Curt Schilling's Video Game Company in Financial Trouble with RI Lawmakers

Party Rooster

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#1
He was on Sam Roberts show last month plugging his video game company. Can't find the audio though.

RI's big bet on Curt Schilling raises questions


Published May 20, 2012
Associated Press

PROVIDENCE, R.I. – In 2010, the man who'd helped Boston win its first World Series in more than 80 years came to Rhode Island promising the job-starved state something even better: hundreds of good jobs, millions of dollars in tax revenue and a foothold in the booming business of video games.

To former Gov. Donald Carcieri and top economic development officials, it was an opportunity too good to miss. The state's Economic Development Corp. offered a $75 million loan guarantee to lure Curt Schilling's 38 Studios to Providence.

Two years later, the company defaulted on a $1.1 million payment to the corporation, Schilling has pleaded for additional state help and Rhode Island faces the possibility of being stuck with the company's debts should it collapse.

Lawmakers who never signed off on the loan guarantee said they now have to answer to constituents demanding to know why Rhode Island backed an untested company helmed by a wealthy former athlete when the state grapples with an 11.2 percent jobless rate and chronic budget deficits.

"We have cities and towns on the brink of bankruptcy," said Senate Minority Leader Dennis Algiere, R-Westerly. "The public is looking at this $75 million and saying, 'What did you do?'"

Schilling's 38 Studios asked the Economic Development Corp. on Wednesday for additional assistance after defaulting on a scheduled $1.1 million payment to the agency on May 1. The company then hand-delivered a check for the amount — but told the corporation the check wouldn't clear. The payment was made Friday, said Gov. Lincoln Chafee.

Himself a vocal critic of the deal with 38 Studios before he took office, Chafee said he doesn't want to give the company any additional taxpayer support.

"This was a very, very challenging investment by the state," Chafee said. "We're just going through the consequences of what we knew right from the beginning."

Industry experts agree that Rhode Island's bet on video games faced long odds from the beginning.

The types of video games 38 Studios creates have upfront development costs in the range of tens of millions of dollars, take years to get to market and their commercial success is not guaranteed, said Doug Creutz, a senior research analyst at San Francisco-based Cowen and Company LLC.

The industry for the moment is concentrated on developing games for social networking sites and mobile devices, while the mainstay gaming consoles — Microsoft's Xbox 360, Sony's PlayStation 3 and Nintendo's Wii — are aging and overall the economy is continuing to struggle, observers said.

"In general, there isn't a lot of money coming into the video game space," said Creutz.

Indeed, the agreement between the state and 38 Studios acknowledged that "the business of producing and distributing proprietary video games is highly speculative and inherently risky. There is no guarantee of the economic success of any video game."

38 Studios is in the process of developing a massively multiplayer online game dubbed "Copernicus." Multiplayer online games can support hundreds or thousands of players simultaneously.

This market is dominated by Blizzard Entertainment's "World of Warcraft," which is estimated to have more than 10 million subscribers, according to figures tracked by the website MMOData.net.

By comparison, "Star Wars: The Old Republic" from Electronic Arts Inc. had 1.7 million subscribers as of February, the company said.

"The bar for success for 38 Studios for their own MMO was always going to be pretty high," Creutz said.

The first game launched by 38 Studios, "Kingdoms of Amalur: Reckoning" sold 460,000 copies in the United States during its first three months on the market, said David Riley, executive director of the New York-based NPD Group. The game has received positive reviews.

"It's a strong performer," Riley said.

Leonard Lardaro, an economics professor at the University of Rhode Island, said the state focused on "the long play, the big project" instead of reforming its tax code and business regulations, something which he said could eliminate the need for big incentives to companies looking to come to Rhode Island.

"Most of Rhode Island's problems — unbeknownst to our state leaders — are structural," Lardaro said. "But we just treat the symptoms, and we put all our eggs into one highly speculative basket."

Rep. Jon Brien, D-Woonsocket, said he believes Carcieri and others were swayed by Schilling's "star power" and the promise of good jobs in a growing high-tech industry.

"Here was this major leaguer pitching a major league game that he said was going to be the jump-off to a really successful company," Brien said.

Carcieri, who left office last year, could not be reached for comment. Schilling has declined to comment on his company's finances, or what he is seeking in additional state support.

