38 Studios and 400 Unemployed

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Yesterday, Curt Schilling’s 38 Studios laid off all of its 400 plus employees working in their offices in both Rhode Island and Maryland. After the company failed to make a loan payment to the state of Rhode Island a of couple weeks ago the media has grabbed onto the story and it has become one of the biggest sports stories in Boston. Schilling, for maybe the first time in his life, has been very quiet since the news broke. I think there is more to this story than we know. Before exploring what that could be, let’s take a brief look at 38 Studios.

Curt Schilling started 38 Studios (previously known as Green Monster Games) at the tail end of his baseball career in 2006. The company focused on creating a Massively Multiplayer Online Role-Playing Game (MMORPG). MMORPG’s are very popular and can be very lucrative given that beyond the initial $50 to $60 investment there is a monthly fee (usually around $14.99) to play the game. The market is very competitive and becoming a hit with 10 million monthly subscribers like World of Warcraft is very rare.

In May of 2009, 38 Studies acquired Big Huge Games, who already had a critical and commercial hit under their belt with 2003’s Rise of Nations. Big Huge Games was already working on an (offline) RPG but retooled the game to fit into the universe already being created for 38 Studio’s MMORPG. The resulting game was Kingdoms of Amalur: Reckoning, released in February 2012. The game was critical success: Metacritic.com, which compiles critics reviews into one round number, has the game rated 81 out of 100. The game has also sold well: as of March the game had sold 410,000 copies (at $60 a piece) in the US. It sold 330,000 in February alone and was the only new game series to crack the top 10 in sales that month.

Despite the success of their first game and the potential for a lucrative Amalur MMORPG in the near future the company has folded. Companies fail all the time but this one has created controversy because 38 Studios moved to Rhode Island in 2011 after being guaranteed $75 million in loans from the state ($51 million of which have already been given out). So, where did all the government money go? I think that is the part of the story we don’t know yet and frankly may never know.

Curt Schilling lured some impressive people into his company: Their CEO, Jennifer MacLean, used to work at Comcast. Their Director of Creative Content, R.A. Salvatore, is an accomplished writer who has sold more than 15 million books in the US. Their Executive Art Directer, Todd McFarlane, created the comic book character Spawn. The thing about hiring talented people like this is that they are expensive. What about Schilling himself? We know he invested his own money in the company, but was he drawing a salary as well? If we ever get to see the books on 38 Studios we might see a lot of wasted government money.

Here’s what we do know: 38 Studios is good at making video games. Kingdoms of Amalur: Reckoning was a hit with critics and has grossed at least $24.6 million since its release. Unfortunately, we also know that 38 Studios has terrible management and 400+ nerds might have to move back to their parents’ basements.

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