it existed. “If we had been successful there, we would have had a more actiony, third person game at that point, and we would have done well with Disney, and that could have led us down a different path. That would have been very different,” he says.
During our conversation, Urquhart and I talked more about Obsidian’s future, and specifically its upcoming release, Avowed. When talking about Urquhart’s feelings on 2023’s Baldur’s Gate III, the studio head zeroed in on one aspect of that game in particular: “I looked a lot at [Baldur’s Gate 3’s companions]. I want to take a lot of that and compare it with what we’ve been trying to do with companions [in Avowed ]. That’s a lot of what we’ve been talking about internally about Baldur’s Gate 3.”
Urquhart went on to talk about the game in the context of Xbox Game Pass, and how titles that publish to the service have to compete for attention amongst hundreds of other games. In fact, Xbox recently delayed the game from later this year to Feabruary 2025 due to the publisher’s crowded fall release schedule: “We made a specific decision about a year ago. Where the game started a year ago is not where the game starts today,” says Urquhart. “Today, it basically has a prologue, and where we’re putting character creation within that, and how much we’re asking the player to do with the character creation. We said, ‘Hey, we need this more directed experience for people to get a taste for a lot of the stuff so they can understand what this game is. We wanted to get people into the game quicker, and not just hit a wall of too much exposition, too much this and too much that.”
While the studio has been working on Avowed, as well as several other projects, it has had to do so in an increasingly volatile industry. Even Obsidian’s own parent company has laid off workers and closed down studios, including Tango Gameworks, which just launched a critically acclaimed, award winning title with Hi-Fi Rush. A game that Xbox had publicly lauded, on numerous occasions, as a success.
Urquhart revealed what it was like at Obsidian during that period in time soon after the Xbox studio closures. “I had to stop being [at the top], stop thinking about the whole [business],” he says. “What does this mean for everybody? I found that people in their 20s were really worried. People in their 30s? Less worried. People in their 40s? Less worried on top of that. They’d already seen this happen before. Not on the same magnitude, and they’d also been with us longer, and could see how we adapt. Particularly after the Xbox stuff, we had a couple of meetings about it. I realized a big part of it was we had to talk about it more, so people realize I am thinking about it, that everyone else is thinking about it. This is personal to people's lives. Should I buy a condo? Should I get married? Should I have kids? Should I get another dog?! And we all need to be thinking about that.”
For more from my conversation with Urquhart, where we talk about Fallout: New Vegas, Alpha Protocol 2, more Baldur’s Gate, and so much more, please watch the full episode of Hit the Limit Break. Also, consider donating to help build the Limit Break Network into a video game outlet for the future (more details in our FAQ), and check out our own video game Punctuation Pop!
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