Gamers-Does Studio 38 (Amalur) Have a Chance of Survival?

[ralph124c]

Ex-Red Sox pitcher Kurt Schilling's game company (Studio 38) cannot pay back a $75 million loan from the state of RI.
It has developed the "Amalur" game-which I understand is not selling well.
My question-is this operation doomed? It seems (to me) that developing and selling a new computer game is a very difficult job-in addition, you must pay hefty licensing fees to Microsoft, Sony, etc., and others (who's softwear and patents you use).
Schilling went to banks and venture capitalists-all of whom turned him down.
Will he survive?

[Kinthalis]

I thought the game was selling fairly well... like over a million units.

Wait.... it cost them 75 million to make that game? That can't be right. Or was that what they spend on marketing it to console gamers?

Unless you spend a hundred million in marketing, an unknown, first title entry in the console market is going to have a very hard time breaking the 1 million mark.

They should of gone the way a lot of small devs go these days. you release a Pc version, sell a million copies (maybe more if your game is really good), and then you have capital to invest on a console version, AND you have the word of mouth and awareness from the press to get you more console sales.

It's what the Witcher 2 guys did. Though it looks like their console sales haven't broken the 1 million mark either (it sold 2 million on PC though).

[Kinthalis]

Apparently they've removed the page with the Bios for all of their executives from their website.

They sent a check to RI offices for the $1.25 million they owe for this year, but there were insufficient funds to cover the check.

This seems like a money grab to me by the leaders of this company. They've got their corporate welfare check courtesy of the RI tax payers and now they're bailing.

[cckerberos]

Originally Posted by Kinthalis

I thought the game was selling fairly well... like over a million units.

I'd be surprised if that were the case. They only sold 330k units in the US in their first month of sales.

Wait.... it cost them 75 million to make that game? That can't be right. Or was that what they spend on marketing it to console gamers?

They're also working on a MMORPG and also own Big Huge Games which is presumably working on something or other.

[Lightnin']

Supposedly R.A. Salvatore was paid five million for the writing in the game- and, frankly, the writing bored me so much that I couldn't finish the game.

From what I've read, and my friends who work there, 38 hasn't been able to make payroll. In my experience, that's the kiss of death for any studio- when that happens, you start hemorrhaging employees, and the best employees are the first to leave. I'd put my money on "doomed".

[Jophiel]

Originally Posted by cckerberos

I'd be surprised if that were the case. They only sold 330k units in the US in their first month of sales.

Everyone I've known who played it enjoyed it but releasing it between Skyrim-mania and Mass Effect 3 was some very unfortunate (or stupid) timing.

[Kinthalis]

Originally Posted by cckerberos

I'd be surprised if that were the case. They only sold 330k units in the US in their first month of sales.



They're also working on a MMORPG and also own Big Huge Games which is presumably working on something or other.

So a brand new company with leaders who know nothing about game development decided to take on several huge projects at once?

Brilliant!

Also, I thought Amalur WAS the MMORPG. Half way through development they abandoned the RPG and released it as a single player experience.

That was a bad sign right there.

[Martin Hyde]

I hadn't played the game they produced but I was a little worried when I saw some of the financial moves they made.

It seems like Curt Schilling, who is a huge computer gaming fan, basically went into it with the thought of "hey, I'm a decently smart guy and I'm a multi-millionaire who is sitting on $100m+ in assets from 20 years playing baseball I can just start my own big time game studio."

I get the impression he threw in a lot of his own money, and used his name recognition to get even more money from others, and basically grew way too fast.

I've read enough Curt Schilling interviews / seen enough to know Curt is a pretty smart guy, for a ballplayer. He has no professional business management experience and no professional video game industry industry prior to this. I was really worried that he was growing his studio way too fast.

It looks like his first game sold 300,000+ copies, that in and of itself wouldn't be terrible. A lot of small game studios could release a first game that sold that many and use it to build into a larger company. The problem was, Schilling's company was already really big at that point, this wasn't some small dev house that released a 300,000+ sales volume game. Schilling should have tried to grow his business more organically, and used his vast personal fortune as sort of a "back stop" to smooth over some of the hiccups newer small businesses have.

If he had done that I think he could have had success, but it looks like he was more about getting real big real fast, to the point where the business got so big with so many liabilities that his personal fortune isn't enough to be able to save the day.

