Analysis: What Happened to Telltale?

With the shocking news of developer Telltale Games’ closure last week, a lot of unanswered questions remain in its wake. It isn’t bad enough that one of the most critically revered developers is now gone, one I’ve repeatedly used as an example of creating art in game form, or that hundreds of employees are now without work and severance, but Telltale has always served as a beacon of hope for successful single player games that don’t involve microtransactions. Beyond that, Telltale’s games were heavily focused on narrative and character development. It goes without saying that the gaming industry is losing an important component with the closure of Telltale, and that an entire genre is now heavily underrepresented. There is a lot to consider, including the implications of Telltale’s closing as well as the empty space it will leave behind. First, let’s answer the question everyone is asking: what the hell happened here?

With the industry’s poor tracking of digital media, especially aging back to 2012 when Telltale’s first big hit The Walking Dead released, it’s hard to say with absolute certainty that their games sold particularly well. The best data we have is a very loose estimate by VG Chartz, which claims to use small sets of retail data to estimate game sales. And given that VG Chartz only tracks retail sales, it’s not much of a help. Though, if we are to believe the reported data, you’ll notice a sharp decline in game sales since The Walking Dead with some small spikes in between, such as with the developer’s Batman series. All the same, with my pessimism toward VG Chartz’s practices (they have never explained their methodology), let’s not beat around the bush: Telltale games were popular, and respected developers of popular games don’t often shut down. There are only a few reasonable explanations for what happened, but let’s knock a few of the more illogical theories out, first.

“Choose your own adventure games can’t and will not sell well, and that’s why Telltale closed”

This one isn’t totally absurd, but there isn’t substantial evidence that would indicate point-and-click adventure games don’t sell well. With games like Detroit ranking high on NPD sales lists, there are plenty of recent examples that the genre has plenty of life in it. Moreover, there has yet to be an example of a genre that struck gold once that was unable to do it several times. Even all-consuming genres like Massively Multiplayer Online (MMOs), with behemoths like World of Warcraft eating nearly 50% of the playerbase, the genre continues to produce successful games like The Elder Scrolls: Online. If anything, it would have been reasonable if a company like Quantic Dream (Detroit, Heavy Rain, etc.) shut down because of a developer like Telltale — who owned a massive chunk of the market share in the genre, at least in terms of games released.

“Games need microtransactions to succeed, and that’s why Telltale closed”

This is a much less popular take, but one that deserves addressing anyway. Microtransactions were notably absent in Telltale’s developed games. Though, I’d argue that the existence of microtransactions, thankfully, is still an implementation in a minority of games. Just going by the NPD sales list of August 2018, far less than half of the games on this list included microtransactions. If we were to follow up on all released games, not just including best sellers from cash-hungry publishers, we would probably find an even lower percentage of titles that involve microtransactions. Assuredly, under the right circumstances, microtransactions can provide increased revenue. As we figured out with Star Wars Battlefront II, however, it is not always lucrative to include microtransactions. It is unlikely that any kind of microtransactions or lootboxes would have solved any of Telltale’s financial issues.

With those out of the way, we’re left with just a couple of plausible scenarios:

1. Telltale games were not making as much money as we thought they were making.
2. Telltale expanded too quickly after falsely assuming that similarly large properties like Game of Thrones would bring in comparable sales to The Walking Dead.

It really isn’t possible to rule out the former, so let’s take the idea seriously for just a moment. If the Telltale games weren’t selling as well as we thought they were, it was likely due to a few reasons. The first of which being massive exposure to The Walking Dead, which won game of the year in 2012 and reaped incredible praise from critics and fans alike. Usually, but not always, a game with strong reviews will sell well. This may have been misleading in the case of The Walking Dead, which was still an episodic game without a major retail release. This exposure may have been further propagated from things like YouTube Let’s Plays and Twitch streams, where the game had a large following. Viewers enjoy watching players making decisions for the first time, seeing their reactions and flipping out over the choices they make. It does seem reasonable that for as many people who watch Telltale games, it’s possible that there are not that many people who actually buy them. This theory, of course, is purely speculative.

The second explanation seems most reasonable, and using the principle of Occam’s razor seems like the simplest solution. Since the release of The Walking Dead’s first season, Telltale has composed (or was in the process of making, in the case of three) 16 separate seasons. For a studio that was comprised of a modest 250 employees, this is absolutely unprecedented in terms of production. Of course, the game’s all share the same engine, similar gameplay and often many of the same choice-based tropes. All the same, that’s nearly three seasons a year. Attached to all of this are several large properties, including Batman, The Walking Dead, Minecraft, Game of Thrones, Guardians of the Galaxy and the not-yet-made Stranger Things. While it’s hard to know how much any of these licenses cost to acquire, there’s little doubt that big money was involved when a company like Lionsgate got involved as a minority shareholder at a reported $40 million. These games cost a lot to make and licenses cost even more. For reference, NBC acquired the rights to Harry Potter material in 2011 for a reported $250 million. That is a lot of copies Telltale would need to sell, even if that number is sliced into a fraction of the cost.

If all of the above is true, it seems almost certain that Telltale bit off way more that they could chew. This is where things get interesting, because it seems awfully stupid. And while I don’t have a hard time believing a lot of the theory laid out thus far, I tend to believe that companies founded for nearly fifteen years – eight of those with no real commercial success – aren’t dumb enough to blow their entire cash line the moment they triumph. Still, the evidence is all there: Telltale finds a cult following with small titles like Sam & Max: Save the World (2006), produces a small chunk of games in between with a similar style, finally hits big with The Walking Dead, and then goes bananas; buying the license to all of the aforementioned series. This all happens in a six year span, and there’s exactly zero evidence to say that any of these franchises sold nearly as well as their first big hit. And here’s the kicker: they would absolutely have to sell as well just to make their money back.

So what the hell happened, Telltale? In hindsight, it’s much easier to see where the prolific company went wrong. This is the same management that is now being sued by former employees for breaking labor laws, the same management team that decided it wasn’t enough to buy the biggest license on the planet in Game of Thrones but to go after Mickey Mouse (Guardians) property as well. And we all know that Mickey Mouse doesn’t run cheap. They expanded much too quickly in what was already a pretty niche genre that likely had a low ceiling and high floor for sales. They had a strong base – as is evident by their survival pre-Walking Dead – but wanted more. Perhaps they needed more. This is the danger of video games entering the spotlight as the fastest growing media group in the United States: it’s not just enough to make money, you have to grow, grow and grow. Maybe Telltale was stupid. Maybe this was all their fault. Or maybe they’ve been running toward an inevitable conclusion since they hit it big in 2012.

For more of Ben Vollmer’s work, check out Epilogue Gaming’s “Three and Out” section, where he reviews games under a self-imposed restriction of three paragraphs. If you appreciate his industry analysis, consider supporting the Epilogue Gaming Patreon, where one to two of these kinds of articles are guaranteed thanks to goals being met. You can also find or contact Ben on his Twitter account @BengermanPlays or his Twitch channel, Bengerman10.