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You may have heard that Cyberpunk 2077 has had some problems. Following a notoriously delayed release, the game debuted with countless bugs, embarrassing performance issues, and a PR debacle that led to the game’s removal from the online PlayStation Store. But those problems were only the beginning, as the game’s developer, CD Projekt Red (CDPR), is now the subject of multiple class action lawsuits related to the game’s failed launch.
But what are the lawsuits really about? And are they likely to be successful?
The short version of the CD Projekt class action lawsuits
The lawsuit is for fraud. The plaintiffs allege that CD Projekt lied to its investors about the state of the game. I don’t think it’s likely to be successful as they would essentially have to show that CD Projekt knew the game’s release would be disastrous, which is a high bar.
Now the long version
Although the case is related to Cyberpunk 2077, this is not really about video games: the lawsuits against CD Projekt are not brought by jaded gamers and do not allege false advertising regarding Cyberpunk 2077 itself. Instead, the lawsuit is a classic example of securities fraud.
CD Projekt is based in Poland, but is a publicly traded company and its shares are offered for sale in the United States. The basic claim that is asserted in the lawsuit is that CD Projekt and its executives defrauded their investors by lying about the status of Cyberpunk 2077 and not disclosing that the game’s launch would be a disaster. The theory is that by exaggerating the quality of the game and not disclosing the performance issues, the defendants artificially increased demand and thereby increased the share price of CD Projekt. Once the truth was out, the stock price plummeted, resulting in losses for each of the defrauded investors.
The challenge with this type of lawsuit is that it is not enough for the plaintiffs to prove that CDPR failed to launch or even that CD Projekt’s claims were false. To prevail, plaintiffs would have to prove that CD Projekt made false or misleading statements, that I knew the statements were false or misleading at the time they were made, and that their statements made the company overvalued.
As a simple invented example, suppose that (1) the day before Cyberpunk 2077 was scheduled for release, the CEO of CD Projekt received a report showing that the game was virtually unplayable on all consoles; (2) the CEO held a meeting with investors and said something like “Cyberpunk 2077 runs at a solid 60 frames per second across all consoles, and our QA team has not identified any bugs in the current version, ”and (3) the CEO’s statements resulted in an immediate increase of 30 % in the price of the shares. In that scenario, CD Projekt investors would have a strong claim for market fraud, as the CEO knowingly made a false statement that artificially increased CD Projekt’s share price, resulting in losses for investors when he performed his deception.
the real the facts are not so favorable for the plaintiffs. Allegedly false or misleading statements are set out on pages 5-8 of the complaint and are not particularly beneficial to the complainants. For example, the complaint claims that CD Projekt lied to investors when it announced, in January 2020, that the game’s launch would be delayed until September because the company “needed more time to finish testing, fixing and polishing.” The allegedly misleading statement is that CD Projekt stated that the game was “complete and playable”.
But seen in context, that claim is neither false nor misleading. From a developer perspective, saying that a game is “playable” simply means that the game is playable. And saying that a game is “complete” means, in essence, that the first draft is finished. But no one reading that statement would see it as an endorsement of the quality of the game; after all, the purpose of the ad was to say that the game would be no be ready on time.
Let’s look at some of the statements that were made on November 25, 2020, closer to the game’s launch. Allegedly false or misleading statements are as follows:
- “The positive impressions from journalists and, in particular, their comments underlining the complexity and incredible atmosphere of Night City make us very happy and confirm the remarkable potential of Cyberpunk.”
- “We think the game is performing very well on all platforms.”
- “So in terms of mistakes, we are all aware of them. Of course, such an important game cannot be error-free. That’s a no-brainer, but we think the level will be so low that players won’t see them. … many of them are already fixed. “
The first statement can hardly be considered false or misleading: journalists did make positive comments about Cyberpunk 2077 in the lead up to its release, and the statement itself spoke more of CD Projekt’s subjective bliss.
The other statements are obviously more troublesome. But even those statements cannot be considered false or misleading. For one thing, the statements reflect the speaker’s (CD Projekt CEO) subjective opinions about the game’s performance and were not presented as objective truth.
More importantly, the statement was made more than two weeks before the game’s release, meaning that CDPR may have concluded that it still had time to correct the game’s most egregious mistakes. To highlight the nuance, there is a big difference between, “(since we are two weeks away from launch) we think the game is performing very well” and, “we think the game is performing very well on all platforms (and it’s even ready for release today) “. Last, and perhaps most significantly, the next sentence, which is not quoted in the complaint, states that “not all platforms should be great”, indicating that performance would be much worse on older consoles.
The final statement doesn’t seem particularly misleading either. Rather, it acknowledges bugs and expresses a subjective, future-oriented belief that major bugs would be fixed prior to the game’s release. Again, that statement, seen by itself, cannot be fairly characterized as objectively false or misleading.
In short, the investor fraud claim looks pretty weak. The lack of misleading statements aside, the fact remains that CD Projekt and its CDPR developers have a compelling narrative: They screwed up. They underestimated the number and importance of the bugs, thought they could adequately address them in the weeks leading up to launch, and were optimistic that they could address the remaining issues through post-launch support. The complaint itself acknowledges, and actually reinforces, this contrary narrative, and includes a post-launch quote from the CEO indicating that CD Projekt “underestimated the scale and complexity of the issues.”
This counter-narrative is also much more plausible. It seems quite unlikely that CD Projekt would have gone ahead with the release if it had known that the game was broken and if it had known that the game would be removed from the PlayStation Store. In this sense, their actions are consistent with their words: they screwed up, but they didn’t lie. And that should be enough to defeat these collective actions.
