Netflix, Telltale and ‘Stranger Things’: Why the Deal Took Two Years to Happen (EXCLUSIVE)

Stranger Things The Upsidedown Editing
Courtesy Netflix

While most of the game industry was bustling about the Los Angeles Convention Center at E3, news was breaking away from the show. Telltale Games and Netflix were pushed into a clumsy reveal that the companies are teaming up for new projects, including a game based on Netflix original series “Stranger Things.”

Details of the Netflix deal and why it took so long to happen reveal new insight into a development studio that was once the darling of the gaming world, combining strong narrative design with eye-catching visuals. Speaking and emailing with a number of former Telltale employees, Variety found a company weighted down by an aging game development engine, too many projects fired out to poor sales reception, and consumer malaise (called “Telltale Fatigue”) that left Telltale a shadow of its former self.

Many of those issues seem to stem from Kevin Bruner, the company’s former CEO ousted in early 2017, and some of those in his management team, sources said. Bruner is now suing the company he co-founded. An expose published by the Verge, and reinforced by sources speaking with Variety on the condition of anonymity, reveals the hostile work environment he fostered and why the company made some of its poor decisions.

Now under new management and with the Netflix deal, Telltale appears to be a studio crawling out of a hole dug by former leadership.

Variety reached out to Telltale Games and Netflix for official comment. Both companies declined to provide a statement on the relationship.

Netflix: A Partnership Two Years in the Making
The deal with Netflix has been described by some as a “life raft” for the studio. While the concept isn’t the work of new CEO Pete Hawley, he did manage to turn a smart, lingering idea into a reality in short order. But that original concept had been floating around inside Telltale for years.

It began in mid-2016. Netflix’s “Stranger Things” became an instant hit, plucking nostalgic notes first sung by “The Goonies,” “E.T.,” and Steven Spielberg’s “Amazing Stories.” Some elements inside Telltale knew that it was a perfect fit for the studio’s formula.

Unfortunately, the pitch fell on deaf ears. Former studio leadership, including Bruner, repeatedly shot down a potential Netflix partnership — starting with a “Stranger Things” game — for two years. “They thought it was just a bunch of kids on bikes,” a source close to Telltale who wishes to remain anonymous tells Variety. “They thought it was a terrible idea.”

A change in leadership in September 2017 brought with it a fresh set of eyes. The concept of working with Netflix solidified, with two different initiatives bringing the two companies together.

Other individuals close to the company had hinted that something like this was in the works before the news broke last week. A few weeks before the Netflix partnership news broke, former head of creative communications Job Stauffer reacted to a story about Netflix’s success and intimated on Twitter that an internal pitch may have been in the works for some time, but didn’t specifically confirm it was at Telltale.

Likewise, the plans to partner with streaming services were suggested as early as E3 2017. In a conversation with GameSpot, Stauffer expressly stated the studio was considering streaming partnerships.

“I think there is a lot of space for Telltale to move on to platforms that most people don’t even really consider to be game systems,” Stauffer told GameSpot. “A lot of boxes of many different varieties in homes — millions and millions of homes across America, where people don’t even think game-playing is possible on them, but maybe they’re watching stories or consuming narrative-driven content or streaming it. It would be unfathomable to think about playing a ‘Grand Theft Auto’ [game] over Netflix, but it wouldn’t be so unfathomable to think about playing a Telltale game over a streaming video service of that calibre. The Telltale experience will be expanding onto services and devices that are already on millions of homes across the world.”

The Netflix partnership evolved as multiple deals. The first covers bringing “Minecraft: Story Mode” to the streaming service. A source says that despite reports, little will be altered, and the full game will be available on Netflix. The other gives Telltale access to “Stranger Things” for a more traditional release. There are also hints that Telltale might be looking at a game based on “Black Mirror,” as Stauffer mentioned the property and creator Charlie Brooker by name in an interview (a regular tactic used by the studio to prime the audience).

A Studio in Trouble
Netflix wasn’t Telltale’s original target for a streaming television and movie service, though. Some people inside Telltale were pushing for this kind of synergy as far back as 2014 through a different service.

“’Game of Thrones’ could have been bigger if it had been integrated with digital platforms,” a Variety source explains. HBO’s standalone streaming service, HBO Now, was announced in March 2015 and rolled out a month later, about halfway through Telltale’s “Game of Thrones” season. The studio didn’t capitalize on its existing relationship with HBO. Telltale could have pushed for pre-roll advertisements for the tie-in game via the service. Likewise, some people inside the studio saw the potential of streaming “Game of Thrones” to subscribers via HBO Now. Unfortunately, the Telltale Tool engine, which had become dated and neglected, couldn’t support the obvious synergy of streaming via HBO Now.

The poor decision-making by upper management aligns with Telltale hitting a slump. “The Walking Dead: Season 2” and “The Wolf Among Us” were the last homeruns for Telltale. The studio started to accelerate development and became poor at predicting success.

