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 Kingdoms of Amalur  house 38 Studios failed to make $1M loan payment
Kingdoms of Amalur house 38 Studios failed to make $1M loan payment
May 16, 2012 | By Mike Rose

May 16, 2012 | By Mike Rose
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    29 comments
More: Console/PC, Business/Marketing



The Rhode Island government is meeting with Kingdoms of Amalur: Reckoning house 38 Studios -- parent of the game's developer Big Huge -- today to discuss what can be done to protect taxpayer money, after the studio this week failed to make a scheduled $1.125 million loan repayment.

The studio was granted a $75 million loan from the government-owned Rhode Island Economic Development Corporation in 2010, after 38 Studios agreed to move its operations to Rhode Island. The details of the agreement stated that the studio had to fill 450 full-time employee positions to receive the full amount.

However, earlier this week it was revealed that the studio is currently suffering from financial issues, with Governor Chafee commenting that he was "doing everything possible to ensure that 38 Studios stays part of the Rhode Island community."

As reported by the Associated Press, it has now been stated that these talks have been occurring as a result of 38 Studios failing to make a scheduled $1.125 million payment to the state's economic development agency.

An emergency meeting between the agency and the game studio has been scheduled for today, to address an "unexpected occurrence that requires immediate action to protect the public regarding 38 Studios."

The loan was put in place back in 2010 to fund the studio's MMO Copernicus, which the company is still keeping under the radar. In the meantime, 38 Studios released Kingdoms of Amalur earlier this year, which when on to sell 330,000 copies in the U.S. during its first month on sale.

[Update: During today's meeting, 38 Studios head Curt Schilling reportedly asked Rhode Island state for additional funding to support his company. While 38 Studios and the state plan to continue their deliberations, Rhode Island officials have not yet taken any action in response to Schilling's request.

Neither party offered details on the kind of resources 38 Studios needs, but Governor Lincoln Chafee said the state needs to answer one question: "How do we avoid throwing good money after bad?"]


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Comments


Rob Wright
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Yikes. I didn't want to believe this, but this is really really bad news on a number of fronts. Forget the debate about government spending and job creation and leave that stuff for the political blogs. Just look at the implications for the gaming industry.

First, what does this say about the economic of game development? Is it possible in today's world for independent studios with this sort of financial backing to still succeed, or has the rising cost of game development made it next to impossible? Then you have the fact that a high-profile agreement like this, if successful, could have opened doors for more government support for game devs. Now? Looking highly unlikely, as 38 Studios could become a cautionary tale. And finally, the MMO market -- even with Copernicus not yet released, you have to wonder in light of the The Old Republic's recent news and other failed MMOs, how viable these games are given the extra heavy lifting needed to support them.

That said, I hope 38 Studios and R.I. find a way out of this that minimizes the damage.

Jerome Grasdijk
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It is bad news, but if they position the Copernicus launch properly they could still do well. The future is bright for games such as Guild Wars 2 and Firefall, while FTP has effectively rescued quite a few of the older MMO's even without massive updates. But looking at what happened with SW:TOR is not encouraging for the launch of even the best-quality subscription MMO, and I'm sure they know that.

The person I feel the most for in this whole affair is Schilling.

Joe Wreschnig
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"The person I feel the most for in this whole affair is Schilling."

YES LET'S ALL FEEL SORRY FOR THE RICH GUY WHO IS SLIGHTLY LESS RICH NOW.

Rob Wright
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@Joe

Yes, Schilling is rich, having made quite a good living as a professional baseball player. I do not feel this should be held against him, especially when he's used a portion of his own money to start a game development company.

Furthermore, I agree with Jerome -- I feel bad for Schilling because here's a guy who LOVES games annd has a passion for the industry and decided to take some of the fortune he's earned playing baseball and use it to build a business around something that he loves. To me, that's a good thing for the gaming industry.

Joe Wreschnig
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I'm pretty sure having to have the government cover a $100,000,000 loan is not a good thing for the gaming industry. And with all due respect to the gaming industry, if this is its future, fuck the gaming industry. If you want to steal money from the government have the decency to go work for a bank or an auto maker.

Jerome Grasdijk
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For the record, Schilling stated some time ago in an interview that the amount of his personal wealth invested in 38 Studios was such that he had "passed the point of no return". That sounds like it could be a bit more severe than just 'a bit less rich', and developing an MMO can easily absorb the personal fortune of a top baseball player plus a $100m dollar state grant...

Michael Joseph
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Do we know if Curt Schilling was not allowed to recover his own personal investment with the loan money?

Joe Wreschnig
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Jerome,

Schilling's "point of no return" is undoubtedly a couple hundred thousand dollars higher than a civil servant who couldn't pay rent due to furlough's "point of no return".

Mathieu MarquisBolduc
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I read the history of the studio on wikipedia with disbelief...

Studio is funded in 2006 by a wealthy MMO fan with (allegedly?) no software or game development experience.
3 years in the running, with no shipped game yet, they acquire another studio.
5 years in the running (2011), 160 employees, still no shipped game.
Now 6 years in the running, over 300 employees, with only one shipped game, 300k copies.

Seems like a case of trying to grow too much too fast, or did I miss something important?

