A year ago, Fallen London and Sunless Sea developer Failbetter Games successfully pitched Sunless Skies on Kickstarter. The upcoming project was funded in four hours and its crowdfunding campaign concluded with nearly 400 per cent of the money needed to smash its financial target. In September last year, Failbetter won a GamesIndustry.biz award for being one of the best employers in the UK video games industry. The team gave enthusiastic quotes to Eurogamer's sister site about the benefits of working at the tiny, tightknit outfit. Failbetter, seemingly, was on a high.

But last week the London-based studio surprised fans and Sunless Skies backers alike with the news it had delayed the game and would cut four staff - a quarter of that same, tiny studio. Those who had talked so positively of life at Failbetter just six months prior were among those headed out the door. Failbetter announced the delay and lay-offs via a blog post which blamed redundancies on a need to slim down its workforce and work on one Sunless Skies-shaped project at a time, a move it said was necessary to protect the future of the company. The news came out of the blue for Failbetter fans, but for staff at the studio, it came as no surprise.

Eurogamer was alerted to the upcoming layoffs and complaints of poor management at the studio several weeks ago, and over the past month I have spoken with around a dozen Failbetter staff, past and present, both before and after the company made its public announcement. These claims have found voice in Failbetter's former boss Alexis Kennedy, who left the company in 2016 but has remained close to the team he founded, and a number of others who have chosen to speak out but wished to remain anonymous for the sake of their careers. These complaints have also, it is equally worth noting, been broadly denied by the studio's board and the majority of other Failbetter staff continuing at the studio.

The claims paint a complex picture of a studio where a number of staff felt unhappy with the overall progress of Sunless Skies and with Failbetter's board for acting too slowly or too cautiously to avoid the current layoffs. But the picture is not black and white, it's hard to pinpoint where and when mistakes could have been corrected, and there are plenty of voices still keen to speak up and defend their team as it navigates a period of significant internal change.

Alexis Kennedy's departure in mid 2016 placed the studio in the hands of other board members - senior staff variously described to me as excellent artists, writers and programmers but people who were better suited to leading alongside Kennedy, rather than without him. Kennedy's exit also left the company with less money in the bank - although the former creative director told me he had the company buy him out for 60 per cent of the cash in the company rather than 60 per cent of its value, in a deliberate bid to ensure things could continue to run smoothly.

Regardless, when considering its next project, Failbetter prudently decided to follow 2015's successful Sunless Sea with a sequel, Sunless Skies, built by the majority of the same team, with similar gameplay mechanics, and released for the same audience as the original. (Another idea, a Banner Saga meets FTL game starring sentient rats, was dropped at this time.) Finally, to provide another bump in funds over the middle of last year, Failbetter pursued an iPad release of Sunless Sea - a game seemingly well suited to a touchscreen interface. Both projects hit problems.

People who worked on Sunless Sea on iPad felt it should have been a success. As a highly-rated game featured on the App Store by Apple around the world, it had everything going for it - except its £9.99/$9.99 price point. Several team members had expressed concern about the price, but the board wouldn't budge. "There was an emergency meeting to find out what the company could do," one person told me, explaining the aftermath of the app's launch. The app was highlighted in all but two countries worldwide but failed to sell anywhere near the numbers expected. "The answer we got was that its release had actually just been an exercise in data gathering - which was news to those who worked closest on the project."

"I remember somebody making a recommendation for a lower price point for Sunless Sea iPad," another person confirmed, "but it being decided to go with a higher price on the understanding it'd be easier to lower the price later." Unfortunately, there was no later - the App Store simply moved its valuable featured spotlight to something else, and the port sank after a tiny fraction of those who had seen the game on the store decided to purchase. It remains £9.99.

When asked if the pricing of the iPad version had been a mistake, Failbetter CEO Paul Arendt told me via email he "didn't think so". "Sunless iOS might have sold more copies at a lower price point, sure," he continued, "but it might also have devalued our flagship product and undermined PC sales. It was our first port, it was enthusiastically received and we have a tonne of data to fall back on if and when we do it again. I consider it a success."

