GDC sees a speech from Flagship's director of business development and general counsel Stephen Goldstein about their failures.  From GameSpot's report:

The entire Flagship structure was built on swinging for the fences," Goldstein said as part of his first of 10 lessons. "Everything was solely plan A; there was no Plan B." Especially in these uncertain times, Goldstein said, it's important to not swing for the fences. "If you are in a startup right now, survival is the new success," he said, before urging independent developers to scale back whatever it is they may be working on.

Bill Roper talks about the recent troubles at Flagship Studios.

GFW: But, seriously, would you take the IP back and say, "Now I'm going to do it. Now I've got the resources!" I just mean from an emotional and mental standpoint, more than anything else. Do you feel done, after what you've been through, or would you want it back?

BR: I think it would be rough from that emotional standpoint. I think that's a thing that the general world never sees. They just assume, "These guys make games. They have this business. They did it. It didn't work out. They move on." It's amazingly difficult from an emotional standpoint. You don't start a company, two companies, and pour five years into doing something and not become emotionally attached. It's impossible. For me, personally, it's been incredibly difficult, because this is the first company I've ever started, you know, and been a part of. I kind of always lived and died by the games. As anybody could tell you, during the last days of Flagship, I was pretty much a wreck. And it wasn't because, oh, all our dreams of financial success are flying out the window. It was the fact that here're guys that I've worked with for anywhere from two to five years that we handpicked. Some of them are in their first jobs in the gaming industry.

I was really happy that we did have some successes, that we actually launched the game. And it wasn't like it was the worst game on the planet. It had problems -- we understand that. But it wasn't a complete disaster. We built the company to do that. We built an online game-services group. The Ping0 tech was amazingly stable. I think contrary to people's perceptions, or what they wanted to believe, the only time the game came down in the first days was when we took it down on purpose to fix a bug or address a billing issue. It didn't crash. It was so much more stable online than Diablo II when we launched it. Which I think was a huge mark of achievement for all the guys that did that. So it definitely got to a point where I was just sick to my stomach knowing that at some point, unless we could get some kind of deal worked out, we'd eventually have to lay people off, [that] things were eventually going to go pear-shaped. Once you get over that hurdle, it's not like it's suddenly OK, but it's like breaking up a relationship. Before it happens you're like, "Oh god, I'm never going to be able to do this." You're nauseous. You're up all night, panicked about what's going to happen. After it's done, it's not like you feel good about it, but at least it's done.

So I think if your rich, beautiful woman showed up with that pot of gold -- can I throw beautiful in there, too? -- I would love to be able to try to buy things free and clear. Unhindered by any past encumbrances. I would do a lot of things really differently. I think that maybe part of the silver lining in all this -- and there isn't a lot in a very dark cloud -- but personally, I learned a hell of a lot that I think will make me a better developer, a better executive, manager, whatever. It's a pretty tough learning experience.

Blues News posts the following announcement on a new incarnation for at least a portion of Flagship Studios, from which Bill Roper's name is conspicuously absent:

Seattle, Washington - August 8th, 2008 - The former Flagship Studios Seattle team is proud to announce their reformation as Runic Games (www.runicgames.com). As the team responsible for the highly-anticipated Mythos at Flagship Studios, Runic Games intends to continue to use their expertise in the Action-RPG MMO genre to create the best games in this market.

The studio is headed by Travis Baldree and Max Schaefer. Travis served as Project Director for Mythos at Flagship Seattle, and previously created the bestselling Action-RPG FATE. Max was the Executive Producer for Mythos, and one of the original founders of Blizzard North, the creators of the bestselling Diablo franchise. He was also one of the founding members of Flagship Studios.

Announcements about Runic Games' forthcoming projects will be made in the coming days.

According to a piece at Hellgate Guru, which in turn was translated from a Korean source, HanbitSoft has let fly at Flagship with an angry tirade.  I can't check the veracity of the source or the quality of the translation but here's the closing shot:

HanbitSoft also stated, “Flagship not only lacked effort, but were only looking for personal gain. Firing all of the Flagship employees in order to protect the personal interests of its founding members only shows how selfish and irresponsible they are.”

