Lessons Learned From the Rise of a New Take on Monster Hunter and Its Sudden Collapse

Dauntless was, it seems, ultimately too successful to succeed.

Launched in 2019 to a rabid fanbase clamouring for another take on the fantasy-hunting genre created by Capcom with Monster Hunter, Dauntless came out of the gate, blowing away most expectations, including those of the relatively small but talented pool of developers.

Within a day, it was bringing in ten times the players developer Phoenix Labs predicted they would get at the best of times. 

But behind the scenes, some early stumbles, a surprising cost to serve, and an unexpected shift of the studio to a prototyping house led to the game’s sudden end earlier this year.

The journey from free-to-play powerhouse to contentious review-bombed monster hunter game was one marked by two corporate sales, a founder’s stroke, and some important lessons learned.

Riot and Phoenix Labs

Established in 2014, Phoenix Labs is probably best known for its Monster Hunter-like game Dauntless and the fact that the studio was founded by three former Riot Games developers. But the roots of Phoenix Labs actually go back a bit further to work two of the founders did while both were at BioWare in the mid-2000s.

Robin Mayne and Jesse Houston met while working at the famed Edmonton, Alberta studio known for its spectacular role-playing games. Mayne said the two knew instantly when they met that they were going to be best friends. Where Mayne was a natural development manager, Houston was a born producer. And the two worked effortlessly together. 

In 2012, both moved to Riot Games, Houston, as a senior producer on League of Legends, and Mayne as a senior development director. It was at Riot that the two met Phoenix’s third founder, Sean Bender, who was the VP of People and Special Projects at the studio.

After spending two years living in LA and working at Riot, Houston realized he didn’t really want to stay in LA and that he also didn’t want to spend the rest of his life working at Riot.

“We wanted to move back to Canada to raise our young children, he said.

Shortly after Thanksgiving 2013, Houston ended up leaving the company to move back to Canada.

And he wasn’t alone.

Mayne left the company around the same time, also moving back to Canada. Soon after, Bender left Riot as well.

The three eventually worked together to establish the new studio, powered by a growing dream team of developers Houston had worked with over the years. The new team members came from BioWare, Riot, Blizzard, and Capcom.

Houston settled into the role of the new studio's President, and Mayne became the VP of Development. Bender initially pushed the two to grow the idea behind the studio, and later came on as CEO. Once development started, Houston transitioned to CEO, and Bender became the Chief People Officer.

Initially, the idea was to create a small mobile studio with fewer than ten people and squeeze out their first game on a bootstrapped budget. But Bender pitched taking a different, bigger route through external financing so they could make something more meaningful and impactful to the world.

The team began pitching to venture capitalists, using Monster Hunter as an example of a game targeting an underserved market. Within a month, Phoenix Labs secured funding, closing deals with the first three investors they met. By late that fall, the studio had settled on one of its early concepts, a project codenamed Archon, as its first game.

From Archon to Dauntless

Houston said one of the founders’ key concepts behind the studio was to look across the landscape of video games in the hunt for underserved audiences. To that end, the small group of devs that made up the early stage of Phoenix Labs put together a Trello board and started filling it out.

“We had this thesis that there were these audiences out there that the game publishers were kind of phoning it in for, if you will,” Houston said, pointing to Team Fortress as an example.

Before Overwatch was announced, the Team Fortress audience had to make do with a game that got little core support from Valve post-launch, he said.

“The biggest thing they had done was hats,” he said. “That game would have been an obvious, great target, but then Overwatch was announced.”

The other big franchise that kept coming up in discussions was Monster Hunter. At the time, Monster Hunter had a massive, hungry audience, but the most recent game arrived on the Nintendo DS and didn’t support online play. People were so into the game, they would rent halls so they could gather and play together through local multiplayer.

Phoenix Labs settled on the hunting genre because it was so co-op-friendly, and they felt they could create a game that dug into that while also easing the pain of the typically arduous onboarding path found in the genre.

Lacking the deep marketing of a major studio to help settle on an art style for the game, the Phoenix Labs team looked at what Disney was currently working on for some direction. At the time, that meant the movie Tangled. The result is a more cartoon art style that was designed to age well over time.

