“There can be no question our country is in the worst economic crisis of our lifetimes. I also think there can be no question that it falls on us, the individuals, to find a way out of our own personal crisis.”
You’ve probably read that quote a few times lately. It comes from Curt Schilling just 15 months ago. I had resisted using it; fought every urge to point out the hypocrisy, but this latest bit of news in the saga of 38 Studios blasted through any reservations I had remaining. It seems that the fault of 38 Studios’ collapse lays at the feet of Governor Lincoln Chafee of the State of Rhode Island; that is, if you believe what Schilling has to say.
In an interview with the Providence Journal, the former Red Sox pitcher shared that he might lose $50 million of his personal fortune and expressed his beliefs that the Rhode Island Economic Development Corporation dealt in bad faith, withholding tax credits to which the studio was “legally entitled.” As we reported last week, Schilling seems to have a fundamental misunderstanding of the law. Even if the EDC wanted to release those tax credits, they simply can’t. 38 Studios is incorporated in Delaware, and Rhode Island law is clear that tax credits can only be issued to entities that are corporate residents (incorporated in that state).
Furthermore, Schilling has gone so far as to suggest that Governor Chafee’s comments about 38 Studios’ fiscal wherewithal put a chill on an unnamed publisher’s decision to invest $35 million in the Amalur MMO. A quick glance at the timeline would leave anyone incredulous. On May 1, 38 Studios was due to pay a $1.125 million loan guarantee payment to the state. That payment was late, triggering the media storm and severe concerns about the developer’s financial health. To make matters worse, when a check was delivered to the State on May 17th, the studio had to immediately ask for it back. Their account didn’t have the funds to cover it. Additionally, it emerged that the twice monthly payroll hadn’t been disbursed since April 30. Chafee could have been struck mute, and it wouldn’t have improved the situation. Certainly, the Governor had nothing to do with the studio’s failure to secure venture capital back in 2007 and 2008.
Perhaps Schilling is referring the State’s refusal to bail the studio out any further. He certainly couldn’t be talking about the news of layoffs, which didn’t reach the Governor’s office until long after they happened. Even if he is speaking of the choice not to pour more money into 38 Studios, it still doesn’t answer the fundamental question, the answer to which hasn’t yet come to light, “where did the $49.8 million in loan money go?”
On May 18th, 38 released a video of the Amalur MMO (codenamed Project Copernicus). On display was a series of environment flythroughs; no characters, no interactions, no quests, no hints of the game mechanics or story. The video looked like an act of desperation to pull in any investors willing to take a chance, but in the process showed that this title, which was supposed to launch this fall (before a delay was outed by the Governor’s office) was far from ready. One look at the sad state of financial affairs, the $4 million per month occupancy and operations bill and what appears to be a lack of real progress and any publisher would be headed for the door. In fact, a ruthless publisher could simply wait for the inevitable fire sale that will happen when the State takes possession of the loan collateral: 38 Studios’ intellectual property (including Reckoning 2, which Joystiq reported about this morning).
Right now, we don’t know exactly what sank 38 Studios. There isn’t even an agreement on whether Kingdoms of Amalur: Reckoning is a “success” (Chafee says it needed to sell 1.8 million more copies than it did—1.2 million—to break even, Schilling says it surpassed EA’s expectations). The only thing we do know is that there is a disconnect between Schilling from February 2011 extolling personal responsibility and the one blaming the State of Rhode Island for the implosion of his company seem to be at odds.