Frogwares, developer of The Sinking City and the Sherlock Holmes series of games, has today released a statement alleging serious breaches of contract by Nacon (formerly Big Ben Interactive). Frogwares was forced to terminate the contract and take legal action against the French company after the latter did not fulfil its obligations.
The Sinking City was released on June 27, 2019, for PC (Steam), PS4 and Xbox One, through a licensing agreement with Nacon. It was also released on the Epic Games Store and Switch, though the latter was self-published by Frogwares. Nacon’s stake in The Sinking City was financial contributions made to assist development, with rights granted to sell the game on Steam, PS4, Xbox One and Epic Games Store, alleges Frogwares.
The IP of The Sinking City was to be retained by Frogwares, who has a history of being the producer and owner of the titles it develops.
Frogwares – The Sinking City
According to Frogwares, the deal it signed with Nacon dictated part payments would be made by the licensee for each milestone completed and met. The contract also stipulated revenue would be shared. However, Frogwares alleges that during development, the licensee was “hundreds and hundreds of days behind in payments in total.” Frogwares also alleges that Nacon would pay each due sum late by 40 days on average, while the developer met each and every milestone as required.
Once the game was released, Nacon retroactively cancelled two previous milestones that had been approved. According to Frogwares, this meant “we would not receive any profit from the sales of the game.” A lawsuit was filed in August 2019 and on April 20, 2020, Frogwares terminated the contract with Nacon. However, Frogwares alleges Nacon refused to agree to the termination, citing emergency laws relating to the COVID-19 pandemic and the protection of French businesses as the reasons.
Turnover was up sharply at €15.7 million (compared with €10.4 million for the 4th quarter 2018/19) thanks to the boom in digital sales, benefiting in particular from the “lockdown” effect, which “boosted” games sales. The latter were multiplied 2.7 fold over the period
So, while it seems Nacon is benefitting from the global uptick in the video game industry during the pandemic, it refused to have the Frogwares contract terminated by citing laws designed to protect businesses struggling due to economic downturn perpetuated by COVID-19.
In addition to this reasoning, Frogwares also alleges Nacon continued to refuse its contracted obligations to the former by not providing payment, failing to produce necessary documents and the like. On July 17, 2020, Nacon sought to oppose the contract termination but was unsuccessful and by law, the contract is now terminated.
However, this hasn’t seen the end of Frogware’s problems as Nacon has cultivated a belief that it is the IP owner of The Sinking City; according to Frogwares’ statement. Listings for The Sinking City on digital storefronts and even the copyright notices printed on the physical box were incorrect Frogware’s alleges and believes this created a perception that Frogwares is not the IP holder. Additionally, the Frogwares logo was removed from the PS4 and Xbox One covers with a mention of the developer only included on the reverse side along with “the technical partners.” Nacon released a tabletop version of The Sinking City without Frogwares’ knowledge which also featured an incorrect copyright notice.
Frogwares also alleges Nacon released materials with its stock market prospectus which suggested The Sinking City was owned by the licensee and not the developer. Finally, Frogwares learned in February 2020 that the exclusivity contract with one digital storefront was in danger of being breached due to a pirated version of The Sinking City being advertised on Utomik.
Other incidents described by Frogwares include Nacon demanding the developer turn over the source code for The Sinking City following the licensee’s acquisition of Cyanide, who released Call of Cthulhu in 2018. Frogwares refused and Nacon failed to pay their financial contributions for more than four months, according to Frogwares’ statement. Frogwares also alleges that Nacon refused to provide accurate sales forecasts and income reports making it next to impossible for Frogwares to plan or calculate what it was owed or even how many units of The Sinking City had been sold.
We spoke with Frogwares CEO Wael Amr about the ongoing legal issues and battles who provided additional context and further detail regarding the allegations.
PowerUp! – How did the delayed payments affect development of The Sinking City and what kind of impact did it have on the studio as a whole?
Wael Amr – It became an ongoing hurdle to deal with throughout development. Instead of letting us focus on making the game and keeping things running smoothly, we would have to spend time and resources chasing our payments. Then as the reasons for delay became more and more elaborate, the more time we’d need to sink into chasing. It was an ongoing burden throughout the development of The Sinking City, one that could have been avoided and allowed our team to focus solely on the game and not the red tape surrounding it.
PowerUp! – You mention inconsistent sales forecasts. Can you elaborate?
Wael Amr – Leading up to release we were getting conflicting reports and answers to our questions about how the game might sell. These forecasts rely heavily on pre-order numbers, retailer sales made ahead of launch, previous sales data etc. We were regularly left in the dark regarding this despite multiple attempts to clarify. Whatever info we did receive would be questionable or to our eyes incomplete. Any attempt to clarify was met with resistance.
PowerUp! – How did you find that the domain names which could relate to your upcoming title we’re purchased by BBI and how does this affect marketing going forward?
Wael Amr – We were able to attain the list of purchased domain names from public records filed by Nacon. We have found workarounds to these purchases so our future marketing efforts and for now are secured.
PowerUp! – How did you find out about the pirated version of TSC and how did you know it was pirated?
Wael Amr – We came across Utomik advertising our game joining their service. Up until then, we were never even aware of any talks with Utomik. Since Frogwares is the only team able to prepare a master version for them as BBI / Nacon did not have the final PC source code, Utomik could not have been provided with an official version of the game.
PowerUp! – How does this lawsuit and unpaid royalties affect development of the next Sherlock game?
Wael Amr – Frogwares is quite meticulous in terms of finances and so we accumulated a strong cash autonomy over our 20-year existence. So the development of Sherlock Holmes Chapter One is secured. That said it is still a continual burden on the studio and a drain on resources we could have happily invested elsewhere. Having an even stronger financial safety net would allow us to better expand and plot our future moves, but as of right now this situation places a massive question mark over on so many of our plans and ambitions.
PowerUp! – More importantly, how has it affected staff and morale at Frogwares?
Wael Amr – We never kept any of the team in the dark about the situation so naturally, it took a toll on morale. It created a continual level of frustration and uncertainty that hung over the project, the studio and continues to do so as of today. Personally, we feel at least 10 of our staff have left the studio to find work elsewhere due to this constant uncertainty.
Given the ongoing and serious nature of these breaches and incidents, Frogwares took the step of requesting The Sinking City be removed from all digital storefronts in order to halt any additional sales and revenue from being received by Nacon. Players who’d like to purchase The Sinking City on PC can find a DRM free version directly from Frogwares.
Thanks to Wael Amr for his time.
PowerUp! has reached out to Nacon for comment.