Curt Schilling Points Finger at Rhode Island Governor

[Andy Chalk]

Curt Schilling Points Finger at Rhode Island Governor

The founder of 38 Studios says "devastating" comments by the Governor of Rhode Island were a big factor in the company's collapse.

Curt Schilling, the former Red Sox ace who founded 38 Studios in 2006, hasn't had much to say about its rapid spiral downward over the past month. He's kept quiet so far in order to avoid upsetting "sensitive" efforts to save the company, but now he's speaking out, and he doesn't have many good things to say about his erstwhile business partner.

"The Governor is not operating in the best interest of the company by any stretch, or the taxpayers, or the state," Schilling told the Providence Journal. "We're trying to save this company and we're working 24/7. The public commentary has been as big a piece of what's happening to us as anything out there."

In response to a statement from Rhode Island Governor Lincoln Chafee that the state will not give 38 Studios any more money in order to keep it afloat, he added, "That money is going into the hands, wallets, mouths of families who live in Rhode Island - right back into the system... We're not trying to take advantage of the taxpayers. We're trying to be a successful business in the State of Rhode Island that helps the State of Rhode Island get out of the doldrums that we are in."

Schilling explained that while the studio's debut release, Kingdoms of Amalur: Reckoning [http://www.amazon.com/Kingdoms-Amalur-Reckoning-Xbox-360/dp/B0044SA70M/ref=sr_1_1?ie=UTF8&qid=1338307801&sr=8-1], was a solid success, the money went directly to Electronic Arts, which had already paid an up-front $35 million "publishing fee" for the game. When 38 Studios' money troubles first arose in mid-April, negotiations for further support, including $8.7 million in tax credits, appeared to be going well, until the state allegedly began playing games. That, combined with public statements from Chafee about the company's solvency issues, burn rate and other matters scared off private investors who were poised to get behind both the "Project Copernicus" MMO and the Kingdoms of Amalur sequel.

The studio isn't dead and buried just yet, as 38 Studio executives are continuing to seek investors to resuscitate the company. It also continues to pursue tax credits the state recently suggested it may be ineligible to receive [http://www.escapistmagazine.com/news/view/117423-UPDATE-Senior-Executives-Flee-38-Studios]. On a more personal level, Schilling says that perceptions of him as a rich guy taking government hand-outs are completely off-base; he's personally got $50 million wrapped up in the company, and stands to lose it all if it goes under.

Source: Providence Journal [http://ireader.olivesoftware.com/Olive/iReader/ProvidenceJournalWithAuth/SharedArticle.ashx?document=TPJ%5C2012%5C05%5C29&article=Ar00100]


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[IndianaJonny]

Schilling explained... the money went directly to Electronic Arts, which had already paid an up-front $35 million "publishing fee" for the game. When 389 Studios' money troubles...

"...got really bad they borrowed money from their cousin, 38 Studios, which in turn put them in financial trouble."

There, fixed that for ya'.

 

[Ignatz_Zwakh]

I was waiting for this. All this while I've been wondering when someone from 38 Studios would bite back.

 

[Albino Boo]

Oh look EA helping screw over another independent developer.

I suggest you look up the meaning of Ponzi scheme. Its where you pay back previous investors subsequent investors money. Sort like when a gaming studio tries to pay back money lent on 1 unfinished product buy selling another unfinished product to EA. Guess what companies don't buy unfinished games from from studious on the verge of bankruptcy because the odds are their money will go straight to RI and they will get nothing.

 

[Something Amyss]

Oh look EA helping screw over another independent developer.

All that's left is to turn KoA into a shooter....

"...got really bad they borrowed money from their cousin, 38 Studios, which in turn put them in financial trouble."

There, fixed that for ya'.

They were in such financial trouble that they had to add another digit.

 

[UnderGlass]

While this whole debacle is undoubtedly Schilling's responsibility first and foremost, it seems clear the Governor of RI was hostile to the cause from the get-go. It doesn't take a financial genius to understand that public doomsday alerts blurted out by their guarantor on the company's solvency wasn't going to do it any favors during the hunt for ripe targets bridge investors to help keep them afloat. He saw a sinking ship and thought to cover his own ass while putting the boot in to a project he never supported. The man is either a complete buffoon or acted quite pointedly against the best interests of the citizens of his state. It's shameful and I hope you Rhode Islanders vote this snake out of office.

