Looking Glass Studios, Inc.

History

The new direction would be realized in the company's only game as Blue Sky, Ultima Underworld: the Stygian Abyss. Neurath took inspiration from the 1987 first-person dungeon crawler Dungeon Master for this project, but instead settling for a game of dungeon crawling and monster slashing, he looked to create an impressive and immersive virtual world inside the dungeon. Not all the creatures in the game would attack you, instead some

 Ultima Underworld: the Stygian Abyss

were NPCs you could interact with. They inhabited the dungeon in little settlements, where they had bonfires, sleeping quarters and bathrooms. This in a time when dungeons in first-person games were a series of random, non-descript rooms connected by corridors. Ultima Underworld would become one of the most influential computer RPGs of all time, with technology, depth and atmosphere that left it's contemporaries far behind. The game received wide critical acclaim, it sold 500,000 copies and spawned a sequel with Ultima Underworld II: Labyrinth of the Worlds.

 
Before the sequel, though, Blue Sky would merge with Lerner Research to form Looking Glass Technologies, later to be renamed Looking Glass Studios. The first game under the new name would be System Shock, a game that built on what the company had done with the Underworld series and take it to new heights.
 
System Shock changes the setting from damp dungeons to a cyberpunk future, where you are trapped onCitadel Station with a crazed AI— SHODAN— one of the most memorable video game villains of all time. SHODAN has turned the corridors of Citadel into a war zone riddled with corpses, mutants and cyborgs on patrol. The game's dense atmosphere was achieved by leaving the player completely to his own devices. You do not encounter any NPCs in the world of SShock, instead the story is told through a series of e-mails that the player finds around the station.
 
The game featured a physics system that affected all the items in the world as well as the character. For

 System Shock

example, when the player ran into a wall or was hit by a bullet, his head would be knocked to the opposite direction of the hit. The interface was also given a facelift. You were not restricted to the small game windows found in the Underworld series anymore, you could now view the game in fullscreen, as well as customize the HUD to show items, emails, etc.
 
System Shock was a critics darling, but commercially it didn't fare so well. It only sold 170,000 copies. The sequel, System Shock 2, was co-developed by Irrational Games (now 2K Boston) and Looking Glass.
 
After System Shock Looking Glass went on to develop a flight simulator focused on aerobatics, Flight Unlimited, but fans were looking for something less serene. A year later they got Terra Nova: Strike Force Centauri.
 
Terra Nova leaves the claustrophobic corridors of Underworld and SShock behind and puts the player in large outdoor areas on four different planets. The environments differ from planet to planet, going from a dead wasteland to an earth-like environment, each of which has unique environmental effects such as moving clouds, a day/night cycle and rain or snow. You control a PBA (Power Battle Armor, basically a small mecha) from first-person perspective and are given a multitude of weapons (including particle beams, rockets and railguns) as well as three AI controlled teammates for each mission. You can't directly control them, but you can give them orders to follow.
 
Terra Nova turned out to be another game for the critics. It was planned as a series, but it's poor sales put a stop to those plans. It sold a 100,000 units and it's one of the only Looking Glass games that didn't break even.
 
One golf game and a sequel to Flight Unlimited later the folks at Looking Glass would push the envelope again with Thief: The Dark Project. Dubbed “first-person sneaker” by the dev team the game put players in the shoes

 Thief: The Dark Project

of Garret, a professional thief. The game takes place in the steampunk world of “the City”, a metropolis that takes it's influences from fantasy, the Middle Ages and the Industrial Revolution. Unlike it's FPS contemporaries Thief was all about avoiding confrontation and sneaking in the shadows. Avoiding light was essential to your survival, as was not letting the guards hear you. You had to watch the surface you were walking on, carpets would not make any noise, but metal would alarm everyone and their grandma to your location.
 
Looking Glass experienced some financial turmoil during the development of the game. The Austin branch of the studio was completely closed and half of the staff at Looking Glass was laid off. The rest of the team was under immense stress and some of them voluntarily quit the project, including the lead programmer. Despite all of this Thief was released in 1998 to raving reviews and it sold 500,000 copies. Looking Glass managed to make a sequel to the game, that sold equally well, but it was too late to save the company. Thief II: The Metal Age would be Looking Glass Studio's final game.

The End

In May 2000, mere months after the release of Thief II, Looking Glass closed it's doors. It simply couldn't afford to pay it's employees any more. They were sure that Eidos would pick up the financing of their next project, but the deal fell through when the bank refused to finance the expenditure.
 
A part of the reason to their decline has been attributed to the company being in the wrong market. It was releasing hardcore PC games at a time when the consoles were gaining momentum and it was doing ports of Nintendo64 games (such as Destruction Derby 64 and the N64 port of Command & Conquer) at a time when the PlayStation was dominating the market. However, according to ex-Looking Glass employees there was no one reason for the company closing it's doors.  

"Looking Glass Studios grew extended on debt, which put it in a vulnerable position. Then we got caught by several surprises in a row, which when combined with an inability to secure a funding partner, sealed our fate." -Paul Neurath, via Salon.com

Legacy

Even though the company is long gone it's influence can still be felt through the industry. Ultima Underworld and System Shock have been cited as an influences to such games as: The Half-Life series, The Elder Scrolls series, Tomb Raider, Vampire: The Masquerade - Bloodlines and Deus Ex, which had a lot of ex-looking-glassers working on it. Ultima Underworld in particular can be seen as a common ancestor to modern 3D RPGs. Paul Neurath went on to make Arx Fatalis, a spiritual successor to the Underworld games and 2K games developed the commercially and critically successful BioShock in spirit of the Shock series.
 
Thief's sneaking-over-shooting influenced such stealth titles as Assasin's Creed, the Hitman series and the Splinter Cell series.