Due to Diamond Hostage Inventory; Company Undergoes Restructuring, Will Lay Off a Dozen Employees
Paizo, Inc. revealed that they had declared almost $2 million in losses in 2025, forcing the company to undergo restructuring in 2026.
Jim Butler, CEO of Paizo, explained the company’s situation in a blog post on June 8, 2026. The main contributor to the Paizo’s losses was the hostage inventory situation created by the Diamond bankruptcy in mid-2025 (see “Hostage Inventory“). They were partners with Diamond Book Distributors for book channel distribution (which included Amazon) for Pathfinder and Starfinder products , and their inventory at Diamond was essentially frozen by the bankruptcy proceedings (see “Paizo Gets Caught in ‘The Diamond Mess’“) because JP Morgan Chase, the DIP secured lender, claimed a lien on all of their products in the Diamond warehouse.
The Diamond bankruptcy has just gone from bad to worse since the initial hostage inventory incident. In September 2025, Diamond attempted to seize and sell inventory from 31 vendors, which included Paizo (see “Against 31 Vendors“). Late last year, the bankruptcy filing went from Chapter 11 to Chapter 7, which created a liquidation scenario (see “Court Orders Chapter 7“). The hostage inventory situation for Paizo dragged on into mid-2026 as courts tried to resolve the now $7 million owed to JP Morgan Chase (see “Diamond Bankruptcy Court“). As a result, almost $10 million in Paizo inventory became stranded at Diamond as the courts sort things out.
The slow pace of the bankruptcy proceedings, having to write down almost half a million in additional sales covered under the bankruptcy, and book-trade sales not doing so well in 2025 all amounted to Paizo being forced to make cuts in 2026 to survive. The company announced that they will be laying off 12 employees from their staff.
Paizo’s workers had unionized in 2023 (see “Voluntarily Recognizes Union“), thus these layoffs will occur in accordance of union guidelines. Employees may volunteer to be laid off; otherwise, least-senior employees of each impacted business unit will be laid off first. Impacted employees have 18-month recall rights, and they will receive a week of severance per year of service (minimum two weeks).
As far as other operational changes at Paizo, Foundry VTT support for Organized Play scenarios will be on pause beyond the current season. Also, Paizo has partnered with Publishers Group to re-establish their book-trade sales, and will launch a direct-to-retail program so LGS can order Paizo products from the company.
Source: ICV2