I contacted Failbetter for comment midway through researching this article, mentioning the behind-the-scenes difficulties I had heard, and a feeling of distance between some employees and the studio's board. In an unusual move, Failbetter suggested the majority of its small team team might respond to Eurogamer as well. Many of their responses duplicate each other, but I've included a sample throughout this article for balance.

"We'd almost certainly have made a bit more money if we'd gone for $7.99, rather than $9.99, but based on the data we've had from sales and testing, a lower price would have only made a small difference," Failbetter's narrative director Chris Gardiner, another board member, told me. "And certainly not enough to affect our long-term situation. It was a difficult decision."

Staff I spoke to under condition of anonymity said they had been told by management there was "no money in mobile". Kennedy recalls being "disconsolate" at the app's failure and the fact board members had not listened to other staff's concerns - a criticism I have also heard began around this time when staff enquired over the company's ongoing financial status.

While Sunless Sea floundered on iPad, Sunless Skies was failing to take off on PC in either alpha or Early Access. Despite its Kickstarter success, plans had been drawn up and budgets made for the game based upon the Early Access sales of its predecessor - which it had nowhere near matched. In last week's blog post, Failbetter admitted the sequel had sold something like 15 per cent of the original over the same period in Early Access. The blog post blamed a "hugely different" marketplace to the one it had launched Sea into - triggering the need for its redundancies. But why was Failbetter only announcing this conclusion now? What had it done to try and turn things around? Speaking to Kennedy and others who chose to remain anonymous, it is clear staff at the studio were concerned at an early stage - but received little to no warning of what was to come.

"I was in contact with my former colleagues a lot after leaving," Kennedy told me, "we saw each other socially and went for lunch, and in September I became aware of the sales figures for Sunless Skies in Early Access. And when I saw them my jaw dropped - they were substantially below what I expected and well below Sunless Sea. I spoke to former colleagues on the board who said 'yes, it's surprising but not a problem, we're just going to carry on as we were because the launch will be very successful'." I've heard from others close to the studio who asked similar questions and received the same dismissals.

When pressed on how soon the board sensed trouble, CEO Paul Arendt told me that yes, they had identified September sales as "disappointing", although this warning does not seem to have been passed on to other staff. Another source who wished to remain anonymous told me it was "apparent something was wrong but because Failbetter is full of nice people, if something like redundancies were on the horizon, we assumed they would say something - it wouldn't just be dropped on us".

"I went to meet with another former colleague on the board," Kennedy added, "and said 'you're telling the team it's okay but it's not, this is the terrain warning on the plane saying 'pull up', and you have to do something. The response I got was 'everything's fine, everything will be great when we go to full launch, you don't understand how the company works any more'.

"We were clear at Failbetter that you needed to have transparency. I used to put the numbers on the company all-hands slides. Here's our burn, here's our current revenue, here's our current runway, here's the business we need to do to keep surviving. And they stopped doing that. People didn't know what the actual situation was."

When asked if this was correct, deputy CEO Adam Myers said the company had "shared information about sales revenue for our games in the past and still do so periodically, especially for Fallen London, for which we hold monthly stats presentations", but that it did not "standardly share detailed information about our outgoings, and never have (at least, in the four years I've been here). Doing so would be very unusual, in this industry or in others".

Regardless, one person told me staff were "aware things were not discussed, monthly financial breakdowns were not being shared, and projects were not reached on time". There were other issues, too, relating to the studio's overall production pipeline. Several people have said the board refused to allow anyone but themselves to directly manage others, a decision which grated and fostered a feeling that non-board members were not trusted. As one person put it to me: "Experienced specialists were being ignored."

Another complaint revolved around staff training. "We had a few projects designed to train staff up, they seemed like they'd been pretty successful," one person speaking anonymously said. "Others were planned, but were nixxed when they realised Skies wasn't selling well." The description of the studio given to GamesIndustry.biz last year boasted of how Failbetter was "taking employee pitches for our next game, which we hope allows every employee to express their creative ideas" - another idea which seems to have failed to materialise amidst draining finances.

