SoftBank-Backed Improbable’s Effort to Revolutionize Gaming Industry Is Struggling

(Bloomberg) -- Worlds Adrift was supposed to be a multiplayer game like no other: think Minecraft meets Second Life. Released to some users in 2018, the virtual world promised to take immersive gaming to another level by using a new technology from SoftBank-backed wunderkind, Improbable Worlds Ltd. Players would build ships to explore a universe of floating islands created by other participants. Then last May its creator, Bossa Studios, said it was pulling the plug. “We fell way short of what the game's original vision was,” Bossa co-founder Henrique Olifiers explained in a YouTube video. “What we have live today is probably perhaps 20% of the game that we wanted to launch, and it shows.”

Worlds Adrift is one of at least three games using Improbable technology that were pulled last year—a setback for Improbable, which promised to revolutionize gaming by helping developers create complex worlds that rival the real one. There are many reasons games can fail, but two people familiar with the situation say Improbable is struggling in part because it surprised developers with frequent updates that forced game studios to spend more time fixing code than perfecting their products.

Founded about seven years ago by Cambridge University students, Improbable is unprofitable and has only one game running on its platform. Since 2018, the company has lost its chief financial officer, chief legal officer, vice president of people operations and chief creative officer, according to their LinkedIn profiles. One high-level person who left said co-founder and Chief Executive Officer Herman Narula didn't give executives autonomy to make their own decisions, from hiring to choosing which projects to pursue. Several people who worked with Improbable and requested anonymity to avoid hurting their careers in the insular gaming industry, also said Narula alienated game developers with his temper—shouting  orders and complaints on the phone and in meetings.

Improbable has since lured a former Disney executive to become the new CFO, is working with several other studios and is starting to develop its own games. Company spokesman Daniel Griffiths said that it's not unusual for game developers to decide against a commercial launch after a trial period. Additionally, he said, studios could decide when to implement updates and were allowed to use an older version of the platform for a period of time. The company offered assistance and kept developers updated of changes in its forums and through emails, Griffiths said. He called accusations of shouting and micromanaging “hearsay” and pointed to Narula's approval rating on the Glassdoor job review site, which was at about 83% when this article was published, and said most reviewers on the site would recommend working at Improbable to a friend.

As for employee attrition, Griffiths said that the company's voluntary turnover rate is in line with the tech industry, which is high. A report from LinkedIn put employee churn for tech at 13.2%, the highest of all the industries it surveyed. Improbable has an internal tool that lets employees offer anonymous feedback as part of efforts to manage its culture, he said.

The London-based startup's travails are just the latest setback for SoftBank Group Corp.'s Vision Fund, which in 2017 led an investing group that plowed $502 million into Improbable. Along with Narula, SoftBank is one of two Improbable shareholders that have significant control, with a stake of 25% to 50%, according to Companies House, the U.K. registrar of companies. While some of SoftBank's bets have paid off, such as its 2018 sale of a majority stake in Flipkart Online Services Pvt Ltd. to Walmart Inc. for $16 billion, several of the Japanese investor's companies have run into difficulties recently. WeWork pulled its initial public offering, robot pizza maker Zume Pizza Inc. announced it was cutting hundreds of jobs in January, and Indian lodging startup Oyo Hotels is eliminating thousands of employees and losing money after an aggressive expansion. SoftBank didn't provide a comment.

Narula, the son of Indian construction magnate Harpinder Singh Narula, founded Improbable in 2012 with Rob Whitehead, a fellow graduate student at Cambridge who's now chief product officer. The men originally worked out of a barn next to Hyver Hall, the Narula family's mansion, before moving to an office in central London two years later. They'd met in the university's computer science department where they bonded over a shared passion for games, dreaming of creating huge, detailed virtual worlds where lots of people could play together.

SpatialOS was going to be the tool that made those dreams a reality. It helps developers create complex, simulated environments. Plants and animals continue to grow and reproduce even when nobody's playing; it can enable programs that mimic how electrical grids, transportation networks and traffic work together. It promised to create elaborate, persistent worlds unlike anything that had been built before. 

“We're in a place today where it is actually possible to create artificial realities,” Narula said in a 2017 interview with Wired. “Basically, we want to build the Matrix,” he joked. SoftBank's investment that year was one of the biggest in a U.K. startup, on par with Google's 400 million pound ($511 million) acquisition of artificial intelligence firm DeepMind. Before that, Improbable got early funding from Andreessen Horowitz, which put in about $20 million in 2015, as well as billionaire Li Ka-shing's Horizons Ventures and Singapore's state investor Temasek Holdings Pte, which were part of a group that invested $30 million later that year. All told, the company's attracted more than $600 million in investment. 

Even after SoftBank's investment, Narula retained control of his company, keeping 75% of the voting rights, according to regulatory filings. 

People who know Narula describe the 31-year-old executive as unusually charismatic and persuasive, drawing people into his “reality distortion field,” a characteristic famously attributed to Apple Inc. co-founder Steve Jobs. During a Ted talk last year, Narula said the types of games his creation enables will reshape human relationships and identity as people spend more time together in huge, collaborative worlds. 

“If we could co-inhabit, co-experience things together, undiminished by physical frailty or by lack of context, create opportunities together—that changes things,” Narula said in the talk. “That bonds people.”

