38 Studios spent $133 million before collapse

"38 Studios was hemorrhaging cash - our cash," says R.I. Economic Development Corporation director

New documents have revealed that bankrupt Kingdoms of Amalur: Reckoning developer 38 Studios burned through $133 million before it closed.

"38 Studios was hemorrhaging cash - our cash," Saul Kaplan, who was former executive director of the R.I. Economic Development Corporation, told WPRI

"The thing that is most amazing to me is their burn rate was about $5 million a month all through 2011, heading into 2012, and it didn't slow down even when they knew they were running out of cash."

Operating expenses for the company, which was founded in August 2006, had reached $118 million by the close of 2011. And the company was making no revenue at that time. In two years $705,000 was spent on "travel and entertainment" alone.

As well Kingdoms of Amalur: Reckoning the company was working on MMO RPG Project Copernicus. Through March $104.5 million was spent on research and development.

"This was just not a startup atmosphere in the company, where you really hunker down and have macaroni and cheese - that's what most companies do," said Governor Lincoln Chafee.

"This was very, very different. [It] might not have been caviar, but they were living high on the taxpayer's dollars."

WPRI also saw business plans in which studio executives predicted $109 million in revenue for 2012, a figure presumably based on the company's sale target for its RPG which stood at 2 million units. Kingdoms of Amalur: Reckoning only sold 1.3 million.

"I honestly think if 38 Studios had moved to get financing months earlier they would have been fine," added analyst Michael Pachter.

"Had they been out in the market in December I think they would have been fine, and I think they probably believed they were fine."

Founder Curt Schilling recently gave an interview offering his thoughts on the studio's failure.

"We never had that sense of urgency or panic, I think there was a sense of invulnerability - I don't want to say invulnerability, but I think we were comfortable."

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Latest comments (5)

David Radd Senior Editor, IndustryGamers7 years ago
I'm not sure I agree with Chafee's assessment that 38 Studios was necessarily luxury - making an MMO is expensive, and they were employing hundreds of people to work on Copernicus, and that doesn't include all the folks working separately on Reckoning. Paying game developers, producers, artists a proper salary is expensive - it's clear that the economics for the company were not in a good way, but quantifying them as basically "living high on the taxpayer's dollars" gives an incomplete picture of the company's condition.
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Meelad Sadat [a]list daily editorial director, Ayzenberg Group7 years ago
Wonder if the governor hunkers down with mac & cheese when he's living off campaign funds
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Eddie In Business Development - Assistant Manager, Nexon Corporation7 years ago
I get that RIEDC was unhappy with 38Studios, especially after Gov. Chafee stepped in. But wouldn't it be in the best interests of everyone involved if 38Studios were left to find additional funding sources and keep the project afloat until launch? An MMO like this on its worst day can make at least SOME of the funds back instead of forcing the people of Rhode Island with no exit strategy save for paying taxes over the next decade. I must be missing something here.

-"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer"

Edited 1 times. Last edit by Eddie In on 26th July 2012 4:15am

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Eric Flynn Content Director, ISOTX7 years ago
This stinks of politician maneuvering. The powers that be in R.I. will spin this as entirely a failure of the previous Governor (he did push it through at the end of his term but were was the oversight afterwards with the new administration?), plus villainize the company.

It looks like a bunch of mistakes were made and failure was pretty rampant. Those responsible must be held accountable. But this administration is going to conveniently gloss over any of their responsibility. The current governor took office in January 2011, why weren't people looking into this giant loan earlier? Didn't they have any means to see 38 Studios were burning through $5M a month? KoA was released a year after the gov. took office in 2012. That should have been enough time to do some oversight. They spent approximately $60M under his watch.

Everyone is going to walk away from this with a bad taste in their mouth. The player were disappointed by the studio. The devs got screwed by management, the people of R.I. got screwed by politicians and management, and a bunch of the money is probably already in someone's Cayman Island or Panama bank accounts.
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Rick Lopez Illustrator, Graphic Designer 7 years ago
Its sad what happened to 38 studios, they really did put out a great product, with kingdoms of amalur.
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