But while longer term issues bubbled under the surface, October brought a more pressing change, as Sunless Skies' game director and producer departed the studio.

Reaction to the departures within the small studio was mixed. "We had significant project management issues," a Failbetter staff member - one of those happy to come forward in defence of the studio - told me. "And in the last few months [we] have changed producers which has helped enormously." "There was a little concern when [the director] said they were setting sail because he held so many different roles here," another Failbetter team member added. "But they spent the next three months training people up and passing on his knowledge. His roles have been taken on by other members of the team who have stepped up to the opportunities and are doing a cracking job."

How did the board respond? I've heard they decided to focus on righting the Sunless Skies ship, which distracted from the company's overall financial future. "They decided to deal with getting the project under control first, even though people were aware the bigger picture wasn't looking good," someone speaking to me under condition of anonymity said. "I think I understand that, but I guess I'm not sure I think that was OK. It was a tricky call."

"The departures contributed to the decision we weren't equipped to run more than one game at a time," Failbetter boss Arendt told me. (Failbetter had previously worked on various projects with varying amounts of overlap, including Sunless Sea and its DLC, Fallen London on the web and iPad, BioWare's The Last Court and another cancelled project.) "We historically have a low turnover, so the departures did affect morale for a while, but people do move on even from Failbetter," Gardiner added. As far as I've been able to ascertain, only one other person has resigned in seven years - someone whose spouse took a job in another country and wanted to go with them.

Failbetter Games, in September 2017.

Around a month after the departure of Sunless Skies' producer and game director, Failbetter granted everyone at the studio pay rises - just six weeks from the point it finally told staff the studio was running out of money and reduncies were probably necessary. With hindsight it sounds an inexplicable decision, when the Early Access sales of Sunless Skies were already clear. It's something I put to Arendt.

"We believe in paying people fairly," he told me. "Until recently, we were operating on a system that encouraged staff to seek pay rises and research an appropriate market rate themselves, but we felt that discriminated against the diffident, so we spent a couple of months planning out a more transparent and equitable system based on brackets and increments."

And still, the message to staff was that, despite Skies' relative lack of sales and the high profile departures, development was still largely on track. "The message now was 'actually, there were some extra issues," someone speaking to me anonymously explained, "but we'd just have to work extra hard and everything will be fine, don't worry'."

The threat of redundancies was finally announced to staff in early December, two days before Failbetter's Christmas party. Around a third of the company was at risk, staff were told, and exactly who would be out of a job would be decided in around two months time.

Deputy CEO Adam Myers says the decision was reached "reluctantly (and honestly, later than we probably should have)". Some staff were flabbergasted, and asked for the pay rises given just six weeks prior to be rolled back instead. "We considered rolling [them] back, of course," Arendt added, "but you can't just roll back a pay rise across the company unilaterally, and doing it in a few cases would have made minimal difference. In any case, it would have done nothing to address our structural issues."

Myers told me the redundancies were "not expected to have much of an impact" on Skies' now publicly delayed release schedule. "Only one of the people leaving us was doing substantial amounts of work on the project, and based on our estimates for the work remaining, the project wasn't and isn't bottlenecked on the area they contributed to.

"We had a very successful Kickstarter, and the way we've managed our finances has ensured that there's never been any question about our ability to complete Sunless Skies," Myers continued. "Instead, the key issue was ensuring the company could survive and keep making games if sales didn't improve after launch.

"Also, we had more staff than we needed for Sunless Skies and Fallen London, but not enough to work on a third game in parallel. And it would have been untenably risky to make more hires at this time in order to allow us to do that."

"Could we have begun the redundancy consultation process sooner? Possibly," Arendt told me, "but it's not something you rush into." The decision to begin a consultation process was made in late November, he says - around a month after the pay rises - and was then communicated to staff in December. The Christmas party was due to take place two days after the board broke the news to team members, but was cancelled after board members gauged the sombre mood within the office. Everyone was given a day off instead. "The process itself did not begin until January," Arendt concluded, "because we wanted to give our team as much time to prepare as possible."