Also, the $75m is some sort of development loan from the state of Rhode Island. It looks like Rhode Island basically solicited 38 Studios to relocate to providence with a sweetheart deal on leasing some property and getting a loan. In exchange RI gets rights to all of 38 Studios games and etc if 38 Studios fails in its obligations. I think Rhode Island made a bad decision here, and I think 38 Studios made a bad decision in accepting this loan. I think they looked at it as quick easy money, but accepting that loan money actually probably put them in worse shape overall.

[DigitalC]

Spending 75 million on that game is crazy, how did they manage that?

[Kinthalis]

Well they might live yet apparently.

The 1.25 million dollar check has now cleared, and they are talking about a June 2013 release window for their MMO code named Copernicus.

If it's an Astronomy MMO, I know a certain doper who would pre-order in a sec!

[Justin_Bailey]

Originally Posted by Kinthalis

Also, I thought Amalur WAS the MMORPG. Half way through development they abandoned the RPG and released it as a single player experience.

Actually, the Amalur MMO was never abandoned. And they never spent $75 million on a single game. Before 38 bought Big Huge Games, they were working on an Amalur MMO by themselves. After they bought Big Huge Games, they started work on Reckoning. The money sink was never Reckoning (which did pretty well for a new franchise). The money sink was always the MMO.

[Kinthalis]

Originally Posted by Justin_Bailey

Actually, the Amalur MMO was never abandoned. And they never spent $75 million on a single game. Before 38 bought Big Huge Games, they were working on an Amalur MMO by themselves. After they bought Big Huge Games, they started work on Reckoning. The money sink was never Reckoning (which did pretty well for a new franchise). The money sink was always the MMO.

How do you know how much was spent on each individual project?

[Martin Hyde]

Originally Posted by DigitalC

Spending 75 million on that game is crazy, how did they manage that?

I don't believe they did, part of the requirements of the loan were hiring some 450+ people by a certain date. A lot of those people were probably on the MMO team or etc. $75m can go really fast with 400 employees. You've got their annual salary, the cost of setting them all up (new computers, office equipment etc.) I don't remember the particulars of 38 Studios occupancy of the Rhode Island facility but it could be some sort of advantageous lease, but that would still involve them having to pay for it and some fees to a maintenance company most likely.

[Martin Hyde]

Looks like Schilling invested $30m of his personal fortune into the company.

Baseball-Reference indicates he earned about $100m in salary over his career, with endorsements and investments, minus living expenses I would hope his personal fortune is probably right around that ~$100m level. So he's in for about 30% of that, which is pretty significant.

It really seems like even taking this loan was a bad move. Sure, it brought a ton of capital into the company, but it obligated them to grow big fast (450 employee requirement for example.) With $30m Schilling came in with vastly more funds than the small shops that created very good selling indie games like Torchlight or Minecraft had, I think he should have kept his company in "small game incubator mode" until they came up with a solid revenue base. That's just my opinion, and based in part on the fact Schilling isn't an experienced video game industry executive of any sort.

[Tom Scud]

If he ends up blowing his entire fortune on this business venture, he'll neither be the first nor the last professional athlete to do such a thing. (Didn't Frank Thomas blow all his money trying to start a record label or something like that?)

[Justin_Bailey]

Originally Posted by Kinthalis

How do you know how much was spent on each individual project?

38 Studios said so:

http://www.gamesindustry.biz/article...remain-solvent

According to a disclosure notice obtained by WPRI, 38 Studios had 379 full-time employees spread between its two offices - as well as 34 full-time contractors, 8 interns and 18 listed job openings - as of March 15 this year.

At that point it had received $49.8 million of the loan, all of which is being used to fund the development of its ambitious, and still announced, MMO 'Copernicus'.

[The Hamster King]

Coincidentally, I just bought Amalur to play for research ... .

There were multiple really bad decisions here:

1. If Rhode Island was interested in funding games to create jobs, this was a horrible way to go about it. It would have been much smarter to give lots of little grants to an assortment of small start-ups. That would have spread the risk around and created a high-tech incubator that would have had the potential to spin out multiple success stories down the line. $75 million would have provided seed capital for a LOT of indie developers.

2. If RI was going to pump all that money into one company it should have been an established developer with a reputation for shipping successful product. Not a start-up run by an industry outsider.

