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Schilling says 38 Studios "employees got blindsided"

Schilling says 38 Studios "employees got blindsided"

Fri 22 Jun 2012 6:52pm GMT / 2:52pm EDT / 11:52am PDT
BusinessFinancial

For the first time since the bankruptcy, Curt Schilling speaks out publicly

Curt Schilling has confirmed that the reason why 38 Studios went bankrupt is because his company failed to raise more money from outside investors. Schilling went into heavy detail about his company in a radio interview on the Dennis & Callahan sports radio show on WEEI in Boston.

"One of the going concerns from Day One - and it was always something that we were cognizant of - is we needed to raise capital," said Schilling. "We tried for a long time to do that and it didn't come to fruition. The one thing we always listed as a going concern we couldn't execute on.

Schilling said he personally invested more than $50 million in the company and also received between $5 million to $10 million from other wealthy investors. There was also the infamous $75 million loan guarantee it received from the state of Rhode Island to entice it to move to Providence last year.

In 38 Studios' Chapter 7 bankruptcy filing, it reported that it owed more than $150 million, mostly to the state of Rhode Island, and that it had less than $22 million in assets.

While Schilling made tens of millions of dollars as a pitcher for the MLB, he said that he was "tapped out" and didn't have any more money to put into the company. "I put everything in my name in this company," said Schiling. "I believed in it. I believed in what we built. I never took a penny in salary. I never took a penny for anything."

Citizens Bank recently sued Schilling for $2.4 million in loans to 38 Studios that it says were personally guaranteed by Schilling. Schilling said last month he broke the news to his family last month that, "the money I saved and earned playing baseball was probably all gone…life is going to be different."

Reports were that employees were let go with little to no warning. Some employees still might be owed back wages and Schilling empathizes with them.

"The employees got blindsided," Schilling said. "They have every right to be upset. I always told everybody if something were going to happen, you're going to have a month or two of lead time, and I bombed on that one in epic fashion."

Schilling says that they nearly raised $35 million for a sequel to Kingdoms of Amalur: Reckoning, but that the deal fell through after Governor Lincoln Chafee said that the company was nearly insolvent. Sales from Kingdoms of Amalur: Reckoning did not immediately pay dividends because they had to pay back publisher Electronic Arts, which had provided the company with an advance.

An investor nearly wrote a check for $15 million to $20 million if the state of Rhode Island agreed to give the company $6 million in tax credits and also renegotiate the loan guarantee so the investor was first in line to be repaid. Schilling said this would have saved the company, but the state refused this deal.

Schilling also bit back at remarks that he was a hypocrite for seeking the loan guarantee and tax credits despite his political stance against bigger government. "I don't know how that correlates to this," said Schilling. "I don't have any problem with government helping entrepreneurs and businesses."

5 Comments

Terence Gage Freelance writer

1,288 120 0.1
I feel kind of sorry for Schilling - he invested a crazy amount of money into this venture and obviously really believed in it. It's crazy how the company burned through more than an eighth of a billion dollars though in trying to make an MMO. That just doesn't make any fiscal sense no matter how you spin it.

Posted:2 years ago

#1

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
The oddball thing is KoA may be one of the best-made games that destroyed a company because it was too big for its own good. I'm gathering they thought the first game would do well enough to generate enough to pay back everyone who loaned whatever and get them to work on that MMO or something like that. Guess we'll have to see what happens if there's a trial of some sort. I really don't think there was any intent to commit any sort of fraud at all. It looks as if they got caught up in a few parts of the lousy economy at the same time and combined with the money already spent, it was a spiral that couldn't be stopped.

Still, I wonder how much less it would have cost if it were a solo game from the outset and not scaled back somewhere in the dev process. Interestingly enough, I recently saw the the price of the game used has gone UP in some shops and it's still selling for full price in others new.

Posted:2 years ago

#2

Rick Lopez Illustrator, Graphic Designer

1,269 942 0.7
I really feal sorry for Schilling and 38 Studios. Kingdoms of Amalur was a really good game. Would have liked to see a sequel and MMO.

For a guy who spent so much of his own money on the company, I dont think there is a case of fraud here or any type of theft.

I just think it was just a bad business plan. Just think they started out too big. Maybe it was better to make a smaller game and build up to making a full AAA game slowly and not borrow so much money.

I wish the best of luck to schilling and his crew. Hope they can get back to making games one day. Cause kingdoms of Amalur was a great game.

Posted:2 years ago

#3

David Radd Senior Editor, IndustryGamers

359 78 0.2
In the end, I don't think the problem was Kingdoms of Amalur: Reckoning; all told, the game sold well enough to keep Big Huge Games in Maryland that worked on it solvent. The problem was that they were working on a much larger project that had yet to bear fruit in RI for their MMO. Even if things had gone smoothly, it was at least a year out until launch, so 38 needed outside help to stay solvent and complete the project, help which they just didn't get.

Posted:2 years ago

#4

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
@David; Ah. Thanks for explaining that. The general news media here is a joke, as they're running the story in such a clipped manner as to make it sound as if there was some wholesale fraud going on from 38. Still, that MMO money would have done better in cooking up a sequel that maybe had co-op and/or online play as options instead of a separate game that was bigger and drove 38 off a cliff. I hope things get a lift for Schilling and everyone at the company, as they'll need it.

Posted:2 years ago

#5

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