 

[deth2munkies]

Their business mistake was relying on a AAA MMO based on a non-existent IP to generate enough investor interest to keep them afloat. With the exception of TOR, which had an initial burst of success due to the license and the studio name behind it (Bioware), no AAA MMOs have even made their money back without going F2P in the last 5 years.

Stupid business planning combined with lukewarm sales of their initial title caused the studio's downfall. As much as I think Curt Schilling is a cool dude for all he was doing, he didn't handle it very well.

KoA is on sale on Amazon this week for $30, I was considering buying it, but given that the entire staff has been laid off and there are no investors on the horizon, I don't think there's much point in supporting a split profit between EA and the government of RI.

 

[Formica Archonis]

Schilling explained that while the studio's debut release, Kingdoms of Amalur: Reckoning [http://www.amazon.com/Kingdoms-Amalur-Reckoning-Xbox-360/dp/B0044SA70M/ref=sr_1_1?ie=UTF8&qid=1338307801&sr=8-1], was a solid success, the money went directly to Electronic Arts, which had already paid an up-front $35 million "publishing fee" for the game.

Waaait, so between EA and RI that means that Amalur was like a $150 million dollar game?

That, combined with public statements from Chafee about the company's solvency issues, burn rate and other matters scared off private investors who were poised to get behind both the "Project Copernicus" MMO and the Kingdoms of Amalur sequel.

There was people willing to invest in an MMO in the wake of SW:TOR. Were they drunk?

The studio isn't dead and buried just yet, as 38 Studio executives are continuing to seek investors to resuscitate the company.

So nice of them to work for free like that. Because if they're getting paid, I think the rank-and-file who were short-changed two paychecks have reason to get the pitchforks and torches.

On a more personal level, Schilling says that perceptions of his as a rich guy taking government hand-outs are completely off-base; he's got $50 million wrapped up in the company and stands to lose it all if it goes under.

So Amalur was a $200 million dollar game. What?

 

[UnderGlass]

Their business mistake was relying on a AAA MMO based on a non-existent IP to generate enough investor interest to keep them afloat. With the exception of TOR, which had an initial burst of success due to the license and the studio name behind it (Bioware), no AAA MMOs have even made their money back without going F2P in the last 5 years.

Honestly not trying to be a putz here, but do you have any reliable numbers for your statement on the financial success of recent MMOs? It's the sort of thing I'd be really interested in reading. All the data I have is anecdotal or woefully incomplete.

 

[CD-R]

I think this parody song sung to the tune of George Thurogood's One Bourbon, One Scotch, One Beer played by a local radio station seem appropriate.

http://www.94hjy.com/player/?mid=22127038

 

[CD-R]

While this whole debacle is undoubtedly Schilling's responsibility first and foremost, it seems clear the Governor of RI was hostile to the cause from the get-go. It doesn't take a financial genius to understand that public doomsday alerts blurted out by their guarantor on the company's solvency wasn't going to do it any favors during the hunt for ripe targets bridge investors to help keep them afloat. He saw a sinking ship and thought to cover his own ass while putting the boot in to a project he never supported. The man is either a complete buffoon or acted quite pointedly against the best interests of the citizens of his state. It's shameful and I hope you Rhode Islanders vote this snake out of office.

He did only win with like 30% of the vote.

 

[deth2munkies]

Their business mistake was relying on a AAA MMO based on a non-existent IP to generate enough investor interest to keep them afloat. With the exception of TOR, which had an initial burst of success due to the license and the studio name behind it (Bioware), no AAA MMOs have even made their money back without going F2P in the last 5 years.

Honestly not trying to be a putz here, but do you have any reliable numbers for your statement on the financial success of recent MMOs? It's the sort of thing I'd be really interested in reading. All the data I have is anecdotal or woefully incomplete.

