On February 7th, 2012, the first, and final entry of game developer 38 Studios Kingdoms of Amalur: Reckoning was released. It was founded by a hodgepodge collection of entrepreneurs (baseball legend Curt Schilling, R.A. Salvatore, and Spawn creator Todd McFarlane), and was met with surprising success: good reviews, strong marketing, and for a brand new intellectual property from a unknown company, fantastic sales. It released two downloadable content packs, and the future looked bright. Months after, the company’s entire work force was laid off, and the studio shut down.
How?
It was puzzling to everyone in the industry. How did a game that had succeeded above and beyond expectations against all the odds suddenly die in its sleep? Then came the avalanche of information: A miscalculated loan from the state of Rhode Island, 38’s poor money management and unrealistic expectations, and burned bridges between the two entities surmounted into a four year investigation for criminal bank fraud against the studio. As of July 29th, 2016, no evidence has been found to warrant an indictment.
But there are gaps in the story that must be filled to understand where pieces started to crumble. 38 Studios was founded in 2006 by former Red Sox’s pitcher Curt Schilling, but opened its doors in 2010 in with the hopes of becoming an industry staple. After several years of talks between the corporation and the state, in July of 2010, the Rhode Island Economic Development Commerce Corporation met for the final time to finance 38 Studios with a large loan. They were confident that their investment would bring money to the state, as the 38’s forecast predicted bright skies:
The company plans to bring in 450 direct jobs with an average annual wage of $67,500 within three years. In addition, it is anticipated that an additional 1,113 indirect jobs will result from this venture.
They developed a loan of $75 million dollars to relocate the studio to Rhode Island, and complete production of a game titled “Copernicus”, which would later be transformed into Kingdoms of Amalur. They expected to reap the benefits of the company’s rapid growth.
After Amalur’s release, it looked like that would be the case. It sold 330,000 copies within the first month, which is practically unheard of for a new IP from a non-major studio. By the ninety days, the game surpassed 1.2 million copies sold. To put it in perspective, Capcom’s Street Fighter V, a major title from a major company, has sold 1.5 million copies, as of writing. It had outsold parent company EA’s projections. Pop out the champagne, it seemed it was time to celebrate.
What nobody was reporting was what was going on behind the scenes at 38 Studios. They spent an excess of money on an abundance of employee, with an average salary of $80,000 a year, and full worker’s benefits that included some of the best medical care in the country. While Amalur had sold admirably, it was not bringing in League of Legends money, nor even enough to warrant the excessive benefits that were being dished out.
Now behind on paying their own workers, even with Schilling himself handing out money, and unable to keep up with the surmounting interest that peaked near $89 million, Schilling liquidated the company. He now says that he lost over $50 million out of his own pocket, and in addition to the loan, cost the state of Rhode Island $112 million.
Understandably, Rhode Island feels that it has been duped. Hyperbolic comments that this was the “worst deal in the history of Rhode Island”1. They claimed that 38 Studio’s own lofty projections had predicted their downfall, needing at least 3 million in sales to break even.
The superintendent of the state police, Col. Steven O’Donnell reeled the outrage back. “A bad deal does not always equate to an indictment”, he said at a press conference. This follows past settlements made by Schilling $12.5 million, following another that that cost him an additional $4 million. Not out of the woods yet, there is also still civil case against 38 Studios that is sure to ignite the flames of the feud.
Schilling has responded to the lack of indictment with less tact than one would expect from a man who should be humbled by avoiding a federal sentence:
Eloquently spoken as usual, Curt.