Flagship Studios is an incorporated company. Hence if any problems occur within this company, it doesn’t affect the finances of any of Flagship Studios’ founders.

They also claim to be well on the way to potentially procuring both IPs.

Flagship has posted an announcement on their forums, saying that while most staff were laid off, the founders remain and they still have control of both IPs (presumably as long as they can find a way to service their loans):

Flagship Studios Still in Operations

San Francisco, CA (July 14, 2008) -- Flagship Studios has announced today that despite rumors to the contrary, the company is still operating.

“It is with deep regret that I must announce that Flagship Studios has laid off most employees. However, the core management and founding team members are still at Flagship.” said Bill Roper, CEO of Flagship Studios. “The past five years have been an incredible experience for us, but unfortunately, we couldn’t sustain the size of the company any longer.”

Flagship Studios owns the rights to all its technology and IP, including Hellgate: London and Mythos. Due to the current situation, Flagship will not be taking any new subscribers for Hellgate: London, and all current subscriptions will not be billed.

Flagship wishes to extend their heartfelt thanks to those that have supported the company and games over the past five years.

Thanks, Kris!

Flagship's community manager has told VoodooExtreme that the company is dead.  Here's their summary:

In summary, Flagship's well is dry, all intellectual property has been lost, all staff fired, and the studio closed. It truly is the end of the line.

Head over to read the details.

Gamasutra reports layoffs from Hellgate London developers.

Gamasutra has received confirmation from a Flagship Studios representative that the Hellgate: London developer has seen significant staff cuts.

This morning, Gamasutra obtained information from a confidential source, who said that staff at both the Flagship development team as well as online services subsidiary Ping0 were let go. Both companies operate out of the same building.

Flagship declined to go into further detail about the layoffs, beyond stating that there was truth to the reports.

Update: Blue's has additional details of what appears to be an attempt to sieze control of the IP by Korean distie Hanbitsoft. The report quotes a translated Korean source as apparently saying "It is hard for us to accept Flagship Studios’ requests for continued support in capital and funding any longer and because Flagship was being difficult" - whether this is correct or not, Flagship has responded, which adds credence:

This story is an outright lie. We have no idea where they are getting their information from and have asked legal counsel to pursue the issue. We are mystified by Hanbitsoft’s conclusions and any attempt to take over the IP will be met with a strong and swift response, to “illegally take over the IP”. All right title and interest in Hellgate; London resides in Flagship Financing, LLC a wholly-owned subsidiary of Flagship Studios. We are outraged that Hanbitsoft would attempt to completely tarnish the reputation of its most vital developer. Hanbitsoft’s new management clearly does not understand the terms of its relationship with Flagship.

Grab that story from Blue's or Hellgate Guru, who broke some of this material.

However, purported lawyers for Hanbitsoft have disputed aspects of the story but go on to claim the IP was used as secured collateral for financing:

We are U.S. attorneys for HanbitSoft. Your story is a repeat of a quote that is not accurate and we request that you pull it down. At the request of Flagship's attorney, we must correct the record:

Please understand that the facts are (1) HanbitSoft is an exclusive licensee of both Hellgate and Mythos in Asia, with rights to sublicense the games; (2) in addition, HanbitSoft is a secured creditor who has been pledged the Mythos (but not the Hellgate) intellectual property as collateral for a loan; (3) Comerica, another secured lender, has been pledged the Hellgate intellectual property as its collateral for a loan; (4) Flagship Studios does not currently own the intellectual properties to either game, which are held in separate companies subject to the security interests of lenders, and Flagship Studios' interest in those companies is also pledged to its lenders; (5) it is unfortunate that Flagship turned down additional investments HanbitSoft offered to make that would have allowed it to keep its doors open, but HanbitSoft hopes to work with Comerica and some of the team at Flagship to see if there is a way to continue to generate content to keep Hellgate online in Asia and to finish the development of Mythos.