The team spent the next two years working on Dauntless, unveiling the online, co-op action role-playing game at the 2016 Game Awards. 

Over the course of an alpha and then a beta, the Phoenix Labs worked closely with the growing fanbase to try to ensure that it would deliver the sort of creature-hunting experience that players were asking for. 

By mid-2018, still a year away from the full launch, more than two million people had already played the game. It launched in the fall of 2019 as the first game to ship with cross-play between PC, Xbox, and PlayStation. The game now had 15 million players.

While Dauntless continued to do well, the studio was quietly sold to Garena at the end of 2019 for an estimated $150 million.

The Sea Group’s Garena

In retrospect, it appears the sale to Garena, while a solid decision on paper, may have been the first in a series of issues that led to the demise of both Dauntless and the studio.

Dauntless was an attention-grabbing success for Phoenix Labs, but that wasn’t why the Singaporean game developer and publisher purchased the studio, or why the founders sold it.

Houston said at the time of the sale, Garena parent company Sea Group, a Fortune 500 business, was the largest company you’d never heard of.

He said the decision was made to sell the company because Phoenix Labs was venture-backed, and as the CEO of Phoenix Labs, he took his responsibility to its investors seriously. He also saw the deal as a way to strengthen the studio and provide a more secure footing for its growing number of employees.

He said Phoenix Labs had about 50 interested buyers in 2019. But Houston and many at Phoenix Labs had a long history with Garena. The company distributes League of Legends and Dauntless across Southeast Asia. So he went with them.

Once the purchase was finalized, Garena came to the company with a surprising ask. Instead of a push to expand Dauntless, Garena wanted Phoenix Lab to dive deep into game prototyping on the hunt for the next billion-dollar franchise.

“So we maintained Dauntless and then split the company up to work on new games,” Houston said. “I think it was the right call, just to be clear. 

“Dauntless wasn’t a billion-dollar franchise. It’s a great game, and loads of people have played it. More people have played Dauntless than live in Canada, which is crazy. But there aren’t another 400 million people that would be excited to play the game.”

Houston and the leadership team at Phoenix refocused the studio on creating new games, while leaving a core group to focus on Dauntless. They launched two new studios and set to work prototyping.

“We had a five-year plan of basically getting a bunch of games into the prototyping phase and then shipping a smaller subset of them,” Houston said. “I think at our peak we had seven games in development.”

That was out of hundreds pitched.

All of the titles were built out of the same concept that launched Dauntless: finding an underserved audience and delivering the sort of experience for which they were hungry.

The titles the teams worked on included a Minecraft-like cozy experience codenamed Dragon, and others with codenames like Bismuth, Falcon (a sort of Star Citizen-like game), LAX (an urban fantasy game), Ra (a more contemporary third-person Path of Exile), Oni (a competitive top down shooter), Unicorn (a collection racing game that was a bit like Pokemon meets Mario Kart), Piranha (a procedural cooperative take on Subnautica), and Zephyr (a team based vehicle PVP game.) There was also a title that actually left the studio and returned.

Fae Farm was pitched as a farm life sim by Dauntless art director Katie De Sousa. Despite being a firm believer in her work, Houston initially rejected her pitch for the game, feeling that because it wasn’t an MMO, it didn’t fit within the studio’s focus. 

So she quit to make the title independently.

Houston said he phoned up the CEO of Garena, Forrest Li, to vent about his decision.

“I’m literally crying,” he said. “I think Katie is one of the greatest creators ever, and she’s a close personal friend of mine.

“I said to him, 'I have this mission to build a billion-dollar franchise, not the next cozy farm sim,’ and he said, ‘Just make the video game.’”

So Houston called De Sousa that night and asked, “What if you didn’t quit? If you stick around with a small team, we’ll ignore you. We’ll pay you, and you just give me the video game.”

De Sousa returned with her idea. Fae Farm would later turn out to be the last game Phoenix Labs would release.

