The employees at Icarus Studios knew something was amiss on Friday, April 30, when their paychecks hadn’t been deposited into their bank accounts.

The second clue came later that day when one worker saw a colleague crying in the company kitchen.

Finally, at a company meeting that afternoon, James Hettinger, co-founder and CEO of the Cary-based gaming company, announced it was abruptly laying off 82 of its 110 employees. (The company rehired seven people after re-examining its finances.)

The company also has failed to pay most of its employees in full and still owes thousands of dollars in back wages.

“We heard it was going to be half of a check,” one employee said. “Then when they handed them out, it was a third. And they owe us another week’s worth of pay.”

The employees asked that their names not be printed because they are concerned about being paid and finding new jobs in the industry.

Another employee said Hettinger, who has since resigned, told the group that one of the company’s investors, Everest Capital, had pulled its funding, and there was not enough money to make payroll. Icarus/ Fallen Earth Marketing Manager Jessica Orr would neither confirm the reason for the layoff nor the identity of the investor. She did confirm that employees had not been paid.

“We’ve put in place a companywide restructuring,” Orr said, adding that Icarus is “cash-neutral,” or breaking even. “Fallen Earth is still on and running, and we’ve continued content development and production on that game and a few other key projects.”

The company’s setbacks are likely due to a volatile and intensely competitive industry. Even though developing a game can take several years and millions of dollars, only one of every 1,000 titles succeeds, said Scott Steinberg, head of the video game consulting firm TechSavvy.

Icarus’ main product is Fallen Earth, a massive multiplayer online game that immerses users in a postapocalyptic world in the year 2156. Players are scientifically engineered clones battling monsters and other threats in the Grand Canyon.

Fallen Earth has to compete with the highly successful World of Warcraft in an oversaturated market. In addition, gaming trends are moving away from “sci-fi and mutants,” Steinberg said.

While Fallen Earth has received mixed reviews in industry magazines, Orr said the game is performing well and that Walmart will begin selling it.

Steinberg said “having a presence in the world’s largest retailer can’t hurt.” However, he cautioned that the bulk of these subscriptions are driven by online word-of-mouth, “not people going to the store and buying it out of the box. Retail is shrinking, online is growing, but the audience is fracturing.”

An Icarus employee said the people “who played it liked it,” but that “there weren’t enough people paying for the game.” The monthly subscription fee is $15.

“That’s a huge obstacle,” Steinberg said.

The company relaunched Fallen Earth last month, the employee said, and many people worked 60 to 70 hours each week to develop additional content and patches.

Icarus is widely respected for its game engines, essentially generic platforms that can serve as structural templates for other games.

“We really felt like they weren’t in it as a passion for the game rather than for the tools they were creating,” the employee said.

“I wouldn’t be surprised if their [Icarus’] investors wanted to see more of a focus on that than the game,” said Alexander Macris, president of the Triangle Game Initiative, a trade association for the area’s interactive entertainment industry. He emphasized he was speculating and did not know about the investment team or its strategy

Fallen Earth attracted a niche audience, “and did better than most,” Macris said, “but it’s not World of Warcraft.”

The key to success in the gaming marketplace is similar to what other media require: loyal subscribers, which are more difficult to attract since there are thousands of free online games. “You’re not only trying to get people to play it but also to subscribe to it and stick around for the long term,” Macris said.

“Very few games succeed, but when they do, it can be exceptionally lucrative,” he went on. “If it doesn’t, then you have a game you’ve invested money into and you lose money without subscriber revenue.”

As for the laid-off employees, some have found other jobs, and others are consulting recruiters to be placed in other companies either in the Triangle or in other states. However, they have yet to be paid.

“The goal is to get to a place where we have a cash-positive situation,” Orr said. “We want to make sure people receive what they’re due. We just don’t know when.”

This is an update of a May 2 blog post originally published on the Indy’s Triangulator.