I'll fully admit that I haven't gone through subscriber numbers etc, because most of that information is not publicly available. What is publicly available is that all of them have either closed up shop or gone F2P in under a year, which is a sign of desperation.

 

[medv4380]

I'd love to believe you Mr. Shill, but that's not how this works.

First you had a loan payment due at the beginning of May. A 1 Million dollar loan payment. You knew that was coming up. Your Accountant knew that was coming up.

The only FACT I really need to come to any conclusion is that you failed to pay, and bounced a check. To put Icing on the cake you then continued to have people work over the month knowing that you couldn't pay them. The honest truth is that time to go public with this and lay people off was April. I don't like people being being let go, but I hate it more when they work for free.

KoA maybe a good game for a first time run, but the company was clearly run by idiots who know have questionable ethics.

If you had done something last month, when you had money, you might have been able to save your company, but you didn't.

 

[4173]

Schilling explained that while the studio's debut release, Kingdoms of Amalur: Reckoning [http://www.amazon.com/Kingdoms-Amalur-Reckoning-Xbox-360/dp/B0044SA70M/ref=sr_1_1?ie=UTF8&qid=1338307801&sr=8-1], was a solid success, the money went directly to Electronic Arts, which had already paid an up-front $35 million "publishing fee" for the game.

Waaait, so between EA and RI that means that Amalur was like a $150 million dollar game?

On a more personal level, Schilling says that perceptions of his as a rich guy taking government hand-outs are completely off-base; he's got $50 million wrapped up in the company and stands to lose it all if it goes under.

So Amalur was a $200 million dollar game. What?

I doubt it. That $85 million probably went to other expenses, and/or was already counted within the cost of making Amalur: Reckoning.

I'd love to believe you Mr. Shill, but that's not how this works.

First you had a loan payment due at the beginning of May. A 1 Million dollar loan payment. You knew that was coming up. Your Accountant knew that was coming up.

The only FACT I really need to come to any conclusion is that you failed to pay, and bounced a check. To put Icing on the cake you then continued to have people work over the month knowing that you couldn't pay them. The honest truth is that time to go public with this and lay people off was April. I don't like people being being let go, but I hate it more when they work for free.

KoA maybe a good game for a first time run, but the company was clearly run by idiots who know have questionable ethics.

If you had done something last month, when you had money, you might have been able to save your company, but you didn't.

Without a more specific timeline of the negotiations with Rhode Island, I don't think we can necessarily conclude 38 Studios were acting unethically.

 

[medv4380]

Without a more specific timeline of the negotiations with Rhode Island, I don't think we can necessarily conclude 38 Studios were acting unethically.

Yes, and here is how. As a company they should have had Monthly or at least Quarterly reviews. With each review they should know how their bank balance is doing. If they were any good at their job they would know that they were coming up on a Cash Flow issue.

So, ether they are unethical about running a business, and where spending money with complete disregard for keeping their cash flow going. This is an unethical business practice. If a publicly traded company did this their would be an SEC investigation. This is the basics of Accounting Ethics.

Or, they were fully aware of the cash flow issue. That is even more unethical because then they were aware that the employees were going to work for Free, and they knowingly bounced a check. They should have been letting people go long before that check bounced.

Both are sound arguments for them being unethical in the Business world. I don't need a "timeline" to with hold judgement. All I need to know is that they are incompetent at running a business, had people work for FREE, and knowingly bounced a check.

Edit:
And from the actual linked article what he was doing is similar to Check Kiting to me. If he had cut people off in April maybe he would have saved some of that 4 Million a month to pay that 1 million loan payment. Instead he notified them on the 30th that he wouldn't be able to make his payment on the 1st. He was also trying to spend money from a Tax Credit he didn't yet have. That's the same thing people are doing when they are Kiting Checks.

 

[Baresark]

While this whole debacle is undoubtedly Schilling's responsibility first and foremost, it seems clear the Governor of RI was hostile to the cause from the get-go. It doesn't take a financial genius to understand that public doomsday alerts blurted out by their guarantor on the company's solvency wasn't going to do it any favors during the hunt for ripe targets bridge investors to help keep them afloat. He saw a sinking ship and thought to cover his own ass while putting the boot in to a project he never supported. The man is either a complete buffoon or acted quite pointedly against the best interests of the citizens of his state. It's shameful and I hope you Rhode Islanders vote this snake out of office.

