What the hell is going on with Subnautica 2?

Engadget

2 days ago

If I had to describe the status of Subnautica 2 in just three words, it would be these: messy, messy, messy. That's not to say the game itself is in terrible shape — this is actually a pivotal claim in the whole situation — but the relationship between Subnautica series developer Unknown Worlds and its parent company, Krafton, is in shreds. This month alone, Krafton fired the founders and CEO of Unknown Worlds, Subnautica 2 was delayed until 2026 and the ousted leaders filed a lawsuit against Krafton, looking to regain creative control of the game and the studio. At the center of the conflict is a bonus payment worth up to $250 million.
Here's a rundown of how we got here and what in the devil is going on with Subnautica 2 , Krafton and Unknown Worlds.
Charlie Cleveland accidentally started Unknown Worlds in 2001 while building the popular Half-Life mods Natural Selection and Natural Selection 2 , and technical director Max McGuire came on as an official studio co-founder in 2006. Inspired by Minecraft and burned out on mods, Unknown Worlds began working on the undersea, open-world exploration game Subnautica and released it in early access on Steam in 2014. With years of community feedback, the game evolved into a singularly tense and rich survival experience, and version 1.0 officially landed in 2018. This is also when Ted Gill joined the studio's executive team, freeing up Cleveland to focus on creative direction. Subnautica and its spin-off, Subnautica: Below Zero , attracted millions of players and established Unknown Worlds as a successful independent team.
So, the larger studios came sniffing. PUBG publisher Krafton, which operates with billions of dollars annually, purchased Unknown Worlds in 2021 for $500 million. The acquisition came with the promise of an additional payout worth up to $250 million if Unknown Worlds hit certain performance goals by the end of 2025. This bonus is a critical piece of the chaos today.
We know more about the details of this deal thanks to recent reporting by Bloomberg . In addition to the leadership positions, which were filled by Cleveland, Gill and McGuire, Unknown Worlds had about 40 employees at the time of the Krafton sale, and they received payouts totaling $50 million at closing and over the following two years. This larger group was poised to receive as much as $25 million in the 2025 performance-based earnout, with each person expecting a different amount, but most estimating six or seven figures. The remaining $225 million was reserved for the Unknown Worlds leadership, but they said they intended to share a portion of their windfall with employees who weren't included in the bonus, covering the full studio headcount of about 100 people.
The leadership of Unknown Worlds repeated this promise in a lawsuit filed against Krafton on July 10, 2025. But we're getting ahead of ourselves.
After the acquisition, Unknown Worlds continued updating Subnautica and Below Zero . In February 2024, the studio released Moonbreaker , a turn-based strategy game that never really took off, partially because of its initial microtransaction system . Since then, the studio has been focused on Subnautica 2 . The game was officially announced in October 2024 with a prospective early access launch window of 2025. It's currently the second-most wishlisted game on Steam, after Hollow Knight: Silksong .
The first public notion that something was rotten between Unknown Worlds and Krafton came on July 2, when Cleveland, Gill and McGuire were fired and replaced by former Callisto Protocol studio head Steve Papoutsis. Krafton didn't provide a reason for the switch-up in its press release , instead offering the following nearly complete thought: 'While Krafton sought to keep the Unknown Worlds' co-founders and original creators of the Subnautica series involved in the game's development, the company wishes them well on their next endeavors.'
Krafton didn't mention delaying the early access launch at this time, but it implemented a review process that it said would be 'essential to delivering the right game at the right time.' The publisher suggested the ousted leaders had been uncooperative in this aspect.
'Unknown Worlds' new leadership fully supports this process and is committed to meeting player expectations,' its press release said.
Cleveland published a blog post on July 4 reflecting on his time in game development, and sharing his disappointment at Krafton's handling of Unknown Worlds and Subnautica 2 . He also referenced Krafton's intent to delay the launch.
'You can see why for Max, Ted, myself, the Unknown Worlds team, and for our community, the events of this week have been quite a shock,' Cleveland wrote. 'We know that the game is ready for early access release and we know you're ready to play it. And while we thought this was going to be our decision to make, at least for now, that decision is in Krafton's hands. And after all these years, to find that I'm no longer able to work at the company I started stings.'