Forte

As with Dauntless, the prototyping work created by the Phoenix Labs studios was well received. Perhaps too well-received by Garena. Houston had expected to move forward with one or two games; instead, Garena had them push ahead with seven. The company had the money, so they invested it, in part, in Phoenix Labs, which quickly grew to about 350 people spread across the studios. Dauntless, by comparison, had been developed mainly by 20 or so and shipped with 60 people.

Things were going well for Garena and Phoenix Labs until about 2022, when the market started to collapse, and suddenly, Garena needed to downsize. 

“I was told to find a buyer,” Houston said. “Long story short, I found a buyer, got the company sold, and then left almost immediately after that.”

Delving into the more nuanced story, Garena sold Phoenix Labs directly to Forte, a company that focuses on technology for games that power NFTs and token economies.

The purchase during an economic downturn was made more daunting by the fact that the studio was comprised of 350 people working in North America, most of them senior talent. It had an enormous burn rate and was operating under the idea of a five-year plan for the development of seven different games.

“I think it was a miracle we found a buyer,” Houston said. “We were a distressed asset and selling in 2022, like, who's buying a $75 million-a-year cash burner?

But the shift in tone from just a year earlier was daunting.

“We wanted to be the next Blizzard,” Houston said of the Garena goal for the studio. “We were super well thought of in the industry. People wanted to work at Phoenix. We were an up-and-comer.”

Houston’s ultimate decision to leave after the sale to Forte came after a cost.

“When I worked for myself at Phoenix and then worked at Garena, I believed in the company’s goals and the vision deeply aligned with my vision. I got very excited by making great video games to deliver great experiences for players. I really liked enriching the lives of the players.

“I love making people laugh, smile, escape, you know, find joy in their lives.”

But Houston said he didn’t feel that was what Forte wanted.

“They wanted to legitimize their business,” he said. “They wanted to be the not-gross blockchain video game company.

“I get it, but that’s not what gets me out of bed in the morning.”

Initially, Houston found some commonalities between the studio’s new owners and his own interests, but as time passed, he found it harder and harder to agree with the company’s roadmap. The studio also underwent major layoffs in 2023, cutting nine percent of its workforce to focus on fewer games.

“The harder it got, the more I put pressure on maintaining things, the more stressed the relationship got,” he said. “Ultimately, I had a stroke.”

Houston said after a particularly grueling meeting in May 2023, he went out to a local burger joint to stress eat—something he had been increasingly doing—and then went home.

He was washing up for dinner that evening, and suddenly he couldn’t feel his face.

“I also couldn’t feel my arm, my leg,” he said. “I’ve got two small kids and I have to look at my son and daughter and say, ‘I gotta go to the hospital,’ not knowing if I’m ever coming home.”

Despite the stroke, Houston said he actually went to work the next day.

“My COO, (Jeanne-Marie Owens), who is also my COO at my current studio, Critical Path Games, was like, ‘What the hell are you doing in the office?’ and then sent me home.”

Houston quit the next day. 

The next year, more than 100 people were laid off and multiple projects were canceled. Earlier this year, most of the rest of the staff at Phoneix Labs were let go, Fae Farm, which released in 2023, had its online support cut, and servers for Dauntless were shut down.

Lessons Learned

Lessons aren’t gleaned from failures alone; a successful game, a successful studio, can still have lessons embedded in its journey.

That’s the case with Phoenix Labs and Dauntless.

When I ask Houston if he thinks Dauntless was a success, he’s quick to list out all of the ways it was.

“Lots and lots of players had a good time playing it. Reviewers liked it. It made money. It employed hundreds of people. It absolutely improved the careers of the staff, I think that makes it an undeniable success.”

But like all game development, there were avoidable issues in its creation.

Build a product for the players, not the developers

Perhaps one of the biggest setbacks was the decision close to inception to have the game earn its money through loot boxes.

Loot boxes have an oddly meandering history in video games. First introduced in the mid-2000s, their use came to a head, and a massive backlash around 2017. To put it another way, Phoenix Labs started work on Dauntless when loot boxes were a fairly routine, tentatively acceptable form of monetization, but by the time the game hit early testing, members of the U.S. Congress were discussing investigations into the practice.