During this time Failbetter brought in an external consultant to oversee the process, although I have heard some staff felt this was more to "protect the board rather than protect employees". I've heard staff during the consultancy process asked about the October pay rises, and queried whether the company had exhausted all other avenues of financing, including signing a deal with a publisher or distributor to bring more cash in. "They didn't appear to have the answers to that list of questions," one person familiar with the situation told me, "and if they did look into it, you would think they would have."

"The people who were let go - none of whom are stupid, we don't hire stupid people at Failbetter, and some of whom crawled over broken glass to get there - asked a bunch of searching questions," Kennedy tells me, having spoken to those who went through the process. "'Have you talked to publishers, investors, have you thought about rolling back pay rises, has the board thought about taking a pay cut, have you thought about financing?' And they didn't share financials, they didn't give indications for what else they've done"

Staff who survived the redundancy process told me via email they could "understand the arguments" put forward. "It's been an enormously difficult period for everyone. I've hated every moment of it," board member Gardiner added. "However, having gone through it, there's a sense of resolution, of excitement for the future, and a determination to make the best, most beautiful, weirdest games we can; which is what all of us got into this for in the first place."

"Most staff remained positive throughout the process," another Failbetter staff member told me. "We're a family here at Failbetter and we love each other, but everyone understands that it's also a business, and that when these sort of decisions are made it's not personal. It's been tough for all of us. It's been tough for me to see the people I love hurt by having to make these decisions, but they were the right decisions to make and I stand by them."

I have spoken with the external consultant brought in to work with Failbetter while the list of candidates for redundancy was whittled down. Here's the statement they gave me:

"I was called by Failbetter in December last year as they wanted some independent advice on how to run a consultation process because they had, in their strategic reviews of the business, come to the conclusion that something needed to be done both from a financial and structural point of view in order to keep the business afloat. It was at this point they told all their employees of the difficult financial and structural situation which could have consequences for the staff. This is exactly what companies are obliged to do - i.e. tell their staff as soon as they know that there is an issue in the business which could possibly have an effect on employment.

"In January, the consultation process continued. The consultation process is the process by which companies exhaust all other options, as redundancy is always the last resort. This process progressed according to policy with employees given ample time from invitation to meetings, being accompanied by work colleagues and given the opportunity to provide ideas for alternatives to a redundancy situation. During the consultation process the company also reviewed other options to avoid a redundancy situation. Selection criteria were used for those who were in a 'pool' of 'at risk' individuals and individuals were offered alternatives to redundancy where possible. When it was clear redundancies would have to be made, the company was, in my opinion, generous in their financial offer to staff and went over and above their legal and moral obligations."

I got a sense that those still at the studio are now keen to press on, keen to get Skies out the door. And from some, there was a sense of irritation at the spotlight being shone on the studio. "I think it's very telling that a lot of the remaining junior staff are keen to stand up and defend the integrity of the company, while those leaving seem to be speaking out," a Failbetter staff member told me via email. "Now that the process is over the negative feelings have left and there is a real lift in the office."

Accounts of morale and a lack of communication between staff and board members appear to vary wildly between employees. I asked Failbetter about reports I'd heard that the atmosphere in the office had recently grown "toxic" - and all those still at the studio refuted the claims. "I'd like to strongly refute any suggestion that our work culture has become 'toxic'," one Failbetter employee told me via email. "I think the term used massively overstates the situation, and risks minimising the impact of the term."

"Communication between junior and senior staff throughout this period has been open and frank," another Failbetter staff member keen to defend the studio told me. "It has never felt like lines of communication were being closed down or that a divide was being created between junior and senior staff, beyond the distance that certain juniors were voluntarily creating themselves.