3. "I'm going to make my own MMO!" is classic fanboy fantasy, only most of them don't have the money or connections to act on it. Schilling might have played a lot of games, but he had NO experience making them. Starting a company with an MMO as your first title is like a toddler trying to run a marathon. Hell, making an MMO scares the hell out of me and I've been professionally designing games for 15 years! 38 Studios should have gone through at least 2 dev cycles of smaller projects before attempting something so ambitious.

4. 38 Studios should have sought an outside investor who understood the industry. Making games is a risky business and sometimes it makes sense for an investor to pump more money into a stuttering company to get to the finish line. Sometimes that's worth it and sometimes it's not, but in order to make that call you need to know the business. Instead 38 Studios owes a whole lot of money to an entity who wants it paid back NOW, regardless of the long-term value of the franchise they're trying to create.

38 Studios is toast. They're at least a year out from shipping their MMO. Some money will keep trickling in from Amalur, but they're already past the big cash spike they should have received from the first few months of sales. If they're out of money now, they're going to need tens of millions of dollars in additional funding to keep them afloat until the MMO hits the shelves. I can't imagine who would be willing to invest in them now.

RI should just bite the bullet and shut the operation down. They should at least be able to sell off Big Huge Games (which is a decent development house) to get a little of their money back.

[Jophiel]

On the plus side, I might score a sweet deal on KoA when Steam has its summer sale in about six weeks.

[Kinthalis]

Yeah, an MMO, specially one of the type they appeared to be working on seemed like really crazy for them to take on. Did no one say anything?

There are MMO's from small devs that have been tremendously succesful, but they aren't traditional. MOBA's like League of Legends have made a ton of money by trying something fairly new.

[The Hamster King]

Originally Posted by The Hamster King

38 Studios is toast.

Well, that didn't take long. Kotaku is reporting mass layoffs.

Here's my guess as to what happened:

Their MMO had an insane monthly burn rate and a long dev cycle. They realized that they needed some source of revenue in the interim. Big Huge Games was working on a single-player RPG. So 38 Studios bought BHG, reskinned their RPG so it was in the same world as the MMO, and released it as Kingdoms of Amalur. The plan (I imagine) was that Amalur would quickly make back all the money they spent to acquire BHG. And it would give them a steady revenue stream to help them make it to the finish line with the MMO. And it would provide the eager public with an advance taste of the Amazing World they invented. Genius! What could go wrong?

Only ... Amalur didn't sell very well.

So now they're in trouble. They're out the cash they spent to buy BHG. They don't have a reliable new revenue stream. And, even worse, the MMO has slipped from 2012 to 2013 as big projects often do. If they had normal game industry investors they could go to them and beg for more financing. And maybe, if the work so far on the MMO was promising enough, they might get it. But they don't have normal game industry investors. They have the State of Rhode Island who doesn't give a flying fuck that the bump maps on that ogre model are really amazing ... .

[Arrogance Ex Machina]

Saw this on another forum --http://www.history.com/this-day-in-h...opernicus-dies ... yeah.

[Kinthalis]

Originally Posted by Arrogance Ex Machina

Saw this on another forum --http://www.history.com/this-day-in-h...opernicus-dies ... yeah.

LOL! That's gotta mean something. End of the world or some such.

[Justin_Bailey]

Originally Posted by The Hamster King

Only ... Amalur didn't sell very well.

For an RPG from a brand new studio set in a brand new world, Amalur sold tremendously well. The problem is that 38 was playing an entirely different sport and their home run barely made it past the second baseman.

[The Hamster King]

Originally Posted by Justin_Bailey

For an RPG from a brand new studio set in a brand new world, Amalur sold tremendously well. The problem is that 38 was playing an entirely different sport and their home run barely made it past the second baseman.

I should have said that Amalur sold decently, but not spectacularly.

You're right -- they needed Amalur to be a grand slam home run to keep the company alive, and instead they got a respectable double.

[kenobi 65]

Originally Posted by Martin Hyde

He [Schilling] has no professional business management experience

I'm not sure that that's entirely true.

For over a decade, he's been involved with Multi-Man Publishing, a company which publishes traditional (i.e., paper) wargames, particularly Advanced Squad Leader (which they license from Avalon Hill / Hasbro). Schilling is (or, at least, was) an avid ASL player. That said, I'm not sure how actively involved he is (or ever has been) in day-to-day management of the company, and it's far, far smaller than 38 Studios.

