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RI Governor: 38 Studios Was "Living High On Taxpayer Dollars"

We're all aware of the 38 Studios debacle by now. But were you aware of the actual size of the numbers involved...?

Some of those numbers came to light after business documents were revealed to the public. As it turns out, the studio that is now bankrupt spent $133 million in only a five-year span; the money mostly came from state loans and the personal fortune of founder and former Boston Red Sox ace Curt Schilling.

Kingdoms of Amalur: Reckoning sold 1.3 million copies but it needed to sell 2 million just to break even. That would've allowed the company to pay back the $28.7 million advance they borrowed to finish the highly anticipated title, and Wedbush Morgan analyst Michael Pachter is surprised the title didn't sell better:

"I don't think 2 million was an unreasonable estimate--I thought it would do 2 million to 3 million. They may have been counting on an extra $30 million to $40 million of revenue from the game."

Investors started to draw away after Reckoning under-performed, which left the studio without the means to cover huge R&D expenses on Project Copernicus, the giant MMO game that managed to suck up another $104.5 million. And with six years of development and a team of 400, they were really counting on Copernicus to hit big. Sadly, the major financial difficulties spelled disaster for that hope.

And RI Governor Lincoln Chafee is none too pleased with the result:

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

Executive director of the RI Economic Development Corporation until 2008, Saul Kaplan, said that 38 Studios was "hemorrhaging cash." He said their "burn rate was about $5 million a month through 2011" and worse still, it didn't slow down when they knew they were running out of money. ...can anyone say "mismanaged?"

Tags: 38 studios, big huge games, kingdoms of amalur reckoning, 38 studios bankrupt

7/26/2012 8:21:04 PM Ben Dutka

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Comments (8 posts)

Rogueagent01
Thursday, July 26, 2012 @ 10:06:26 PM
Reply

To me the mistake was releasing it near Skyrim. I know that it released in February and Skyrim released in November but the burn out effect and just the fact that many were probably still playing Skyrim had to take a toll on it. If they could have held it off till summer or released a couple months before Skyrim I think the game would have had a totally different outcome.

And I really don't have sympathy for RI as you gave then a huge loan and didn't put any restrictions on the loan, so eat it RI.

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frylock25
Thursday, July 26, 2012 @ 11:45:31 PM
Reply

can anyone say idiot?

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firesoul453
Friday, July 27, 2012 @ 12:03:36 AM
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Man I hate to see a company get so messed up.

I wish it was released more around this time, I'd bet it would get more sales then.

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JackC8
Friday, July 27, 2012 @ 6:30:38 AM
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The stuff the governor said is typical political BS - the owner of the company invested his entire personal fortune in the company and lost it. That's not in any way living high off the hog.

It was mismanaged though - $104 million on an MMO? The average cost of developing a game these days is around $30 million.

It's sad that KOA didn't sell better. But that's the way things are these days. Any new IP will be ignored by by all but a few gamers. Sales figures prove time and time again that the majority of gamers don't want to play anything that they haven't played several times before.

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___________
Friday, July 27, 2012 @ 8:15:05 AM
Reply

god for a guy who is suppose to know these things pachter sure is a absolute moron!
its a new IP, from a new unheard of developer, in a saturated genre!
kingdoms was lucky to see the sales it did!
theres allot of games out close to it which were A better, B from well known developers and publishers, C from well known franchises, and last but not least D had a marketing campaign behind them!
seriously dude you need to find a job you actually have a blues clue at!

ah, finally its clear what happened to the company.
why the ^%$# would you go develop a MMO as your second game?
these guys are absolute morons!
the biggest developers in the industry are struggling to make MMOs successful!
so how are they suppose to?
its like a high school student saying hey im the best wrestler in school so im going to enter myself into the WWE!
the kids going to get his head ripped off!
your a new company with little experience and little money, you need to go make a few small games, rake in the dollars, test the market.
then maybe think about doing a MMO, but again be very careful about it because its such a fickle market!
there such expensive games to make, and they are THE most hit or miss games out there!
you either hit it big, or you go up in flames faster than the Hindenburg!

its a shame what happened to them, but to be honest im glad it happened when it did!
if there THAT stupid than god knows how much worse it could of been!
im sorry, but if your stupid enough to send your 10 year old to compete with the WWE you deserve to have your a$$ locked in jail for eternity!

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wackazoa
Friday, July 27, 2012 @ 9:52:52 AM
Reply

Im still miffed as to why it cost so much to make games in the first place. (well not just game mind you) They are making things virtually, i.e. not real (in physical form), so why does it cost so damn much. R&D costs blew through $133 million ? I dont get it.

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Beamboom
Saturday, July 28, 2012 @ 1:54:31 AM

It's the brainwork that costs (ie programmers, designers, project management).

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PHOENIXZERO
Monday, July 30, 2012 @ 6:14:18 PM
Reply

What bunch of idiots thought it a good idea to create an MMO in this day and age or even six years ago when development started as a brand new developer with zero reputation? 38/BHG would have been fine if the primary focus was KoA for their first game instead of the tens of millions put into a genre that even in 2006 was incredibly difficult to get into and be successful in or at the very least put that on the back burner. They would have been fine if they just had focused on KoA and perhaps it would have come out sooner. Of course the RI Governor is a blithering idiot and typical politician throwing everyone they can under the bus to distance themselves that they were involved in screwing up and further sabotaging the company.

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