"The vast majority of staff have come out of the other side of it feeling positive and optimistic for the future," the staff member continued. "I've been aware of the dissatisfaction felt by some of those people affected by the redundancy procedure. I feel some staff members found the very principal of redundancies impossible to reconcile and are now seeking to spread blame for what was a painful but necessary process."

Could these redundancies have been avoided, with greater planning? It's worth pointing out Failbetter went through a round of redundancies before. "We did lay people off when things were at their very fucking darkest in 2012," Kennedy explained, "but that was when the company was literally six weeks off not making payroll - which is not the case here. And we subsequently hired one of them back. And yeah, business is business but Failbetter was a different kind of company.

"I do not see how you can get from running a hugely successful Kickstarter in January, which is almost 400 per cent funded, through saying 'everything is fine' in September, to then saying in December 'we're down to our last resort, there's nothing else we can do bar laying people off'."

Looking to Failbetter's future, there is again a mix of opinions on what lies next. All voices, past and present, are quick to acknowledge the talent still present at the studio. But there is a continued sense that many of the same people are not good managers, and could have done more to prepare or safeguard the company ahead of what was to come.

"People have expressed self-doubt as a result of the way they've been treated in what was once an incredibly lovely company," one person speaking anonymously told me. "I believe the board thinks they've given this their best shot, or have convinced themselves for their own mental health that they have. There's no sense the board are this evil megacorp who have consciously decided to burn through their resources, but they have let everyone they are responsible for down in a variety of ways."

"I believe the mood is now one of optimism and hope," Failbetter deputy CEO Myers told me in contrast. "People seemed genuinely excited when we viewed some smaller potential offices yesterday."

Staff seem hugely enthusiastic to see Sunless Skies finally launch, and described it to me as "astonishing, unique, elegant" and "the most Failbettery thing" the studio has made. Arendt tells me it is "comfortably on course for a release this year" and backers will get a revised release date "later this month". This revised date will come with "the usual caveats: we're a small company, so there's always the risk a couple of key people will get hit by a bus during their lunch break, and of course we have to dodge giant AAA releases".

It's tough to know what's next for Failbetter until Skies sees a full release but, without six of the staff present at the studio just six months ago, I get the sense this new Failbetter is now working with something to prove. "I sympathise with people not wanting to address problems - there's just a deep unwillingness to engage," Kennedy concluded. "Even now, if the people running the show came down from their notional boardroom and said 'we fucked up, here's everything we're going to do, we're including you in meetings and talking to you rather than just saying everything's okay', even now things might be turned around."

In addition to speaking with the studio's staff and board, Failbetter provided a separate statement to Eurogamer for this article. It is reproduced in full below:

"This is very sad and disappointing to hear. While we won't comment on specifics of a redundancy process: Sunless Skies sold 15 per cent of what Sunless Sea did in a comparable period after launching into Early Access. We came to the decision to make redundancies last year due in part to financial projections and in part to enable us to concentrate on a model of one game in development plus maintaining Fallen London. We want to be able to make games without gambling the company's future on every release, and that meant making some cuts. The redundancy process was overseen externally, adhered to the best possible practice, and was notably more thorough and generous than required by law. It was incredibly hard on all of us, which is natural, especially in such a small company.

"Sunless Skies is going to be delivered later than the date proposed during the Kickstarter (May 2018). Development is progressing rapidly (check out our latest Exploration build if you want to see more), and there's no danger of us failing to deliver the project you backed. Our primary responsibility externally is to our backers, and we want to reassure them that Sunless Skies' production is in good shape. Delays to crowdfunded games are common, because delivery dates have to be shared much earlier than for privately funded projects. We'll deliver an excellent game that matches the pitch; currently, we're finalising a revised timeline that takes into account the ongoing feedback we're receiving from our Early Access players, and we don't want to rush into giving a date now that we'd later have to change.

"We're hopeful for the understanding of our community, many of whom were with us when Sunless Sea delivered later than promised; in our experience our fans and backers have been happy for us to take the extra time where required to make the best games we can. We look forward to making an announcement with a new release date later this month."