The culture within the studio became suffocating. One source described the organization has having a “creative bottleneck.” “They shot down a lot of very clear slam dunk ideas,” one source says. “They had a very narrow idea of what Telltale projects should be. They often seemed to miss why people liked the games.”

The engine was causing its own share of struggles. It wasn’t getting any better, leading to development challenges and performance problems. Insiders suggest that between technical problems and “Telltale Fatigue,” the studio’s last three releases, “Minecraft Story Mode: Season 2,” “Guardians of the Galaxy,” and “Batman: The Enemy Within” are some of the worst-performing games the studio ever launched (including “Wallace and Gromit’s Grand Adventures”).

In February 2015, alongside a reported $40 million minority investment from Lionsgate, Telltale announced a live-action and interactive project it called a “super show.” Bruner explained that each episode would have both components. Whether the original IP it was based on is still active isn’t clear. However, the “super show” concept hasn’t taken off and multiple sources tell Variety that, like many Hollywood projects, it simply didn’t progress past pre-production. It was Bruner’s pet project and in many ways indicative of issues he had as an executive. He chased the idea but didn’t check financial modeling which later suggested it would never make enough money to cover its costs.

What helped Telltale during its down period was the publishing team’s decision to bring to market the critically maligned “7 Days to Die,” an also-ran survival game, in 2016. Multiple sources suggest it was one of the most profitable Telltale endeavors since the first season of “The Walking Dead.” Telltale has backed off its publishing efforts, but the initiative isn’t dead. It’s on hiatus while the studio re-orients under new leadership.

Variety sources say a series of poor managerial decisions, excessive crunch periods, and Bruner’s own ego led the company to the brink of ruin. Telltale was in desperate need of a “corporate reboot” according to insiders.

Rebound: New Leadership, New Engine
When Lionsgate invested, it did so under co-founder Dan Connors’ leadership. Shortly after, Connors needed to take a break, and the board handed the reins to Bruner. The resulting two years were described by insiders as the studio’s lowest point, with hires made just to fix the problems he created. In 2017, the board needed to make a change, voting to oust Bruner.

Connors stepped back in to fill the gap. He and board members, including Unity CEO John Riccitiello, made it their mission to find the right fit. An exhaustive hiring process led them to Zynga vice president Pete Hawley.

Hawley was viewed as Telltale’s savior by its board of directors. A corporate fixer, he was brought in to make the hard choices necessary to right the studio’s ship and then keep it afloat long-term. According to a source, Hawley has no plans to depart after the studio is on better footing (unlike a traditional fixer, who is brought on temporarily to deal with crisis).

Layoffs were inevitable as employees were told that Telltale would slow down a bit and produce fewer games. “The Walking Dead: The Final Season” is allegedly expected to bring in decreased revenue compared to earlier series entries. In November 2017 (one month after Hawley signed on), 90 employees (approximately 25% of the studio’s workforce) were let go.

“The Wolf Among Us 2” was also almost a casualty of Hawley’s cost-cutting, according to one of Variety’s sources. Another says it was a struggle to get the fan-demanded project off the starting line. Even after Telltale committed to a second “Wolf” season, it wasn’t out of the woods. A 2018 release is no longer in the cards, as it was delayed until next year.

Multiple sources also tell Variety that the days are numbered for Telltale Tool, the company’s in-house game engine. The studio is shifting to Unity for its projects (both detailed by Variety’s source and referenced in job listings), with the final season of “The Walking Dead” the last to premiere on the old engine. “Stranger Things” is slated to be the first Unity engine project, according to multiple sources.

Despite the engine’s creaking bones, fans reacted favorably to “The Walking Dead: The Final Season’s” latest trailer. The last Telltale Tool game will be also be the end of the road for Clementine and the franchise that rocketed the studio to fame. And at least one source says that the team under Hawley realigned to ensure her final title would be a peak moment.

Sources tell Variety that while the move away from Telltale Tool is long overdue, a new engine means growing pains. Developers are re-learning how to manage workflow as they adapt to the new engine. This is causing a longer process than Telltale is used to working.

It might be late in arriving, but the Netflix deals (both for streaming existing games and accessing Netflix IP) have the potential to be a major piece of Telltale’s course correction. One can only imagine how Telltale’s fortunes might have shifted if leadership had embraced the synergy between its games and streaming platforms two years ago, when it was first pitched. Thankfully, Hawley is moving to correct that error.

“Pete Hawley has quickly restored Telltale Games to its former position of innovation and leadership in choose-your-own-narrative interactive storytelling,” says Telltale Games board member and Lionsgate president of interactive ventures, games and digital strategy Peter Levin. “The reaction from the marketplace around the Netflix partnership with respect to ‘Minecraft: Story Mode’ was overwhelmingly positive. The trailer for ‘The Walking Dead Season 4’ is receiving the greatest accolades and level of interest for the title…ever. Breaking ground and telling fantastic stories is what Telltale Games has been known for… they are very much back on track in both arenas.”