Subnautica 2 Lawsuit: Payout vs. Release Delay

The financial heart of this legal dispute revolves around a staggering $250 million earnout bonus. This substantial payout was a crucial part of the agreement when Krafton acquired Unknown Worlds in 2021.

 

The earnout was not just for the three former executives; it was also promised to approximately 100 dedicated developers within Unknown Worlds. This structure incentivized the entire team to drive the success of future projects. The condition for this massive bonus was straightforward: Unknown Worlds needed to hit specific, predefined revenue goals by the end of 2025.

 

The significance of Subnautica 2 to this earnout cannot be overstated. The game, a highly anticipated sequel to a critically acclaimed and commercially successful title, was widely expected to be the primary driver for achieving those revenue targets. Its planned early access release in late 2025 was considered a near certainty to push Unknown Worlds past the required financial thresholds, thereby triggering the substantial payout to the founders and their development team.

 

According to the lawsuit filed today in a Delaware chancery court, Krafton was allegedly well aware of Subnautica 2’s impressive trajectory. The filings claim that Krafton possessed internal data indicating that Subnautica 2 was “on track to meet if not exceed the revenue target” necessary to trigger the $250 million earnout. This crucial detail suggests that Krafton’s alleged subsequent actions were not a result of poor performance or development issues. Instead, the lawsuit contends, the publisher began to take deliberate steps to “essentially prevent that” payout from materializing.

 

The original Subnautica, known for its immersive underwater survival adventure, garnered significant critical acclaim and achieved considerable commercial success, building a loyal fanbase. Its sequel has capitalized on this popularity, remarkably becoming the second most wishlisted game ever on Steam. This immense player interest and strong pre-release momentum would have translated directly into significant sales upon early access launch.

 

The lawsuit argues that this strong market position made the earnout highly probable. Krafton’s alleged efforts to delay the game, therefore, directly threatened the developers’ contractual right to this substantial bonus, transforming what should have been a celebratory launch into a contentious legal battle over financial obligations.

 

Alleged Corporate Interference and Shifting Attitudes

The lawsuit provides a detailed account of alleged corporate interference, painting a picture of a calculated effort by Krafton to undermine the planned release of Subnautica 2. The legal filings specifically describe a pivotal meeting that took place between Krafton’s US and Korean employees. The purpose of this meeting was to discuss the critical marketing strategy for Subnautica 2. Such meetings are standard practice in game publishing, where marketing plans are solidified to ensure a successful launch.

 

However, the aftermath of this particular meeting was reportedly alarming. According to the lawsuit, Krafton’s US employees, who had previously worked closely and collaboratively with the Subnautica 2 development team at Unknown Worlds, observed a dramatic shift in Krafton’s overall attitude towards the game.

 

This change was communicated back to Ted Gill, one of the terminated executives. The lawsuit quotes these US-based Krafton employees as reporting to Gill that “Krafton’s leadership was not focused on a successful launch, but instead on how it could convince Unknown Worlds to delay the game.” This statement suggests a deliberate pivot in strategy, moving away from promoting the game’s success towards actively seeking its postponement.

 

The allegations escalate further, with the lawsuit stating that Krafton’s US employees explicitly revealed highly sensitive information to the Unknown Worlds founders. They allegedly disclosed that “Krafton’s legal team was combing through the agreements looking for any opening to terminate the Founders if they proceeded with the planned release.” This particular claim is grave, implying that Krafton’s legal department was actively searching for pretexts to sever ties with the founders, specifically if they insisted on adhering to the original release timeline. It suggests a proactive legal maneuver aimed at disrupting the contractual relationship, rather than resolving development challenges.

 

These alleged revelations paint a picture of a publisher that was not only seeking to delay a game but was also preparing for potential legal confrontation with its own developers. Such actions, if proven, would represent a severe breach of trust and a direct effort to impede the contractual obligations related to the game’s release. The shift in attitude, from focusing on marketing success to actively seeking delays and legal loopholes, forms a central pillar of the plaintiffs’ case, arguing deliberate malice and a clear intent to avoid the earnout payment.

 

Breaches of Contract: Control, Development, and Termination

The lawsuit filed by Unknown Worlds’ former executives meticulously details alleged breaches of the original acquisition agreement between Krafton and Unknown Worlds in 2021. According to the plaintiffs, a key part of that deal included explicit clauses designed to protect the integrity of Unknown Worlds’ operations and the founders’ roles. The lawsuit asserts there was an agreement that the founders would maintain control of the company and, crucially, would retain control over the release schedule of Subnautica 2. This autonomy over the release timeline is a critical aspect, often a point of contention between developers and publishers.