Schilling has spoken often of his political views and has campaigned for Republican candidates, though he's registered as an independent. In a March interview on Fox News, he criticized big government and said he's never sought a handout but praised the loan guarantee his company got in Rhode Island.

"I will tell you that the growth of our company 38 Studios is government doing — gone right," Schilling said.

Lawmakers said they'd be reluctant to give the company additional support — though they acknowledged the state might find itself paying even more if the company goes under.

"It's a tough pill to swallow," said Rep. Agostinho Silva, D-Central Falls, whose own city is in the middle of bankruptcy proceedings. "We could be on the hook for the whole $75 million. Now, the question is, do we give them more money to save $75 million, or do you let them go? It's not a good place to be."

Though lawmakers approved the $125 million loan guarantee program, they didn't know what companies might seek to take advantage of it. Several lawmakers said they assumed the state would back small loans to dozens or scores of small businesses instead of one $75 million loan to a single company.

Some lawmakers say they now wonder whether the 38 Studios incident shows that the Economic Development Corporation should be reformed. Algiere said more oversight of the agency is needed.

The EDC now caps loan guarantees at $10 million for any single project. Ehrhardt said he wants to make that policy a state law. The North Kingstown Republican drafted a similar proposal in 2010, but to his "never-ending regret" he was convinced not to proceed with it, he said.

"Now things might be a little different," he said. "Some people will say I'm trying to close the barn door after the horse has gotten out. But there will probably be more horses coming in the future."

http://www.foxnews.com/us/2012/05/20/ri-big-bet-on-curt-schilling-raises-questions/#ixzz1vUET2nDK
 

CougarHunter

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Mar 2, 2006
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#3
I remember Curt being a big Everquest player back in the day.
 

Psychopath

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#4
I read Kotaku, Gamasutra and Joystiq every day and went to school for game design. I have never heard of this studio or any games they have released.
 

Party Rooster

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I remember Curt being a big Everquest player back in the day.
He mentioned that in Sam's interview. He's apparently a huge geek. He said a lot of MLB players are big gamers because it kills the time when you're traveling and have hours to kill in hotel rooms.
 

Don the Radio Guy

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He's been working on an MMO for 10 years. It'll never come out. Vanity project.
 

Madness

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I read Kotaku, Gamasutra and Joystiq every day and went to school for game design. I have never heard of this studio or any games they have released.
They released Kingdoms of Amalur back in January for OC, PS3 and 360. It's actually a pretty good game.
 

Psychopath

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I didn't know they released that. I thought a Japanese company released that.
 

Don the Radio Guy

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He's a bad person because he didn't know how to run a video game company and had to fire the people who worked for him when it failed? Typical Gawker retardation. If this guy's friends are such great video game designers, why did they stay with a company that was obviously poorly run?
 

Party Rooster

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And BK'd...

Curt Schilling tells WEEI radio show that he invested more than $50m in his video-game firm

06/22/2012 10:25 AM
By Todd Wallack, Globe Staff

Former Red Sox star Curt Schilling said Friday that his Rhode Island video game company, 38 Studios LLC, went bankrupt two weeks ago largely because it couldn’t raise more money from outside investors.

“One of the going concerns from Day One – and it was always something that we were cognizant of – is we needed to raise capital,” Schilling said in a radio interview on the Dennis & Callahan sports radio show on WEEI in Boston. “We tried for a long time to do that and it didn’t come to fruition.”

Schilling, who founded the company six years ago, said he personally invested more than $50 million in the company, in addition to $5 million to $10 million from other wealthy investors and a $75 million loan guarantee it received from the state of Rhode Island to entice it to move to Providence last year. But Schilling said it wasn’t enough to remain in operation until it could complete its flagship project, a online multiplayer role-playing game code-named Copernicus, which was scheduled to be released next June.

“The one thing we always listed as a going concern we couldn’t execute on,” Schilling said.

The interview was Schilling’s first since 38 Studios filed for Chapter 7 bankruptcy on June 7. The company laid off all its workers, roughly 400 people, in late May. The company reported it owed money to more than 1,000 people and companies, most of whom likely won’t recover any money. In its Chapter 7 bankruptcy filing, 38 Studios reported that it owed more than $150 million, mostly to the Rhode Island Economic Development Corp., and that it had less than $22 million in assets.