Eric McVinney
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Yikes! That isn't so much of a history you'd want out in the open or even be proud of. True, depending on the size of the MMO, it could take 3-4 years (maybe 5), but to acquire ANOTHER studio during that time is ridiculous. That's more money being pulled into an unknown risk factor :|

Michael Herring
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Interesting! And this loan was granted in 2010? So...Four years without a shipped product, but with one acquisition.

If I lived in RI, I'd be angry primarily at the clowns who decided THAT was a good investment decision.

Dave Smith
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wasnt the aquisition the one that actually shipped the game?

Dave Smith
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dp

sean lindskog
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> with only one shipped game, 300k copies.

This article gives more precise figures: http://www.gamespot.com/news/kingdoms-of-amalur-reckoning-us-sale
s-hit-330000-6365410

- 330,000 units in February
- This figure includes US sales only
- This figure does not include digital distribution (Steam, Origin)

It seems reasonable KoA will hit a million sales, counting worldwide retail+digital distribution, which is respectable for a AAA console game.

Mathieu MarquisBolduc
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Seems reasonable indeed, and those are very respectable sales, but doubtful that it can provide the cashflow to sustain 300+ employees. I wish them the best of luck, though. Ive been in a similar situation before, outside of gaming, and I know how stressful it can be for the developers.

sean lindskog
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> but doubtful that it can provide the cashflow to sustain 300+ employees.

Agreed. Given the current news, it must not be.

Based on limited knowledge, I'd call the problems of 38 Studios specific to the MMO, and not KoA. To me, it looks like KoA:
1. Will likely at least cover the cost of it's development.
2. Generate a lot of buzz for 38 Studio's original IP, which I believe is also being used for the MMO
3. Give 38 Studios the experience and cred of shipping a game.

The precarious finances of making an MMO is what has put 38 Studios in danger. They're not the first to have trouble with this, and won't be the last. The big question is how close they are to having the game built, and how good it is. If it's good, and mostly finished, everything could end up working out, maybe at the cost of added external or publisher investment.

Joe Wreschnig
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"If it's good, and mostly finished, everything could end up working out, maybe at the cost of added external or publisher investment."

So it's already drained
- A significant amount of Schilling's personal fortune
- Unknown amounts of investment from other angels
- Any of the profit from another million-ish seller game
- $75,000,000 of government money

And you think it just needs "added external or publisher involvement"?

sean lindskog
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Joe, notice how the post you quoted uses these words: "precarious", "danger", "trouble", and "problems". I guess those must have slipped by you. Obviously the situation ain't rosy. But almost all MMOs are very expensive to make, and some successful ones make a lot of money. Success is a possible future scenario. That's all I said.

Aaron Casillas
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The guys at BHG did a fantastic job turning their game into 38's game., I hope everything bodes well for them (I was there for a couple of months when THQ sold them).

The problem with 38 and other studios like them is that they are extremely top heavy, you have to hire people who can create material worth for you, especially when you are a startup like they were. Surround yourself with people who can code, or get into an editor, write a contracts, make art and generally make something that can go into the game.

Bernardo Del Castillo
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Its actually quite disturbing... I considered Kingdoms of Amalur a commercial success, but maybe the model they have isn't really viable..
Maybe the game is too big for its audience? Seems stupid but it could be that they didn't focus their resources well enough...

A W
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Why did they need to borrow so much money, and why did the local government allow such a large loan to be granted? I'm just not getting the full picture here.

A W
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@David Thanks. Now I'm starting to understand exactly what is going on. It doesn't sound good at any angle.

Bob White
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FYI the game sold poorly due to the ridiculous decision of EA locking out SEVEN SINGLE PLAYER missions for used copies . Only new copies were allowed the DAY ONE DLC for "free". You still had to go online and punch in the code and then wait for it to download. All others were forced to pay extra to download what should have been included on the disc.

Many of my gaming colleges/friends (and myself) were pumped about the release of this game until they announced the used copy lockout scheme. This game was heavily boycotted on principle alone before it even landed on the shelves. Another sad story of the big bad wolf EA trying "shut down" the used market and it just blowing up in their face. My pity level is at a minimum for these guys.

Dave Smith
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i doubt that.

Maria Jayne
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I think the problem is game developers which are not EA, Activision-Blizzard, Take Two, Ubisoft etc are spending money on game development like they are.

You don't need 100 million dollars to make a successfull video game. The momment you start spending that kind of money, you're almost certain to need ridiculously high sales just to break even. I don't make video games, but I can see that, why can't they?

Jerome Grasdijk
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There are quite a few game franchises which make that kind of money, which means the investment is not entirely unjustified. However not many MMO's have done it since WoW. Perhaps they were expecting a Fable-level 3-4m sales from KoA to carry them.

A W
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I think it is a bit unjustifiable when you are talking 75 million dollar government loan to a company that had not yet produced much. Why wouldn't a bank / hedge fund, or private venture capitalist not invest that much money into them? Did they not ask those entities first?

Bob Johnson
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Ah well. Maybe Schilling can rent a room from Mike Tyson.

Amazing how a state can lend a company $75 million to help fund a MMO given their track record the past 10 years. A big hand to MA for showing restraint with the taxpayer money.

btw, there is always Kickstarter!!!

Matt Cratty
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I sure hope that they get their game out the door at least.

Its been a long time, hurry guys and good luck.


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