[Martin Hyde]

I remember hearing about his involvement in ASL now that you mention it, I always got the impression he was just a super-hobbyist who was selling some stuff on the side. MMP looks like a very small venture, small enough that probably a regular Joe could run something like that if they felt the need. I guess it is a type of business experience, but I'm not sure it's very relevant to what Schilling was trying to do with 38 Studios.

Incidentally, updated sales figures I've seen from Ars Technica indicate Amalur sold 1.3m copies. How many new studios that sell over 1m copies of their first game go under like this? I imagine most don't, I imagine a lot at least make it to a second release and/or get bought up by larger companies at that point. The problem is the way Schilling decided to expand the company was disastrous. It really looks to me that accepting that loan was essentially a death sentence for 38 Studios. I genuinely don't know why they did it, I can only guess Schilling saw it as a way to get a big capital infusion and he was so certain he'd be able to rebrand an RPG already being developed by BHG with his game's universe and make enough to make the loan payments (and recoup the cost of buying BHG) and keep growing that he saw it as win/win.

The way I see that loan was a clusterfuck stupid mistake. It was stupid to accept (it forced expansion in that it required 38 Studios to hire more staff to comply with the terms and created a strict requirement for revenue to meet loan payments) and it was colossally stupid for Rhode Island to issue.

Most State governments have outfits that provide sort of public venture capital financing, and for a state the size of Rhode Island $115m (which is what their total projected loss from this is going to be) is huge. I know of similar sized states whose entire fund for development entrepreneurship projects like this is $25-30m. The whole budget for the state of Rhode Island is only around $7.8bn this fiasco is going to cost around 1.4% of that. They have major State scholarship initiatives that cost less than this thing. It's truly horrific that Rhode Island's citizens are going to have to pay such a heavy cost for such stupid, stupid decisions by their elected officials.

[The Hamster King]

Originally Posted by Martin Hyde

Incidentally, updated sales figures I've seen from Ars Technica indicate Amalur sold 1.3m copies.

This fact makes the failure of the company even more damning.

• They knew their monthly burn rate.
• They knew they weren't going to ship another title until 2013.
• They had a revenue stream which exceeded projections.

I've been assuming that Amalur's poor sales dragged them down. But if Amalur sold better than they were expecting, then how in the hell were they planning to fund the company until the MMO shipped in 2013? Five minutes with a spreadsheet should have told them that they were going to hit the wall. It should have been obvious that they were in dire straits last fall, long before Amalur shipped. A responsible studio owner would have been looking for a way to structure a soft landing. Instead Schilling and his management team appear to have closed their eyes, stuck their fingers in their ears, and prayed for a miracle right up to the moment when the whole operation slammed nose-first into the ground.

[Lightnin']

Many of my friends and past coworkers have been hit hard by this fiasco. I can think of at least five people who left my current studio to go work for 38. Heck, even the recruiter who got me this job quit hers to go work for Schilling! I had even thought about doing it- 38 Studios was my fallback job. I'm glad it didn't come to that.

And the hits just keep on coming. Apparently, employees who were moved to Rhode Island from Massachusetts were assured by 38 that their home mortgages would be assumed by the company so they wouldn't have to deal with selling their homes... but it looks like 38 hasn't been paying on those mortgages or even communicating with the banks.

The more I read about this situation, the angrier I get. I'm glad that my studio, at least, seems to be run ethically.

[The Hamster King]

There's a nice summary of the collapse on Gamasutra.

[ralph124c]

Studio 38 filed for bankruptcy today-and owes over $280 million!
How did they blow such a pile of cash?

[Robot Arm]

Originally Posted by ralph124c

Studio 38 filed for bankruptcy today-and owes over $280 million!
How did they blow such a pile of cash?

Skip left the starter in too long. Shoulda brought that left-handed phenom in to pitch the ninth.

[Airk]

Slight bit of thread resuscitation here, but I thought this was a really interesting read on the decisions and fate of 38 studios:

http://www.quartertothree.com/fp/201...to-38-studios/

[The Hamster King]

Thanks, Airk. It's a really nice summary.

There's also a new bit up on Gamasutra from a 38 Studios spouse about how badly the company screwed her family. They relocated to Rhode Island from the west coast in December 2011 and are still on the hook for moving expenses that the company had promised to pay.

[Airk]

Originally Posted by The Hamster King

Thanks, Airk. It's a really nice summary.

