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