Schilling said he was “tapped out” and didn’t have anything left to put into the company to keep it afloat.

“I put everything in my name in this company,” Schiling said, adding that he wasn’t looking for sympathy. “I believed in it. I believed in what we built. I never took a penny in salary. I never took a penny for anything.”

Schilling could be personally on the hook for some of the losses. RBS Citizens, better known as Citizens Bank, sued Schilling for $2.4 million in loans to 38 Studios that it says Schilling personally guaranteed. He said he told his family last month that “The money I saved and earned playing baseball was probably all gone…Life is going to be different.”

The company, which missed its May 15 payroll, also reported that employees were owed millions of dollars in back wages. Schilling acknowledged that workers didn’t have any warning about the company’s financial troubles.

“The employees got blindsided,” Schilling said. “They have every right to be upset. I always told everybody if something were going to happen, you‘re going to have a month or two of lead time, and I bombed on that one in epic fashion.”

Schilling said the company collapsed quickly. He said the firm was on the verge of signing a deal with a major video game publisher worth as much as $35 million for a sequel to the first single-user game it released in February, “Kingdoms of Amalur: Reckoning.” But he said talks collapsed after Governor Lincoln Chafee publicly said a month ago that it was trying to find a way to keep the company solvent, the first public indication that 38 Studios was in financial trouble. Schilling also said the company didn’t immediately see an infusion of cash from sales of its first game, because the initial sales first had to be used to payback the game publisher, Electronic Arts, which had provided the company with an advance.

Schilling said an investor “at the end” promised to write a check for $15 million to $20 million to salvage 38 Studios if the state of Rhode Island agreed to give the company $6 million in tax credits and renegotiate the loan guarantee so the investor was first in line to be repaid. “If that happened, he would come in and save the company,” Schilling said. But the state refused.

In addition, Schilling said he was puzzled by comments accusing him of being hypocritical for seeking the loan guarantee and tax credits from the state of Rhode Island, despite his political advocacy for smaller government. He noted that tax credits were available to all companies that invested in film or video-game production in the state.

“I don’t know how that correlates to this,” he said.

Schilling added, “I don’t have any problem with government helping entrepreneurs and businesses.”

http://www.boston.com/businessupdat...VtA4ZDu2zdyH2OhS7eaK/story.html?p1=News_links
 
Jun 30, 2005
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It's all in there, but summary
1. They had nearly $40 million in financing lined up, were signing the NEXT day and the R.I. governor held a press conference when he questioned the "Solvency" of 38 studios. That single moment ruined the company as the financing pulled out and the company couldn't meet payroll.
2. The ENTIRE baltimore studio was acquired and all the employees are working
3. The game designers in R.I. were passionate/talented people who liked the idea of starting a fresh company. 95% of all the employees found employment in 2 weeks.
4. Schilling lost over $50 million of his own money .
 

VMS

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Apr 26, 2006
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#15
Starting a company is hard. Until you've tried, you really don't know how hard it is. For an outsider to come into an industry and try to become a success by hiring people who know what they're doing, that's even harder.

If a programmer has an idea, is free to do so, and has good business sense, he might be able to pull off starting his own video game company. If you know gaming, though, you also know a lot of companies that have gone out of business.

Starting a company is risky. I don't blame anyone starting a company for trying to get start-up cash from the government. I think it's stupid for the government to offer anybody start-up cash (or guarantees) for a company, though. People who know business, who probably know the industry that your particular business is in, fail often enough. But when they risk, say, $75 million, they have the chance to earn hundreds of millions in return on their investment. A government guarantee of a loan risks $75 million if things don't work out but only gets a long term tax benefit if things work out. It's a lot of risk for a low reward. It's just a bad investment, especially for something in the entertainment industry, which is notoriously cyclical.

Shit, Schilling was trying to put together a game for PCs/consoles? Did he read into how much of the gaming industry is in mobile devices nowadays? There wasn't a major company at E3 that didn't put mobile gaming in a prominent position, and some of the biggest vendors were mobile-only.
 

Party Rooster

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#17
I feel bad for him, he seemed like a class act and the guy put $50 million of his own money on the line. Not to mention the few million he could have made the last few years working in baseball if this wasn't consuming all of his time.