 

Furthermore, the acquisition agreement allegedly stipulated that Krafton could not impede the game’s development. This clause would safeguard Unknown Worlds from any obstructive actions by the publisher that might hinder the creation process. It also stated that Krafton could not fire Unknown Worlds’ founders without just cause, providing a layer of job security for the key creative forces behind the studio. These contractual provisions were likely put in place to ensure that Unknown Worlds could continue its successful development philosophy post-acquisition, protecting its creative autonomy.

 

However, the lawsuit contends that Krafton subsequently launched a deliberate “campaign to do both”—that is, to impede development and to find reasons to terminate the founders. The legal filings allege that Krafton “failed to follow through on several of its development responsibilities” for Subnautica 2. This includes critical aspects such as pulling essential marketing and localization support. Marketing is vital for generating pre-release hype and ensuring broad market reach. Localization, adapting the game for different languages and cultures, is crucial for global sales. Allegedly withdrawing these core supports would significantly undermine the game’s release potential.

 

Further solidifying these claims, the lawsuit includes a startling internal communication: “Indeed, one of Krafton’s El Segundo publishing employees reported to Gill that Krafton Headquarters told all Krafton teams to stop all creative tasks related to Subnautica 2.” This alleged directive from Krafton’s central leadership, if true, represents a direct and systemic attempt to halt development progress and impede the game’s readiness for launch. It suggests a top-down decision to actively obstruct the project rather than support it.

 

The lawsuit explicitly claims that Krafton took these “obstructionist actions” with the singular purpose of delaying the game to avoid the significant $250 million earnout payout. This motive is directly supported by an alleged conversation detailed in the lawsuit: at a meeting between Krafton CEO Changhan Kim and Charlie Cleveland (one of the founders), Kim purportedly stated that “if Unknown Worlds released the game on its planned timeline […], it could be disastrous financially and hugely embarrassing for Krafton.”

 

This alleged statement directly links the delay to financial concerns for Krafton, reinforcing the plaintiffs’ claim of deliberate sabotage to avoid the bonus. Notably, Krafton has declined to comment publicly on these specific allegations, maintaining a silence that leaves the detailed claims of the lawsuit as the primary public narrative.

 

Public Fallout, Leaks, and Conflicting Narratives

The legal battle surrounding Subnautica 2 has quickly spilled into the public domain, creating a complex narrative filled with conflicting statements and leaked information. After the initial story broke regarding the alleged true reason for Subnautica 2’s delay—namely, Krafton’s attempt to avoid the massive earnout bonus—the situation gained significant media traction.

 

Responding to the mounting pressure and public scrutiny, Bloomberg reported that Krafton subsequently “agreed to extend the timeline for the earnout” to account for Subnautica 2’s later release. This move, if confirmed, could be seen as an attempt by Krafton to mitigate some of the legal and reputational damage.

 

It suggests an acknowledgment that the original timeline was indeed disrupted, regardless of the reason. This contrasts sharply with Krafton’s previous public stance. Earlier, the company had “denied that it delayed Subnautica 2 for any other reason but to polish the game.” This claim positioned the delay as a quality-assurance measure, a common and often lauded reason for game postponements, intended to deliver a better product to players. The lawsuit, however, directly challenges this narrative, arguing the delay was financially motivated.

 

Further complicating the situation, an internal document regarding Subnautica 2’s development was leaked on Reddit earlier this week. The document, presented as two pictures taken of a computer screen, offered a glimpse into the game’s development state. It specifically outlined the content originally planned for the game’s early access launch and detailed how some material had to be changed or removed to meet the revised, later release date. This leak provides a tangible look into the development process, showing that adjustments were indeed made to content.

 

Significantly, Krafton publicly acknowledged the veracity of these leaked documents. In a statement, the company said, “Given these circumstances, Krafton has determined that transparent communication is necessary and has chosen to confirm the authenticity of the document.” This admission of authenticity is a critical point. While on the surface it might appear as an act of transparency, the timing and context suggest a strategic move by Krafton.

 

By confirming the document’s authenticity, Krafton could be aiming to “bolster its argument that Subnautica 2 was not ready for its early access release.” The leaked document’s details about removed or changed content could be used by Krafton to support its claim that the delay was necessary for polishing and refinement, rather than being solely driven by a desire to avoid the earnout.

 

This creates a nuanced and highly contentious situation. The plaintiffs argue deliberate sabotage for financial gain. Krafton, while confirming a document showing development adjustments, maintains the delay was for quality. The legal proceedings will likely scrutinize these conflicting narratives, internal communications, and development timelines to determine the true motivations behind Subnautica 2’s delayed release. The outcome will have significant implications not just for the parties involved, but potentially for future publisher-developer relationships in the gaming industry.