Strange Things Are Afoot At Red Five StudiosS

While a Red 5 Studios press release claims the studio is only restructuring, sources close to the studio paint a much bleaker picture, complete with forced and voluntary resignations, strange declarations, and a new majority shareholder in China's The9.

Yesterday we posted a rumor regarding layoffs at Red 5 Studios, the company founded by former Blizzard employees keen on creating their own MMO. Today Red 5 issued a statement regarding the layoffs, calling them part of a "new direction" the company is taking. It's a very reserved statement, with elements that don't quite jibe with what we've heard from sources close to the company.

First, Red 5's statement:

"Red 5 Studios, Inc. is currently working on an unannounced massively multiplayer online game. Recently, the team formed around a new direction and took on additional investment from a strategic partner in the online games industry.

"Red 5 remains committed to releasing a AAA quality, online title targeted for a worldwide release. The company has restructured the team in order to accomplish this goal. As part of the restructuring, some team members chose to part ways while others were let go. Red 5 has great respect for these departing team members and the contributions they have made."

It all sounds so tame, especially when compared to an account of events leading up to the "restructuring," sent to us from a reliable source close to the development studio.

According to our source, trouble began late last year, when CEO Michael Weingarter was forced to resign by the company's board of directors. The source also says that art director William Petras, a founding member of the company, resigned last Tuesday.

Then things get a little strange.

Our source tells us that former CEO Mark Kern called a meeting last Thursday afternoon, during which he explained that Chinese online gaming operator The9 were now majority shareholders in the company, declaring the "old" Red 5 dead. This was the "new" Red 5, and he was the "new" Mark Kern. Then the "new" Mark Kern informed employees that they had until 11AM the next day to let him know if they wanted to stay with the company, offering no guarantees that positive replies equated to continued employment.

So "the new" Mark Kern is now CEO of Red 5, which is essentially under control of The9. This revelation could explain the change to a game "aimed at the Chinese market."

So the MMO project lives on, albeit in a form we may never see in North America, and the company is in the loving hands of a man who allegedly refers to himself in the third person. As for the layoffs and resignations, our source had something to say about those as well.

"On Friday, the team had to wait until after 5pm to find out their fate. It was delivered via email."

Our source told us that half of the 28 people left the company voluntarily, while the other half were just plain laid off. Fully half of the 28 who were let go left voluntarily. Prime departures included the chief financial officer, human resources, and the IT department, along with 80% of the art staff.

The company that made such a big deal about being founded by members of Blizzard's World of Warcraft team now contains only one ex-Blizzard staffer - CEO Mark Kern.

We've contacted Red 5 Studios regarding the information we've uncovered, and received the following statement:

"We can only confirm Mark's continued employment and that he is CEO. We'll release statements in the future regarding any additional investments."

So who knows what the future will bring? We're relatively sure, but for now this post will carry the rumor tag, such is its burden.