On July 9, Krafton officially delayed the early access launch of Subnautica 2 to 2026. That same day, Bloomberg published a report outlining the performance-based bonus agreement and implicitly questioning how the timing of the delay would make it difficult for the studio to hit its goals, putting the payout in jeopardy. This was the first time the details of the bonus became public.
Krafton shared a statement with Engadget — and in a pop-up on its own homepage — on July 10 that straight-up accused the fired leaders of abandoning the studio in favor of personal creative pursuits, specifically calling out Cleveland's film production company . It also threw shade at Moonbreaker and claimed the former bosses wanted the bonus payment 'for themselves.'
'Krafton made multiple requests to Charlie and Max to resume their roles as Game Director and Technical Director, respectively, but both declined to do so,' the statement said. 'In particular, following the failure of Moonbreaker , Krafton asked Charlie to devote himself to the development of Subnautica 2 . However, instead of participating in the game development, he chose to focus on a personal film project. Krafton believes that the absence of core leadership has resulted in repeated confusion in direction and significant delays in the overall project schedule. The current Early Access version also falls short in terms of content volume.'
That same day, Cleveland announced that he and the other ousted studio heads had filed a lawsuit against Krafton.
'Suing a multibillion dollar company in a painful, public and possibly protracted way was certainly not on my bucket list,' Cleveland wrote. 'But this needs to be made right. Subnautica has been my life's work and I would never willingly abandon it or the amazing team that has poured their hearts into it. As for the earnout, the idea that Max, Ted and I wanted to keep it all for ourselves is totally untrue.'
The lawsuit wasn't unsealed until July 16. But on July 15, Bloomberg reported that Krafton now planned to extend the window for the bonus payment by an additional year, giving the studio more time to hit its goals. The publisher will also reportedly advance a portion of a separate profit-sharing bonus pool to all Unknown Worlds employees in 2025.
These moves seem designed to moot the core issues raised in the breach of contract complaint that Cleveland and other Unknown Worlds leaders filed against Krafton in Delaware Chancery Court. The lawsuit, unsealed on July 16, claims Krafton illegally fired the studio heads and delayed Subnautica 2 in order to avoid the bonus payments. It also provides a timeline of growing tensions between the founders and Krafton this year, accusing the publisher of intentional sabotage.
The lawsuit claims that Krafton and Unknown Worlds had a respectful relationship until April 2025, when Gill presented Krafton executives with the studio's positive revenue projections, which were made with the assumption that Subnautica 2 would hit early access in 2025. He also outlined the expected bonus payout under the agreement.
'When that happened, everything changed,' the lawsuit reads.
The complaint alleges that at this point, Krafton began looking for ways to force out the leaders of Unknown Worlds and delay the launch of Subnautica 2 , with a goal of circumventing the bonus payment. Cleveland, Gill and McGuire argued back and forth with Krafton executives over whether the game was ready for early access, and Krafton eventually pulled all of its resources from the studio. Krafton issued a stop order on Subnautica 2 development, took over Unknown Worlds' communications channels and in June it started laying an internal paper trail accusing the founders of abandoning their fiduciary duties, according to the complaint.
Cleveland, Gill and McGuire were fired and removed from the Unknown Worlds board of directors on July 1. This is where the rest of us entered the story. To view this content, you'll need to update your privacy settings. Please click here and view the "Content and social-media partners" setting to do so.
The main conflict here is over whether Subnautica 2 is really ready for an early access launch, and that matters because of a potential $250 million bonus payment that's jeopardized by a delay. Not only is this a large sum for Krafton to lose, but it's also a massive amount of money for Cleveland, Gill and McGuire to miss out on, especially now that they've lost their studio and tentpole IP. The ousted leaders reiterated in their lawsuit that they 'planned to share even more of the earnout with their dedicated team' than they were contractually obligated to. In the complaint, they're looking for Krafton to pay out the full bonus as projected without a delay, fulfill its obligations as a publisher and reinstate them as the heads of Unknown Worlds.
Every party in this situation claims they want what's best for Subnautica 2 and its players. It's possible that they're all telling the truth and this is a simple disagreement over artistic integrity. It's also possible that they're all lying and everyone is looking to make (or keep) a quick buck — but man, that's bleak. The truth, as usual, likely lies somewhere in between and, chances are, we'll never know it. At least the court system will eventually be able to determine the second-best thing, which is who's at fault.
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