Paizo laying off 12 due to fallout from Diamond's bankruptcy

Paizo is laying off 12 employees, due to losses sustained from Diamond Comics' bankruptcy last year. Paizo announced the news in a post made to their website today, citing losses caused by ongoing litigation surrounding Diamond's bankruptcy. Paizo stated they lost $2 million in 2025, which has necessitated the move. Diamond was Paizo's exclusive bookstore distributor and Paizo was one of several RPG companies caught up when Diamond declared bankruptcy last year. JP Morgan Chase claimed a lien on all product currently held by Diamond after they declared bankruptcy, which included stock owned by Paizo that was held by Diamond for consignment sales. Diamond also appealed the termination of Paizo's exclusive contract, meaning that Paizo hasn't been able to move to a new bookstore distributor.

Paizo is currently working with their union on the layoffs, with severance offered to impacted employees. If volunteers aren't found, Paizo will layoff the least-senior employee in each impacted division.

Additionally, Paizo will reduce their new Pathfinder Society and Starfinder Society offerings to once a month starting in October. Foundry VTT modules for organized play will also be paused until Paizo can find a way to increase profitability. "These changes are not a retreat," Paizo said of the changes. "Paizo believes strongly in the power of Organized Play and always will, but the current publishing model for Society scenarios is not working and we need to slow down, stem the financial losses from a struggling program and evaluate where to go from here."

 

[Parmandur]

The way loans work in a bankruptcy/foreclosure, there is an order in which the creditors are paid. This is usually classified by both type of lien (secured vs unsecured), subordinations, and lien order, among other factors.

If you take money outside of that order, you are, in effect, stealing from the people who have higher priority claims, because that money was owed to them before it was owed to you.

In the case here, JP Morgan put a secured lien on the company in exchange for loaning them enough money to finance them until they were sold off (this was to ensure an orderly transfer of assets and to keep the company open, potentially allowing it to start doing business again after restructuring its debt and being brought under new ownership, which is the generally preferable thing in cases of corporate bankruptcies so everyone doesn't lose their shirts). After the sales fell through because of Diamond's chicanery (and probable fraud), the company went from chapter 11 bankruptcy (reorganization) to chapter 7 (liquidation) because JP Morgan refused to lend them any more money and no one else was willing to loan them money either.

JP Morgan's lien on the property takes precedence over unsecured liens.

If people had filed UCC-1 forms to perfect their interest in the consigned property, they would have been able to recover their property because it would have been properly recorded as belonging to them, not to Diamond. However, it seems that no one (or almost no one) did so, and because they didn't properly record what they consigned to Diamond, they are having to fight in court to prove that the property really is theirs (with what is likely subpar documentation). Otherwise, they are just unsecured creditors, who are last in line to be paid in the bankruptcy, so will likely get nothing or get much less than they are owed.

It really sucks for everyone who was operating in good faith and "just doing what everyone else was doing", but how can the courts or even Chase know who owned the property if the paperwork trail was never properly documented?

 

[smiteworks]

So, for now anyways, the only viable way to support Paizo is to buy from their store, right?

Paizo Store

store.paizo.com

Every licensed Paizo product sold for Fantasy Grounds VTT pays a royalty back to Paizo that is as good or better than a sale from a game store. The core Fantasy Grounds VTT software is also free now as well, so you just pay for any content you want pre-loaded and ready-to-run. Finally, the book content is now readable online in the Fantasy Grounds Library on our website. It's better than PDF IMO.

We have the most licensed Paizo content for any VTT platform.

Disclaimer: I am the owner of SmiteWorks, creator of Fantasy Grounds VTT. We have been partners with Paizo Inc. for a long time now and will continue to support them.

 

[djotaku]

Between this post and end of thread you probably got a lot of suggestions, but I actually find their APs fun reading, with a bit here and there to throw into my own games. I don't know if I would run one though, because of the monthly cadence, sometimes they aren't as well networked as I would want. But again, if you are going to go and support, you can do a lot worse than buying some of their adventure paths.

Starting, I think this year - maybe last year - Paizo moved to a quarterly cadence to save on shipping. I think it was partially due to the cost of shipping to overseas customers and partially all the nonsense that happened to shipping around the tariffs.

 

[djotaku]

We have the most licensed Paizo content for any VTT platform.

Interesting, to hear the internet tell it (especially Reddit), Foundry is the most supported Paizo platform. I'm not calling you dishonest. I'm suggesting if you truly have the most licenses, you have some marketing to do. Or maybe people just like the Metamorphic ports more? I have no idea. I am a Foundry user, but I'm new to the Paizo space. When I run MiMC next month it'll be the first paizo game I run (both in foundry and in person)

 

[smiteworks]

We have 946 officially licensed Paizo products released on our store today and loads still in development. We essentially pioneered the VTT space for Pathfinder, D&D, and many other publishers. It doesn't cost Paizo anything up front when we develop an official product for them, so every sale brings in more revenue for them (and us to a lesser degree) with no costs beyond sending us the raw files to work from.

There was someone within Paizo who really likes Foundry and they formed a team to develop those modules in-house. As a result, I think the majority of the marketing went to those products to try to recoup their costs, or perhaps because their employee preferred that VTT over our platform. Either way, 60% of all licensed Paizo purchases on our platform go back to Paizo.

 

[djotaku]

. Either way, 60% of all licensed Paizo purchases on our platform go back to Paizo.

Awesome! We all succeed together when we share in the profits.

 

[Staffan]

It really sucks for everyone who was operating in good faith and "just doing what everyone else was doing", but how can the courts or even Chase know who owned the property if the paperwork trail was never properly documented?

Presumably, there is an overall consignment contract specifying the terms and periodic manifests going back and forth about what has been shipped to the warehouse and what has been sold. As a layperson, I don't understand why you'd need additional documentation.

 

[Parmandur]

Presumably, there is an overall consignment contract specifying the terms and periodic manifests going back and forth about what has been shipped to the warehouse and what has been sold. As a layperson, I don't understand why you'd need additional documentation.

You see, the problem as I understand it is that presumption turned out to be dead wrong, which is why Chase seems set to get all the inventory in question. The paperwork in question that would have properly delineated who owned what was optional and would have cost the company's like Paizo money, so basically everyone decided to cut costs on the implicit understanding that Diamond would be cool about it. Unfortunately, courts and banks don't operate on polite understandings...

A proper distributor would have insisted the paperwork was all done, IMO, but Diamond didn't get where they did by crossing their t's and dotting their i's.

 

[Deset Gled]

Presumably, there is an overall consignment contract specifying the terms and periodic manifests going back and forth about what has been shipped to the warehouse and what has been sold. As a layperson, I don't understand why you'd need additional documentation.

Adding to what @Parmandur said, I believe Terry Gilliam made a documentary on this subject. It's called Brazil.

 

[Staffan]

You see, the problem as I understand it is that presumption turned out to be dead wrong, which is why Chase seems set to get all the inventory in question. The paperwork in question that would have properly delineated who owned what was optional and would have cost the company's like Paizo money, so basically everyone decided to cut costs on the implicit understanding that Diamond would be cool about it. Unfortunately, courts and banks don't operate on polite understandings...

A proper distributor would have insisted the paperwork was all done, IMO, but Diamond didn't get where they did by crossing their t's and dotting their i's.

My understanding is that the whole thing turns on there being a special document in addition to the above that wasn't filed. It's not enough that there's a contract and ongoing reports about stock, but there also needs to be a UCC-1 (?) document specifying that These Particular Items are stored on consignment and Do Not Actually Belong to the warehouse. That seems like a fault of legislation.