There's also a new bit up on Gamasutra from a 38 Studios spouse about how badly the company screwed her family. They relocated to Rhode Island from the west coast in December 2011 and are still on the hook for moving expenses that the company had promised to pay.

Humorously, I found the link the article I posted in the comments of the article you posted.

I thought the spouse piece was interesting from a "Jeez, way to F-over your employees, 38 studios!" perspective, but from a WTF actually happened and why did things go this bad perspective, the other article was more interesting.

[Marley23]

Schilling says he has lost $50 million and might be broke, although I imagine it's hard to really say what his financial status is at this point. I never liked the guy, but jeez.

[Lightnin']

Originally Posted by Marley23

Schilling says he has lost $50 million and might be broke, although I imagine it's hard to really say what his financial status is at this point. I never liked the guy, but jeez.

I'm willing to bet that his version of "broke" is a bit different from the "broke" that his ex-employees are now experiencing.

[markdash]

I doubt he's truly "broke" since he has a six-figure job at ESPN awaiting him whenever he wants to go back.

[boytyperanma]

Originally Posted by Lightnin'

I'm willing to bet that his version of "broke" is a bit different from the "broke" that his ex-employees are now experiencing.

I know a few people who have lost their jobs with the 38 studios thing and I don't really feel bad for them nor do they. Many of 38 studios employees knew it was doomed to fail from their first job offer. 38 was hiring people at a much higher pay rate then one would expect. The logic the people I know that took the jobs was 'Well they are offering 1.5 times my current salary for me to join them, hell even if they only survive a few years it's a ship worth boarding.' Now it's sunk and I'm sure there are a few people that lacked the foresight to bring a life preserver but those people weren't smart enough to notice the lack of lifeboats either. It does suck now because the economy has tanked so many would have been better off with a more stable job rather then trying to find one now but that was part of the gamble.

As a MA citizen I'm so glad we didn't agree to any deals with Schilling. He basically said give me a sweetheart deal because I'm Curt Schilling or I'll move. There was certainly pressure from fanboys to give him an offer but smarter people prevailed. Instead RI said we'll do it. All yours RI hows that working out for you.

[Quercus]

Originally Posted by Marley23

Schilling says he has lost $50 million and might be broke, although I imagine it's hard to really say what his financial status is at this point. I never liked the guy, but jeez.

Oh, yeah, it's a tough life, only being given $75 million or whatever of taxpayer money to run your little this-is-my hobby company, completely mismanaging it, and then having the taxpayers have the unmitigated gall not to bail you out. And imagine the shame and emotional pain the poor guy is going through, considering the number of people mocking him for being such a pro-capitalist anti-government-handouts cheerleader before failing at capitalism even with huge government handouts. Not to mention how wretched and self-betraying he must feel when he complains the government didn't do enough to help him, considering his former anti-government bluster. Must sting a lot I'm sure. Nearly as much as blaming the Governor of RI for not working closely enough with a potential investor, when there are tons of stories out there about how many venture capitalists walked away from Schilling because he had too many conditions for their investment.
And ohh, yes, losing $50 million that you got paid for PLAYING A BALL GAME! That really makes my heart bleed for you, yes it does.

Now, the taxpayers of Rhode Island, them I feel sorry for.

[Mr. Miskatonic]

The wikipedia entry for the Studio 38 game Kingdoms Of Amalur: Reckoning has this about Kurt Schilling the game's inability to recoup costs:

Known as an idiotic blow-hard for most of his career, many people were overjoyed to hear this news.

Wonder how long that will last before an edit?

[The Hamster King]

Originally Posted by boytyperanma

Many of 38 studios employees knew it was doomed to fail from their first job offer.

Yeah, the structural problems with 38 Studios were so huge some people HAD to have seen the writing on the wall. It sounds like it was a good gig while it lasted -- nice offices, higher than average pay, a gregarious fanboy for a boss. Of course, a less-nice company would have had a more cutthroat approach to development that might have actually allowed them to ship.

In his latest interview Schilling comes off less as evil than as woefully naive. The money he made as a ballplayer allowed him to play dress-up as an industry big-shot for few years, but he didn't know the first thing about making games. If he didn't have such a reputation as a pompous blowhard, I'd almost feel sorry for the guy.

[muldoonthief]

So it turns out that the 38 Studios board had already voted to seek bankruptcy protection before Chafee announced the company's problems publicly on May 14. Thus proving even further that Schilling is a lying moron for claiming Chafee's actions were what killed any future investments.