If I recall reading on another article, it was actually guaranteed by the previous governor, but I do not have the willingness to search that information out. But, if that is true, this governor was not actually on board at any point. He may just consider this a waste of tax money (which is definitely an arguable point) and does not want to give them any breaks at all.

All of that said, pointing fingers at any one individual is stupid. No one person could be responsible for what happened at this company. It is a series of events that leads to this, not the actions of one man or group.

 

[4173]

Without a more specific timeline of the negotiations with Rhode Island, I don't think we can necessarily conclude 38 Studios were acting unethically.

Yes, and here is how. As a company they should have had Monthly or at least Quarterly reviews. With each review they should know how their bank balance is doing. If they were any good at their job they would know that they were coming up on a Cash Flow issue.

So, ether they are unethical about running a business, and where spending money with complete disregard for keeping their cash flow going. This is an unethical business practice. If a publicly traded company did this their would be an SEC investigation. This is the basics of Accounting Ethics.

Or, they were fully aware of the cash flow issue. That is even more unethical because then they were aware that the employees were going to work for Free, and they knowingly bounced a check. They should have been letting people go long before that check bounced.

Both are sound arguments for them being unethical in the Business world. I don't need a "timeline" to with hold judgement. All I need to know is that they are incompetent at running a business, had people work for FREE, and knowingly bounced a check.

Edit:
And from the actual linked article what he was doing is similar to Check Kiting to me. If he had cut people off in April maybe he would have saved some of that 4 Million a month to pay that 1 million loan payment. Instead he notified them on the 30th that he wouldn't be able to make his payment on the 1st. He was also trying to spend money from a Tax Credit he didn't yet have. That's the same thing people are doing when they are Kiting Checks.

Good call. I do remember, now that you mention it, that 30th/1st thing.

All I was getting at with the other, is that if they thought they were getting the tax credit a week or so later, bouncing the check is reckless, but I'm not sure I'd be ready to say its unethical (hard to say, without being in the negotiating room). What bits and pieces have leaked out certainly don't paint 38* as admirable, at the very least.

*(though how much input Curt had on the day to day, I'm not sure. Such is the risk of being the public face of a company. You get credit blame for things that may not be your responsibility.)

 

[UnderGlass]

While this whole debacle is undoubtedly Schilling's responsibility first and foremost, it seems clear the Governor of RI was hostile to the cause from the get-go. It doesn't take a financial genius to understand that public doomsday alerts blurted out by their guarantor on the company's solvency wasn't going to do it any favors during the hunt for ripe targets bridge investors to help keep them afloat. He saw a sinking ship and thought to cover his own ass while putting the boot in to a project he never supported. The man is either a complete buffoon or acted quite pointedly against the best interests of the citizens of his state. It's shameful and I hope you Rhode Islanders vote this snake out of office.

If I recall reading on another article, it was actually guaranteed by the previous governor, but I do not have the willingness to search that information out. But, if that is true, this governor was not actually on board at any point. He may just consider this a waste of tax money (which is definitely an arguable point) and does not want to give them any breaks at all.

All of that said, pointing fingers at any one individual is stupid. No one person could be responsible for what happened at this company. It is a series of events that leads to this, not the actions of one man or group.

What you are saying is true. However once the deal was made and the money spent there is not much anyone could do about it. Now, if 38 Studios goes under, the Rhode Island tax payer gets to pay back some 60 million+ dollars for the next decade. So don't you think this new Governor, regardless of his previous feelings on the deal, ought to have acted in the best interests of the company to try and keep the Rhode Island taxpayer out of the fire? Instead the way he went about things undoubtedly contributed to their difficulties. Would Schilling have found a rich drooling idiot investor to save them? We'll never know. Either way Governor Chafee is either stupid, or spiteful or he was trying to cover his own ass at the expense of his taxpayers.