After a disastrous lawsuit against Epic Games and the critical and financial failure of X-Men: Destiny, Canadian developer Silicon Knights has fallen on hard times. The developer has been long revered thanks to games like Legacy of Kain, Eternal Darkness, and Metal Gear Solid: Twin Snakes. However, since departing the good graces of Nintendo, the studio has struggled to release a game of high quality.

According to a former employee of the company, Silicon Knights fell apart due to the authoritative control of Denis Dyack, studio head. Cutting ties with Nintendo meant Dyack would have total control of the studio, without the support he would receive from the Japanese publisher. "This is the reason for the extremely high quality games that SK built a reputation on," a source said. "Nintendo was going to put their name on the game, so it had to be 'Nintendo quality.'"

The studio's ability to create "Nintendo quality" is what earned it projects with Sega, Microsoft, and Activision. "They leverage this by talking about Eternal Darkness endlessly," a source revealed to Kotaku.

The studio eventually signed with Activision to work on X-Men Destiny, but it was clear that Dyack was uninterested in investing in that game's development. "SK didn't take the development of XMD seriously the entire time I was there," one source said. "Denis is not an X-Men fan either, so he didn't care much for the license. To him, it seemed more like a job to get us by."

Dyack actively moved developers from X-Men Destiny to another game being developed at the studio: Eternal Darkness 2. "They were working on an Eternal Darkness 2 demo that they could take to publishers. While I was there, they were even siphoning off staff from my team to work on it," one source said.

Although development on X-Men Destiny was already struggling, one source said that "SK had about 60% of the development team working on XMD and the other 40% working on ED2." That would prove to be problematic, Activision "started to get pretty upset that nothing they mentioned was ever addressed properly and remedied" on the game. Apparently, Silicon Knights was hoping to wrangle a delay from Activision, but the publisher refused.

"Instead of offering an extension, Activision turned up the pressure by publicly announcing the game, and attaching Silicon Knights' name to it prominently," the report notes--after Silicon Knights had already moved many more resources off the game. "The idea was to slow down production more than ever before, to try to apply pressure for an extension."

When X-Men Destiny reached store shelves, it was a rushed, incomplete game--as evidenced by the critical backlash it received. And not only would X-Men Destiny further sully the Silicon Knights name, the studio had nothing worthwhile to show regarding Eternal Darkness 2. "Bad tech, combined with a team composed of people who had not shipped a title since Metal Gear really hurt that demo," one insider said, noting that "a lot of key people responsible for the original Eternal Darkness are long gone."

According to Kotaku, the studio currently employs "less than five staff--including Denis Dyack." That certainly would make the company's hopes to make a next-gen game seem rather unlikely.