Didn't see any posts about this and thought it was an interesting if somewhat unfortunate story.

http://www.npr.org/2012/05/22/153280535/r-i-strikes-out-on-ex-pitchers-video-game-venture
http://bostonherald.com/business/general/view.bg?articleid=1061134172&position=0
http://www.boston.com/business/technology/articles/2012/05/25/curt_schillings_38_studios_lays_off_entire_staff/
http://www.wpri.com/dpp/news/politics/polls/wpri-providence-exclusive-eyewitness-news-poll-shows-38-studios-deal-unpopular-with-rhode-islanders

A while back Rhode Island's Economic Development Council (basically a small business development initiative that was originally set up to provide state backing for loans to small businesses.)

The idea -in theory- of this sort of development initiative is not so much to break even or make money on the loans but to make it easier to start businesses with the understanding that if 95/100 fail, 4 succeed, and 1 flourishes that the net economic benefit is worth the cost of backing the risky loans. For this to be a worthwhile proposition you have to spread the financing capacity of the development corporation across as many relatively sound propositions as possible (since small business start-ups have a very high failure rate in general.) In the case of 38 Studios however they backed a 75 million dollar loan out of an original financing limit of 50 million dollars; the state had to pass legislation to increase their capacity just to make this one loan.

The former governor quite admired Curt Schilling and helped to push through the legal changes required to make this possible; he also appointed a new head of the REIDC who would approve the loan. This was done against the objections of some within his own party, the better judgment of independent analysts, the mission of the REIDC, the disapproval of 70% of Rhode Island voters surveyed, and objections of some of the opposing party. It was not a primarily partisan matter but smells strongly of the kind of cronyism (in this case favoritism to perceived friends in lieu of sound judgment) that is unfortunately very familiar.

38 Studios has recently come close to defaulting on its very first loan payment (made over a week late) and has just laid off its entire staff. While the REIDC has secured the intellectual property and other assets as collateral for the loan, the final cost (after interest) to the RI tax payers could easily be over 100 million dollars. The subversion of a system that only even theoretically benefits the taxpayer (net effect of facilitating the development of job-creating businesses over the direct cost of failed loans) when you spread the risk over many business ventures is one component. Another component appear to be abject incompetence on the part of Curt Schilling whose business savvy meant his company's first game would have to sell 3 times the projected/expected sales to break even but made sure to pay himself back for a 4 million dollar loan he had made to his own company just before receiving the 75 million.

I feel pretty awful for the employees and its sad that the citizens of RI and politicians on both sides who opposed the loan in the first place now have to clean up the mess.

[Edited on May 25, 2012 at 12:02 PM. Reason : edit]

5/25/2012 12:01:07 PM

Curt "small government" Shilling getting government handouts and pocketing the money while laying off 300 people.

Yep, that's about right.

5/25/2012 1:22:42 PM

I remember hearing him talk about how much he had invested in this a few months back (and by he, he apparently actually meant taxpayers) and thinking it was a turrible idea.

5/25/2012 1:34:02 PM

Yeah, that was a fucking terrible idea.

5/25/2012 6:00:58 PM

So what kind of video games was this studio going to be making?

I mean I would assume baseball but that's pretty cliche.

5/25/2012 6:33:41 PM

RPG and MMRPG. Sounds like they were on the right path but did not control their spending. Development of these types of games is an expensive affair, this is not low hanging fruit like Angry Birds.

5/25/2012 10:45:11 PM

thank god they kept Obama out of the loop on this one. He would have thrown in another $400M for good measure.

5/26/2012 8:07:05 AM

Schilling is sticking some of his former employees with 2nd mortgages after the company had previously claimed to have sold their houses as part of their relocation program. These employees, whose layoffs en-masses without notice violated the law, are now also getting calls from banks and being informed that the company lied to them, their former houses did not sell, and hat they are now required to pay the mortgages in addition to whatever rent or mortgage they currently pay.

http://www.theverge.com/gaming/2012/5/25/3043282/38-studios-downfall-leads-to-second-mortgages-for-some-employees

http://www.gametrailers.com/side-mission/2012/05/25/38-studios-violated-agreement-by-failing-to-disclose-layoffs-will-face-financial-audit/

So yeah pretty much a massive clusterfuck.

[Edited on May 26, 2012 at 12:17 PM. Reason : as]

5/26/2012 11:59:22 AM

Reminds me of that movie with Jim Carey.

5/26/2012 12:31:08 PM

i thought this game was supposed to be good

5/26/2012 1:00:44 PM

^ Well there were two games they were doing; one game (Kingdoms of Amalur:Reckoining) was being done by another studio that Curt Schilling's 38 Studios aquired (Big Huge Games.) That game received mostly positive reviews and beat sales expectations; it was delayed however and missed the holiday season so these expectations may have been lower than what they might have originally wanted if the game had been on time.

The second game being developed (Project Copernicus) was to be an MMO set in the same world. This has also been delayed and, being an MMO, likely entailed far higher development costs and larger staff. Consider that Skyrim had a staff of about 100 working on it while Elder Scrolls Online has a staff of several hundred.

5/26/2012 1:48:20 PM

Yeah, what made this all the more tragic is that they assembled a solid set of talent. This wasn't a pure boondoggle persay; the company (even through acquisition) did produce a solid title and was on the road to some interesting MMO work. The problem was that the management expanded way too quickly and was reckless with spending.

5/26/2012 3:06:41 PM

^ Perhaps if they had received their start-up money from venture capitalists who actually care about earning a return on their money, a bank who cares about getting their money back, or a debenture with covenants to hold them accountable INSTEAD OF A BLANK CHECK FROM A FANBOY GOVERNOR maybe, just maybe this wouldn't have happened.

And if they still lost money the only people who would care would be the idiots who made a willing and informed decision to invest instead of the entire state of children, retirees, and workers.

This isn't that hard to understand. Government "investment" is destroying this nation. We're on the path to becoming a controlled economy and it will blow up just like it's blowing up in China right now.

5/26/2012 4:57:13 PM

Never said I thought this was a good idea by the state of Rhode Island. Not to dogpile on them, but having lived in New England, I've come to believe that they're probably the most corrupt state in the region if not the Union.

5/27/2012 9:08:42 PM