Developer DC Studios, which operated out of Edinburgh, Scotland and Montreal, Canada, has been forced to shut its Scottish studio after the commercial failure of State of Emergency 2.

According to Scottish newspaper the Sunday Herald, the firm is still exploring its options and hopes to get the Edinburgh operation up and running again - but for now, 29 staff have been made redundant and the UK operation is not currently trading.

DC Studios acquired the State of Emergency 2 project from fellow Scottish developer Vis Entertainment when the latter firm went into administration in the middle of last year. The first title in the series was published by Rockstar shortly after Grand Theft Auto III, and rode to chart success on the shirt-tails of that title despite critical slamming.

Rockstar passed on the sequel, but small publisher Southpeak released State of Emergency 2 in the USA and Europe earlier this year - with revenues which DC boss Mark Greenshields told the Sunday Herald were "substantially lower than we expected."

"We had to pay a lot of money in order to complete the game," he explained. "A lot of things were discovered after the acquisition. But when you buy something out of receivership, it's buyer beware."

DC Studios' Canadian operation, which employs 55 people, will remain in business as usual, and Greenshields remains cautiously optimistic about the Scottish operation. "I'm taking legal advice on whether we go into administration or if there are other options," he told the Sunday Herald. "I have to be careful about doing the right thing for everyone. I have to obey the law."

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