Bossa Studios was Improbable's first big gaming customer to use its technology platform. The two companies began discussions about what they could build together in 2014, giving some users early access to Worlds Adrift in 2018. It was a major departure for a gamemaker that previously specialized in simpler, social titles, such as I Am Bread, “a beautiful story of one slice of bread's epic and emotional journey as it embarks upon a quest to become toasted.”

Following Bossa's vote of confidence, Spilt Milk Studios decided to give Improbable a try with a game called Lazarus. Described as a sci-fi twist on Groundhog Day, the game let thousands of players fight over technology and territories in a world that reset weekly. After about three years letting players test the game, Spilt Milk shut it down in September, saying the game was too expensive to continue and cited the costs of maintaining, running and updating the game as it became more feature-packed. 

On its website, Improbable says it costs “slightly more” to use SpatialOS than traditional cloud-hosted, dedicated game servers. Improbable estimates that for the smallest “templates,” hosted in the U.S., developers are paying 8% to 35% more per hour.

Bossa declined to comment and Spilt Milk didn't reply to requests for comment. Both are focusing on other games. 

The biggest failure so far has been Automaton, a SpatialOS game developer which last year went into administration, the British version of bankruptcy. Its Mavericks: Proving Grounds game was going to be a 1,000-player “battle royale” shooter with users ducking in and out of abandoned buildings and running across landscapes to be the last one standing. The game had weather systems, and players left footprints and shell casings behind that let others track them. Mavericks was going to be vastly bigger than similar games, like Fortnite, which typically host a maximum of 100 people at once. 

Big, complicated games like Mavericks are expensive to develop, and Improbable offered studios financing ranging from thousands to millions of pounds, the people said. Studios in return agreed to give Narula control over aspects of their business including communications and financials, depending on the deal, people familiar with the arrangements said. Game makers also agreed not to make disparaging comments about Improbable, they said.

Last year, Improbable provided Automaton a credit line of about 5 million pounds that could be converted into equity, according to the administrators' report. The deal gave Improbable some control over Automaton's finances. But Improbable became so involved in the game's development that Automaton felt more like a subsidiary than an independent studio, and employees complained that they didn't know who was making decisions, people familiar with the episode said.

Then last summer, Improbable told Automaton, which had drawn down less than a third of its credit line, that it would be withdrawing further funding, according to the administrators' report. No other benefactors materialized, and the firm, which had been profitable through the fiscal year ending in May 2018, entered administration with just 30% of Mavericks development completed. As part of discussions about the company's insolvency, Improbable said it would be willing to take on about 20 staff who'd been working on the project. The company had 40 employees at the time. Automaton's founder, James Thompson, now works at Improbable as head of product research. He didn't respond to requests for comment.

The Improbable loan was meant to be a bridge while Automaton looked for other investors, Griffiths said. The loan was to be used specifically for Mavericks, and did give Improbable some oversight over how the money was spent, but was never meant to fund the game's entire development, he said. Improbable decided not to extend the loan further after Automaton notified them that it hadn't secured any additional money, though the company did contribute to a fund for Automaton's employees who were affected by the administration, he said.

Improbable, which is private, reported that sales rose to 1.22 million pounds for the year ended in May 2019, double the revenue from a year earlier, but less than the 7.8 million pounds in fiscal 2017. Its net loss narrowed to 39.2 million pounds from a 50.4 million loss in 2018 as the company invested in its technology and expanded,  adding employees.

In the absence of significant game traffic on its platform, Improbable has said its main revenue source has come from defense industry projects.

The company's next move is to develop its own games. Improbable has set up studios and bought Midwinter Entertainment, a Washington state-based SpatialOS developer, in September. No games are ready for commercial release, though Midwinter has been play-testing one title, called Scavengers, where opposing players must decide whether to join forces to defeat monsters and survive in the wilderness. The company also acquired game development consultancy the Multiplayer Guys in September and hosting firm Zeuz in February.

There are also a number of other SpatialOS games in development including Seed, a multiplayer game by Klang, and Wizard's Wrath, a fantasy first-person-shooter from DragonfiAR.

Improbable has also recently attracted a new CFO, Dan Odell, who spent 15 years at Walt Disney Co. where he was finance chief of Maker Studios and Disney Mobile and Social Games, the company said. 

But so far, the only game for sale is from NetEase Inc., a Chinese gamemaker that invested more than $50 million in Improbable in 2018. Called Nostos, the multiplayer survival title launched as an early release in December.

“It's a great team with solid technology, and Herman Narula is a visionary CEO,” NetEase said in an emailed statement. “We chose to work with Improbable for their advanced technical capability and the increasing usability of their technology further confirmed our choice.”

Nostos got three out of five stars on game-distribution platform Steam, with reviewers hailing its promise and beautiful graphics, but complaining that the game is unpolished and buggy. NetEase developers posted in January that they realized there were some problems and had been working on improving performance issues.

“I really want to like the game, I really do but there isn't much game here,” the top reviewer, the self-styled Trashgoblin, wrote in December. 

--With assistance from Nate Lanxon.

To contact the editor responsible for this story: Giles Turner at gturner35@bloomberg.net, Robin AjelloMolly Schuetz

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