Dean Gloster
Nilima Patel
dgloster@fbm.com
npatel@fbm.com
www.fbm.com

Flagship has announced they have secured a line of credit that allows the studio to "not rely so heavily on publisher investment" according to Next Gen:

San Francisco-based Flagship, which also developed the game Mythos for PC, inked the agreement with Texas-based regional bank Comercia for an undisclosed amount that is reportedly in the millions.

Flagship said the money will help the studio continue the development of triple-A and online game franchises as the PC market transitions from boxed retail to digital distribution.

The ubiquitous Bill Roper has been interviewed at CVG, discussing his background with Blizzard in the early days through to the formation of Flagship Studios:

Out of interest, if you were in charge of Diablo 3, what would you do with it?

Roper: Use all of the resources available to Blizzard to take absolutely as long as required to make it what the fans and we wanted - although that is always easier said than done.

If we had the ability, we would have taken longer on polishing Hellgate: London, but that is the difficult balance an independent developer has to strike.

Diablo III is going to be tricky because it has to innovate while still being what the core players want. It will be interesting to see if they go for a specific commercialization model (subscriptions, item sales, etc.) or have company subsidized online play (meaning it is free for the players but not to the developer/publisher) and try and crank out expansions.

You have to place a lot of trust in Blizzard in terms of what they do, and I think that the core philosophies would be the same regardless of who was running the project.

RPG Vault has an interview with Flagship Studios' Steve Goldstein on the business side of bringing an online game to market:

How do you determine your pricing model? Micro-transactions? Subscriptions? Retail box? What factors go into making this decision?

Because we haven't announced any type of pricing model for the online components of our games - or if we will even have a pricing model - I can't comment about what Flagship is doing on this front. That said, there are a slew of issues that a developer or publisher faces, not only when determining what economic model to use (whether it's subscription or micro-transactions) but how to price that product so that it fits within the current market. For example, Arena.net has received accolades for making Guild Wars free to play online; however, if you buy each of their expansions when they come out, about one every six months, that's about the same as paying a $10 a month subscription. Turbine has chosen to maintain the traditional subscription for Lord of the Rings Online, but they are offering a $10 per month plan for pre-orders.

Flagship Studios has opened a new studio headed by casual RPG developer Travis Baldree (FATE) announced their new project, Mythos:

The studio is led by Travis Baldree, Project Director. Baldree previously worked at Wild Tangent as the Lead Designer on the popular free-to-play role-playing game Fate. Flagship Seattle has a diverse history of game development. Other team members have worked on titles including Total Annihilation, Dungeon Siege and SWAT 3.

Flagship Seattle is currently working on Mythos, an online role-playing game that will be used to test the networking technology behind the multiplayer component of the highly-anticipated action role-playing game Hellgate: London. Mythos will be digitally distributed by Flagship Studios subsidiary Ping0, LLC in North America and Europe in 2007. HanbitSoft, Flagship Studios’ partner in Ping0, will be responsible for distributing Mythos in Asia.

“We were very impressed with the work of Travis from when we were first shown Wild Tangent's Fate at E3 2005", said Phil Shenk, Creative Director of Mythos and founding member of Flagship Studios. “Both he and the Flagship Seattle team have an exceptional pedigree in games development. Their skills and expertise make them real assets."

“To be involved in the formation of Flagship Seattle is an honor“, said Travis Baldree, Project Director of Flagship Seattle. “We are sure that Mythos will put Flagship Seattle on the map, and in turn will become an integral part of the Flagship Studios experience”.

Flagship Studios has added new studio called Flagship Seattle, headed up by Travis Baldree.  Readers may recall Travis was the lead developer on FATE for Wildtangent.  The new game Mythos is described as a "casual RPG", but since it appears to be online only, we have the full press release at MMOWatch.