In an interview with radio station WEEI, Curt Schilling has finally broken his silence following the sudden and tragic collapse of 38 Studios. While the former Red Sox pitcher has accepted some blame for the developer’s financial meltdown, he continues to blame Rhode Island Governor Lincoln Chafee for the failure of the company to raise private capital. The truly unfortunate thing is that Schilling continues to misunderstand why tax credits that were assured to the firm never came through.
Is it unfortunate that Schilling has allegedly lost his entire baseball fortune in the demise of 38 Studios? Of course. However, the tales of pregnant woman finding out their health insurance was unexpectedly terminated, the families that relocated to Rhode Island, the people who were lied to when payroll didn’t come through and the taxpayers who will be paying for this debacle for the next 10 years strike me as the real victims here.
One interesting note is that Electronic Arts (EA), who published Kingdoms of Amalur: Reckoning via their EA Partners program, provided an advance to 38 Studios. The Partners program is a contract-based suite of services that can include marketing, public relations and distribution. While EA declined to speak with us about the particulars of their arrangement for Reckoning, they did disclose that each contract is different. One frequently asked question that emerged in the wake of the 38 Studios collapse was, “Where did the money from Kingdoms of Amalur: Reckoning go?” Now we know. Much of it went to repay EA for the advance and services provided.
Schilling has asserted that an investor prepared to fund the studio to the tune of $35 million walked away after Chafee stated publicly that he was working to find a way to “keep the company solvent.” Furthermore, the former pitcher accused Chafee of having an agenda. I concur. The governor’s “agenda” was to protect and inform the taxpayers of his state; the people who were on the hook for the $75 million loan guarantee. He had no choice but to disclose the situation when Schilling’s company failed to make its $1.125 million loan guarantee payment in May.
Additionally, Schilling cites the failure of the state to deliver the promised tax credits as the reason that a second investor backed out of $15 million – $20 million in angel investing. As we reported last month, 38 Studios was simply ineligible for those credits. They never incorporated in the state of Rhode Island, and according to the laws dealing with the subject, this made it illegal for the studio to receive any such consideration. The other term of the agreement was a renegotiation that put this investor first in line to be repaid should the studio go under. Of course the state declined. Political fallout aside, the government had an obligation to protect the taxpayers as much as they could. Signing a modified agreement would have flown in the face of that responsibility.
Unfortunately, as this matter fades from current event to cautionary tale, there are still victims of Schilling and the executive team’s mismanagement that are without work. Many of those laid off from Big Huge Games (which 38 Studios acquired in 2009) were saved by Epic Games‘ founding of Epic Baltimore. Unfortunately, many of those that relocated to Rhode Island to follow Schilling are facing a long job hunt and likely relocation. Those people never had a baseball fortune to rely on and are guilty only of trusting an employer who kept them in the dark for far too long.