Loki Speaks up on Chapter 11

Traivor writes "Loki sent an email to all its customers about the chapter 11 filing. The most interesting bit is they claim to be making money." I've been rooting for Loki forever (and I've taken to buying all their releases even tho I don't have time to play them lately ;) Anyway, I've atached the email to this story so you can read it if you're curious.

The following is an email sent by Scott Draeker of Loki

Dear Friend of Loki:

As you may know, on August 3, 2001, Loki filed a Chapter 11 reorganization. As our valued customer, we wanted to let you know why we have elected to reorganize and how, if at all, it will impact our ongoing business.

Under US law there are two kinds of bankruptcy:

1. Chapter 7 is a liquidation. We have not filed a Chapter 7 and have no intention of doing so.
2. Chapter 11 is a reorganization. This will allow us to deal with our creditors fairly and equitably and at the same time continue to operate the company. We are still shipping products and porting new games and expect to be doing so for a long, long time.

Most of the debts we are restructuring through the Chapter 11 are well over a year old. They represent mistakes made by a young company. We've learned from our mistakes and become cash positive. Going forward we have every confidence that Loki will continue to be successful and grow.

We cannot say for certain how long Loki will remain in Chapter 11. It depends on many factors. However we do intend to bring the process to a conclusion as quickly as possible. Once our plan of reorganization is accepted by the court, our creditors will receive an agreed upon settlement and all other prepetition obligations will be fully and finally discharged.

During and after the reorganization your orders will continue to be honored. We will continue to provide end user support, bug fixes and new products. Negotiations are in progress to guarantee Loki a steady stream of additional AAA games to bring to Linux.

Most importantly, we'd like to thank each of you for your support over the years. Without our customers, we are nothing. The outpouring of support we have received in the last few days has been overwhelming, and we will continue to do everything we can to merit that support.

Kind regards,

Scott Draeker
President, Loki Software

More informative media on Loki

[jvmatthe]

Read the LinuxToday [linuxtoday.com] tell-all article here [linuxtoday.com] where it goes into the real story about Loki and how bad their situation is.

Also, LinuxGames [linuxgames.com] did a retrospective article [linuxgames.com] the night that the Loki news first broke. It covers history, achievements, difficulties, and the possible future of Loki. Read it here [linuxgames.com]

Re:Not Enough Income is Just That

[RazzleDazzle]

Yo, read the letter! They ARE making money now. Loki is very high class; there is no reason they shouldn't make money.

Different pictures

[maelstrom]

This Linux Today column [linuxtoday.com] seems to paint a different story. Implying that the company was on the edges for quite some time, being funded by employee credit cards.

Who's right?

Windows First, Linux Later = Max Profits

[Anonymous Coward]

I've seen numerous people suggest that a simultanous Windows/Linux release would be best for both the Windows developer and Loki. That is not true for the Windows developer.

Most Linux gamers buy the Windows version. They dual boot, use wine, use a second PC, whatever. A Windows sale is better than a Linux sale for the developer, they don't have to share anything with Loki. A simultanous release would result in many Linux sales replacing Windows sales, bad for the developer.

After a few months the Linux vesion can be released and the purists who can only be reached with a native Linux version can be taken care of. As an added bonus other Linux loyalists who already purchased a Windows version will purchase a second copy to get a native Linux version.

In terms of when to release a Linux version, simultaneous or after the Windows version, the interests of the original developer and Loki are in direct conflict.

As to the theory that sales are lost when a port arrives after the original. The Mac porting experience shows this is not necessarily the case. Mac ports that followed the Windows version by a year or more zoomed to the top of the Mac sales charts. Their sales numbers being comparable to simultanous Windows/Mac releases.

Oddly enough, Loki has a small benefit from not having a simultanous release. They don't have to support a 1.00 product, they get a few rounds of bug fixes and patches in their initial release. This in no way make up for the loss of sales due to Linux gamers who will only buy the Windows version. However some Mac porting companies have had their "profits" wiped out supporting buggy 1.00 releases.

Re:Reality Bite on Ch. 11

[Xerithane]

No, a lot of companies pull out of Chapter 11. It's not champagne and lollipops. Most of the time it's stupid decisions made in the beginning of the company, like Scott said.

The purpose of a Chapter 11 is to re-establish a relationship with your creditors so you can start getting your business setup again.

You file because of bad times, bad decisions, bad whatever. Hopefully it goes good, and it fades into history.

Re:I've changed my mind...

[Kirby]

I'd suggest instead buying the games you think you'd like to play, and not buying the ones you won't.

I don't fully understand the idea of supporting a company on principle, or based on who is in charge. If they produce quality product that I want, I'll buy it.

I can see arguments for not buying from companies whose owners have political or ethical stances you disagree with, like Dave Thomas of Wendy's (outspoken anti-homosexual). But because their president has poor business sense? That's the sort of thing that either they'll straigten out, or the market will straighten out for them, but doesn't seem like a worthwhile use of, effectively, a boycott. But hey, if you have moral and ethical issues with people who can't manage a company and its debts, knock yourself out.

Sound very typical

[2Bits]

The tone and wording of the letter sound very typical of a company in ch. 11. Have you compared the letter/press release of different companies in the same situation?

I remember when I was interviewing at Montgomery Ward in 97 for a network design engineer position. I didn't follow the news, so I didn't know MW had just filed ch. 11 the day before the interview. The director who interviewed me brought up the issue as soon as we sit down. It sounded almost exactly like this.

Ch. 11 gave them almost 4 years, but it still went down.

Re:Buying Time

[jguthrie]

You know, less than a decade ago Continental Airlines went through "Chapter 11", and their airplanes still take to the air every day. Yes, a bankruptcy is a dramatic step, but smart people who own a business will consider it long before the company is on its last legs.

