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Curt Schilling says Rhode Island Governor comments on 38 Studios were 'devastating'

Curt Schilling says Rhode Island Governor comments on 38 Studios were 'devastating'

Tue 29 May 2012 4:26pm GMT / 12:26pm EDT / 9:26am PDT
Business

A publisher backed out of a deal to publish a Kingdoms of Amalur: Reckoning sequel

Big Huge Games

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38 Studios founder Curt Schilling has come out and publicly criticized Rhode Island Governor Chafee for contributing to the state of the beleaguered developer. Schilling claims that state economic-development officials backed off on a deal to approve film tax credits that he says 38 Studios was legally entitled, and to allow the company to defer a $1.12-million payment due on May 1 so that 38 Studios could meet its May 15 payroll.

Schilling also called Chafee's remarks that the state was trying to keep 38 Studios solvent was "devastating". He cited an example where an unnamed video-game publisher pulled out of a $35-million deal to finance a sequel to Kingdoms of Amalur: Reckoning after the comments by the Governor.

38 Studios moved to Rhode Island when the State offered a $75 million to move there from Massachusetts, something Chafee opposed when he was running for Governor of the state. Rhode Island taxpayers will be be on the hook for more than $100 million if 38 Studios fails and Schilling says he could be out $50 million that he earned as a professional baseball player and committed to the company.

For his part, Governor Chafee has denied that his comments hurt the company and disputes that the state reneged on a deal for tax credits.

Last week 38 Studios was forced to lay off its 291 workers in downtown Providence that were focused on the MMO Project Copernicus and 100 more in the Maryland subsidiary Big Huge Games who were mainly responsible for Kingdoms of Amalur: Reckoning. Many of the employees are seeking jobs and had their old mortgages foisted upon them.

5 Comments

Morville O'Driscoll Blogger & Critic

1,630 1,509 0.9
I kind of agree with Curt here. If 38 Studios were a publically traded company, the Governor's comments would've affected the share price. The fact that it isn't doesn't lessen the impact what he said had on the business affairs of the studio. It's a bad mistake, and the Governor shouldn't have spoken out in such a negative fashion to the media.

Posted:2 years ago

#1

Christopher Bowen Editor in Chief, Gaming Bus

461 754 1.6
Hey, that's what happens when you take a government funded loan; someone else comes in, and now you're HIS whipping boy. Curt would have understood how the government is bad and evil if he'd have listened to EVERYTHING HE'S EVER SAID BEFORE HE TOOK THE LOAN.

Posted:2 years ago

#2

Joshua Rose Executive Producer / Lead Designer, Storm Eagle Studios

191 81 0.4
@Christopher: Completely agreed my good man... Just look at GE in the US.

What I still don't understand, is what accounting genius saw their current mode of operation as a sustainable business model. In another article I read on gi roughly a week ago, it discussed how KoA sales were supposedly 'better' than expectations of the company, but apparently they had to sell 3 million copies across all platforms to break even...

Let's think about this for a second... If you estimate you have to sell 3 million copies to break even, but at the same time, your EXPECTED sales are less than this, something doesn't seem right there. I understand something like this is a risk regardess of the expected sales. But if you report that you BEAT your estimated sales, and STILL had to make massive cuts across the board, What on god's green earth made you think you were going to make ANY money at all after shoveling millions into the fire? Anybody in their right mind would say, 'hmm... something is wrong here, what can we do to fix it'... let me give you a clue, It's not failing to make payroll, then letting company healthcare run out, then telling everybody they're being canned... It's called plugging the holes from which you're bleeding money, and figuring out WHATS WRONG.... this problem should have been addressed LONG before release.

I think Curt got some really bad advice from some people who were more interested in funneling money out for personal gain than giving honest advice to help make the company profitable.

Mark my words, there are pieces missing to this puzzle.

Posted:2 years ago

#3

Christopher McCraken CEO/Production Director, Double Cluepon Software

111 257 2.3
The Governor speaks for the taxpayers. It was a bad loan, everyone knows it was a bad loan. Schilling could NOT get, and was actively denied private funding from Banks, VC's, and other sources left and right. Even a major studio would question a title that needed to sell 3 million copies to break even. But R.I steps in, with a bond supported loan (with a moral obligation clause, which is pretty iron clad, and requires the state to pay it back, no ifs ands or buts) and he blows it.

The failure of 38 has nothing to do with the employees, or even the current Governor. It has to do with the utter and complete mismanagement of 38 studios by the people who were in charge. To put this into context: Blizzard themselves said it cost 100 million to produce and operate WoW. 38 had a 75 Million loan, doled out over time. Based on VERY loose language and dubious goals to release said money. (Most of them were based on how many R.I people 38 hired, not based on actual progress with actual production)

Let me go even further: if your business model depends on making a loan payment, so you can sell a tax credit so you can in turn make payroll...you don't have a business model. You have an insolvent operation that robs peter to pay paul as the de facto policy.

In closing, the Governor could have said "Tetsuya Nomura is being brought in to fix this, and get the MMO out" and 38 STILL would have failed. Facts are this: the company was mismanaged, the loan was badly written and badly underwritten, and the taxpayers are on the hook. The Governor was absolutely right to call it like he saw it. Someone should go to jail over this. People have been dumped into the market, lost their health insurance (including some pregnant employees) and to add insult to injury, now have a second mortgage due to the lies, and overall incompetence of the people managing 38.

Posted:2 years ago

#4

Morville O'Driscoll Blogger & Critic

1,630 1,509 0.9
@ Christopher

Whilst I generally agree - especially with "the company was mismanaged", since if nothing else their accounting department seems very "lax", shall we say - I don't think it's the Governor's position to call out 38 Studios. I would say it's a financial issue, and that the financial authorities should investigate it fully before politicians speak out on it. The Governor is responsible for informing the taxpayers about the situation, but surely a simple statement along the lines of "We will ensure that the taxpayers are not out of pocket" would be a more astute statement? What about if people end up being sued? Tainting the civil-suit jury pool isn't a great start to an investigation.

Posted:2 years ago

#5

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