While the team quickly pivoted away from loot boxes, the costs were meaningful. The studio had spent an enormous amount of time creating the dynamic system that opened a box for players, something they called the core cracker. The items delivered to players were also intrinsically built into the progression system. And on top of all of that, early players who were testing the game had already spent money on these boxes.

While the decision to remove loot boxes was made fairly quickly, the cost of shifting away from them, both in development time and the impact on the game itself, was massive. 

The studio eventually sorted through the issue—changing to a system that allowed you to directly purchase cosmetics—but internally, the damage was done.

The lesson from a high level, Houston said, is to focus on building a product for the people, not the developer.

“The reality is that gamers didn’t like loot boxes, so let’s not build loot boxes,” he said. “If gamers don’t like the color red, don't make your game red.”

Dig deeper into player motivation

While the solution for the loot box issue seemed straightforward at first, it came at a surprising cost that the developers didn’t pinpoint for years.

Post launch, Houston realized that while they did a lot of surveys and tracking of player sentiment, it was mostly about the players who spent money on cosmetics and if they were happy with what they purchased.

For the most part, they were.

But what Phoenix Labs failed to see for some time was what the players who didn’t spend money felt about cosmetics.

It turns out they would often stop playing the game. 

After noticing a steady drop in players, players who would sometimes not even finish new content when it arrived in Dauntless, the studio went back and did a much deeper analysis on player retention.

What they discovered had everything to do with the friend groups of four who would gather to play the game together.

If two players in the group monetized and two didn’t, eventually one of them would stop playing and move to something else because they didn’t want to spend money, and it wasn’t as fun for them anymore because their friends had these neat new cosmetics.

Eventually, that entire group would collapse, and everyone would leave.
“We realized we had kicked the legs out from our retention system,” Houston said. 

What made it hard to track was that players would say they were having fun playing the game up until the moment one of their friends left.

“Really understanding, really spending more time deeply looking at the motivational factors for why people play is incredibly important to monetization,” he said. “Having a really strong, verifiable thesis on why they’re playing beyond ‘it’s fun to kill monsters.’”

Houston now believes that the mistake was built on a core assumption the studio made when they first started developing Dauntless. 

“We assumed players in the loop will engage in the loop because it’s a good loop,” he said. “Instead of very specifically figuring out, ‘why does Monster Hunter work?’”

Cost to serve

The final lesson, Houston said, was that the cost to serve for Dauntless was something that the studio didn’t pay nearly enough attention to through development.

One way to look at cost to serve for video game development is the amount of money that it costs to give a player an hour of experience.

Where once those costs included things like the cost of the DVD you put the game on, the packaging, the delivery, and so on. With modern live service games, those costs include things like servers and data egress.

“It's how much it costs every time a player comes into the game for an hour, “ Houston said. “That should be managed to be as low as humanly possible when you are making a free-to-play game, or really any online game. Because the lower that number is, the less reliant you are on aggressive monetization. And we were probably 10x in the wrong direction in cost to serve.”

That mainly was server costs, he added.

With Dauntless, Houston said, Phoenix Labs built the game with the idea that a great day would be maybe 15,000 active users. They only modeled up to 50,000 users because that was five times what they thought they would ever get. But on day one, the game’s player count hit roughly six figures.

“Immediately, everything was fucked,” he said. “We were seeing unheard of success. We passed a million people on the first day.”

A bug in the way the database was created, and the user base size, forced the studio to transition the Dauntless database from SQL to Google’s Big Table, which is what the company uses for search.

“It’s like horrifically expensive,” Houston said. “Laughably expensive. Needless to say, it was very expensive to run Dauntless.”

These days, Houston is the co-founder and Game Director at Critical Path Games, running the Vancouver-based studio alongside co-founder and COO Jeanne-Marie Owens.

And he still looks back at his time with Phoenix Labs with fond memories. 

"Phoenix Labs was a great company to work at,” he said. “It also made games that gamers loved. It attracted amazing talent and loyal fans. But while we were super focused on making great games with great folks, we didn't underscore the importance of a profitable business with our staff. Keeping the lights on was too much of an afterthought."