It can also be good for the creditors, too. You can't get money from a company that's filed for Chapter 7, as that means the company has gone out of business, but generally the payments are rescheduled in a Chapter 11 bankruptcy so the creditors at least have a shot at getting all of what they're owed.

Of course, the folks at Loki probably would rather have not filed for protection, as it is a very public admission of being in over your head, but this doesn't mean that they're going to go under no matter what.

I've changed my mind...

[ChaoticCoyote]

In the earlier thread, I urged people to help out Loki by buying their games. In light of recent information (both obtained through friends in the biz and various web articles), I have changed my mind.

I've worked for companies where someone held things together using their personal credit. That's a sign of poor management at best, and sheer stupidity at worst.

Given what I know now, I'd say wait to buy Loki products until someone other than Scott Draeker is in charge there. That's what I intend to do, at least. I was going to buy the Linux port of Kohan this weekend (I own the PC version already); now, I think I'll wait and see where Lokie ends up before giving them my money.

Re:Reality Bite on Ch. 11

[Mhrmnhrm]

Not necessarily. LTV Steel in Cleveland has been in and out of Ch. 11 a number of times in the past 20 years, primarily because of forces outside its control. Like many American steel companies (and the auto industry), it had grown fat on subsidies and protective tariffs. When those were cut out, it went into protection as it found ways to cut size without cutting production. This has been going on again lately with the question of foreign steel being dumped here. When you operate a massive, full-bore steel foundry and mill (like most steel companies did), your costs are enormous compared to the european mini-mills.

Chapter 11 is also similar in some ways to a debt consolidation loan. You're taking on a huge new debt, but getting rid of all your old ones at the same time. You still have to pay your old creditors, but once they've got their share, they're over with. All that's left is the guy/bank/venturist who spotted you the money to pay off the loan sharks.

(Snide comment at the risk of being modded down: Do you really think M$ needs a line of credit?)

Re:sigh

[Anonymous Coward]

That is not what the definition of cash positive is. Because of the way modern accounting works many of the things you have pushed off or "hidden" until later can come back to hit you once your income does far outweigh your expenses. In many cases these debts now have severe penalities which cripples your ability to continue to function. By seeking Chapter 11 you are saying that, "Hey I am making money and I can pay you guys... just give me a little more time." Good or bad this is the way it works.

I have no doubts they are making money every month. But as they stated they have so much debt they can't continue without some sort of protection. People do it all the time and so do companies.

Re:I've changed my mind...

[Anonymous Coward]

Why wouldn't they use SDL? It's far cleaner an API than DirectX, Xlib, or any of the libraries it encapsulates, and adds almost nothing in the way of overhead, since basically after you initialize a 2D buffer for drawing, or a 3D OpenGL window, SDL gets out of the way and lets the programmer do whatever he wants to the buffer, without having to worry about all the myriad idiosyncrasies of whatever low-level API you're running on.

And, as an added bonus, the same SDL-compiled binary runs transparently under X, svgalib, and fbcon without any source hacking necessary. :-)

Loki contractors.

[Anonymous Coward]

I hope that Loki's contractors will be seeing at least some of the money Loki owe's them due to this. One ex loki contractor I know is owed several thousand by Loki and has been for quite some time now...

Re:Reality Bite on Ch. 11

[Xerithane]

I'm not sure of your logic on this. If you go through the Chapter 11 successfully and fairly, it doesn't taint your record and cause them to flee like you're a lepar.

Besides, if the company is as Scott said, Cash positive the line of credit is probably not a huge concern. They already have their shop setup, which is most of the costs of any company. They have employees, and are "balanced" out. All expansion and everything can come from their profit margin.

I'd be more surprised to see Loki sold than Loki buying or expanding their business model in the next 2 years. Chapter 11 isn't the end-all-you're-screwed, you still deal with your creditors. Everyone should walk away mostly pleased. That's what the purpose of it is.

Who needs loki

[Niksie3]

i agree that having a company to port games is nice... but who really needs it??????? i mean... the Open source community can port games!!!!!!!!!!! we don't need the source if we can reverse engineer data files, think about freecnc, freeciv, and all the other fun games for linux!!!!

True, but tha'ts the whole POINT of chapter 11.

[mindstrm]

IT's for when you owe people money, and you can't pay. The idea is that you can stave off the creditors for a while, deal with them all fairly and evenly, and allow your company to start making some money. This doesn't mean 'making money because they don't have to pay bills'... it is designed to give them breathing room in order to dig their way out.

A *seriously* troubled company wouldn't bother with Chapter 11... they would just dissolve.

Re:relief

[_xeno_]

You wouldn't be referring to Unreal Memory Leak by UT would you? The game that under Windows will run for hours without a problem (and I've done this) but even when run as the only application under Linux eats up all available memory after a half-hour on a machine with 256MB?

(And leaves my system in a nice, stable state - you may wanna check with your sound card manufactorer and upgrade to the latest drivers - sounds like you've got some issues with the current ones.)

Yeah, I really see the increase of performance under Linux... at least with Linux, I can killall -9 ut to stop it, while under Windows - wait, I've never had a problem under Windows that requires me to kill it. I just choose "Exit."

Re:Reality Bite on Ch. 11

[MeNeXT]

no one will ever loan you money again.

This should read no one will loan you money in the near future. If Loki has a positive cash flow and can show that they were in the BLACK for over a couple of years (depends on the creditor), then there is a chance that they will lend you money at THEIR terms(ie. Prime +5 and such). Ch.11 is made to help business survive when there is a possibility for success. We will know more in the next couple of months.