RI Governor: Amalur Had to Sell 3 Million to Break Even

RI Governor: Amalur Had to Sell 3 Million to Break Even

image

For a new IP, Kingdoms of Amalur: Reckoning sold incredibly well, but not well enough to save its developer.

Despite selling 1.22 million copies in its first 90 days on the market - an impressive amount for a new IP from an unproven studio - Kingdoms of Amalur: Reckoning has left developer, 38 Studios, deep in the red. The developer owes the Rhode Island Economic Development Corporation some $50 million dollars and, as of Thursday afternoon, has laid off all its staff. So how many sales does Amalur need to reach to recoup its costs? Three million, according to "experts" contacted by Rhode Island Governor, Lincoln Chafee.

It's unclear where Chafee's experts are getting their numbers from. Even a fairly low profit margin estimate for 3 million sales produces enough to pay back 38 Studios' loan and then some, and that's not even counting the fact that expecting a company to pay off a $50 million investment loan in the space of one game is ridiculous.

At this point, 38 Studios is left hoping that a potential partner will step in and help them complete "Project Copernicus", the Amalur-themed MMO into which the studio has invested most of its loan money. That outcome seems unlikely, especially now that 38 Studios and Big Huge games have laid off their entire staff. So what was all that work worth? Well, according to analyst Michael Pachter, the "Project Copernicus" IP is worth a mere $20 million dollars.

Source: Joystiq

Permalink

I am beginning to suspect that it wasn't just Shilling who was ignorant of how the video game industry works in this whole debacle.

I have a feeling Schilling knows exactly how industry works. The people at the top take a big cut, and fuck the people who are actually making things.

Maybe you shouldn't dump all your money into the MMO "sequel" for your brand new, unknown, relatively-hypeless, untested IP until after you see if it is actually successful first. And maybe you should be especially careful about doing that if all your money is from a loan with pretty outrageous terms. I don't blame the governor or the state at all, 38 Studios still signed the paperwork. Also probably shouldn't release your new, untested, etc. etc. WRPG within spitting distance of Skyrim's release date.

This was just bad business for the developer.

Its not really a shocker since the game looks pathetically easy and wanted to be patched by people. Its a shame that Grant Kirkhope worked on this debut game for a dying company. Which is funny because he used to work at Rare which is also a dying company. Guy needs to get hired by Nintendo and put his musical genius to work.

Sylveria:
Maybe you shouldn't dump all your money into the MMO "sequel" for your brand new, unknown, relatively-hypeless, untested IP until after you see if it is actually successful first. And maybe you should be especially careful about doing that if all your money is from a loan with pretty outrageous terms. I don't blame the governor or the state at all, 38 Studios still signed the paperwork. Also probably shouldn't release your new, untested, etc. etc. WRPG within spitting distance of Skyrim's release date.

This was just bad business for the developer.

The game itself started as an MMO. Lack of funds drove it to become single player & now that it was somewhat of a success they continued the mmo plan.

-- .

So by 'break even' here I assume they mean for itself /and/ for Copernicus. There's no way they spent that much money just on Reckoning alone, and Reckoning started as the MMO then forked into the single player while Copernicus went on as the MMO.

Amalur wasn't horrible, but there's no way they burned $50M on it alone unless the mafia were involved. ... ... Okay, this whole thing is so bizarre, maybe.

Grey Carter:

It's unclear where Chafee's experts are getting their numbers from. Even a fairly low profit margin estimate for 3 million sales produces enough to pay back 38 Studios' loan and then some, and that's not even counting the fact that expecting a company to pay off a $50 million investment loan in the space of one game is ridiculous.

It's not really that far of a stretch to say they'd need 3 million. They're (at least) $50 million in the hole. Let's be generous to the Governor and say that's what he means by "cost of development" (i.e. having a company with people and a building). The game sold at $60. So, if they sold 3 million copies, that'd be $180M in gains. But over half that money will be blown on returns, the retailer, paying for the platform license, and, of course, distribution. So that leaves 38 Studios with $90 million. Except 38 Studios didn't publish themselves, EA did. EA ran the marketing, plus their own QA testing. And, if EA is like any publisher in any other medium (and I assume they are), then they got the lion's share of the money. But, to be generous to you, let's say EA split the gains right down the middle with Curt Schilling's plucky little band. So, that leaves 38 Studios with $45 million. Just short of the $50 million they owe the Development Council.

So, Curt can go to bat and say, "hey, don't call my game a failure--it sold 1.2 million copies in its first 90 days" but the Governor's right in that it failed to sell enough to keep his company solvent. And that's what the state was expecting to happen when it backed the loan. Not that the game would make $50 million out of the gate, but that it would make enough to that 38 Studios could both pay the $1 million installment and their payroll. Turns out, it wasn't enough to do either.

I think they have made a classic start up business mistake. Publishers are forced to offers retailers credit terms ranging from 30-90 days. I suspect that last years drop in the sales have enabled the retailers to push for the 90 days terms. So if 38 Studios made their break even point they wont be seeing the money for at least another 3 months at least. EA would also have payment terms in their contract with 38 Studios so could be anything up to 6 months before payment. They ended up in the classic cashflow hole, the money is coming but they don't have the cash on hand to pay the bills now.

"We are a new, unproven studio with small budget, lets make an MMO - a genre that toppled the biggest giants on the market! What can possibly go wrong guys!?"

Seriously, developpers... what's wrong with you. And amalur also was supposed to be an mmo...
Those MMO fetishists...

Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

Grey Day for Elcia:
Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

I think I'm going to start stalking your posts to see if I can find a positive one.

Eric the Orange:

Grey Day for Elcia:
Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

I think I'm going to start stalking your posts to see if I can find a positive one.

You've nothing in the world better to do? Fair enough. Enjoy.

Grey Day for Elcia:
Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

and

Eric the Orange:

Grey Day for Elcia:
Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

I think I'm going to start stalking your posts to see if I can find a positive one.

I admit, I'm kind of jealous :<

Padding:

oldtaku:
Amalur wasn't horrible, but there's no way they burned $50M on it alone unless the mafia were involved. ... ... Okay, this whole thing is so bizarre, maybe.

Way more money was spent, the loan was for $75M, on developing the Amalur IP with the game coming out before the MMO, apparently they were in business for over five years... Not bizarre, but just bad, not as in unfortunate but just... bad.

somonels:

Grey Day for Elcia:
Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

and

Eric the Orange:

Grey Day for Elcia:
Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

I think I'm going to start stalking your posts to see if I can find a positive one.

I admit, I'm kind of jealous :<

Padding:

oldtaku:
Amalur wasn't horrible, but there's no way they burned $50M on it alone unless the mafia were involved. ... ... Okay, this whole thing is so bizarre, maybe.

Way more money was spent, the loan was for $75M, on developing the Amalur IP with the game coming out before the MMO, apparently they were in business for over five years... Not bizarre, but just bad, not as in unfortunate but just... bad.

I'll stalk you if you like.

*gets into bushes*

Grey Day for Elcia:

somonels:

Grey Day for Elcia:
Gameplay and general feel of the craptasticly horrid Fable series, with none of the humor--who'd have though that's not a winning formula.

and

Eric the Orange:
I think I'm going to start stalking your posts to see if I can find a positive one.

I admit, I'm kind of jealous :<

Padding:

oldtaku:
Amalur wasn't horrible, but there's no way they burned $50M on it alone unless the mafia were involved. ... ... Okay, this whole thing is so bizarre, maybe.

Way more money was spent, the loan was for $75M, on developing the Amalur IP with the game coming out before the MMO, apparently they were in business for over five years... Not bizarre, but just bad, not as in unfortunate but just... bad.

I'll stalk you if you like.

*gets into bushes*

... I'll start stalking Eric the Orange and we have a ??? triangle!
I'm just going to leave the windows open and... change.
image

---------------------------------------------------------Won't make ANOTHER post

Grey Day for Elcia:
I suddenly regret my pity offer. I take it back! Oh god, I take it back!

*runs away crying*

image

somonels:

Grey Day for Elcia:

somonels:

and

I admit, I'm kind of jealous :<

Padding:
Way more money was spent, the loan was for $75M, on developing the Amalur IP with the game coming out before the MMO, apparently they were in business for over five years... Not bizarre, but just bad, not as in unfortunate but just... bad.

I'll stalk you if you like.

*gets into bushes*

... I'll start stalking Eric the Orange and we have a ??? triangle!
I'm just going to leave the windows open and... change.
image

I suddenly regret my pity offer. I take it back! Oh god, I take it back!

*runs away crying*

This thread has taken a decidedly odd turn.

Grey Carter:
It's unclear where Chafee's experts are getting their numbers from. Even a fairly low profit margin estimate for 3 million sales produces enough to pay back 38 Studios' loan and then some, and that's not even counting the fact that expecting a company to pay off a $50 million investment loan in the space of one game is ridiculous.

It's a break even analysis. They have to make enough money on the game to be self sustaining for the next game, and still pay their loan. Once you take into account salaries for a second game and development time that's where you got the very large 3 million sales. The only problem with their analysis done this way is that it's probably too low. The most likely assumed constant costs based on how the last IP did. Variable costs can balloon and games are always getting more expensive to make. Not less expensive.

oldtaku:
So by 'break even' here I assume they mean for itself /and/ for Copernicus. There's no way they spent that much money just on Reckoning alone, and Reckoning started as the MMO then forked into the single player while Copernicus went on as the MMO.

I imagine you are correct, and it's a shame this wasn't clearly stated because it sells the BHG devs short. Reckoning sold just fine, but Schilling was an idiot if he thought an untested IP from a developer just getting into RPGs would pay for itself and have enough left to fund an MMO.

The fact that so many RPG gamers were still neck deep in Skyrim when Reckoning was released also couldn't have helped matters. Given that Bethesda is only a few hours away and BHG had several former Beth devs they must have seen this coming . . . . but I imagine 38 Studios couldn't afford to sit on the game for several months.

Yukinari:
Its not really a shocker since the game looks pathetically easy and wanted to be patched by people.

Difficulty, of course, being the only measure of a game.

Anyway, people wanted a patch, but only like 5% of XBox players and 3% of Steam players (last I checked) ever beat the game on hard.

DVS BSTrD:
I am beginning to suspect that it wasn't just Shilling who was ignorant of how the video game industry works in this whole debacle.

RvLeshrac:
I have a feeling Schilling knows exactly how industry works. The people at the top take a big cut, and fuck the people who are actually making things.

I suspect the latter is far more likely.

Zachary Amaranth:

DVS BSTrD:
I am beginning to suspect that it wasn't just Shilling who was ignorant of how the video game industry works in this whole debacle.

RvLeshrac:
I have a feeling Schilling knows exactly how industry works. The people at the top take a big cut, and fuck the people who are actually making things.

I suspect the latter is far more likely.

I think Schilling's failings have to do with ignorance instead of greed. A lot of MMOs failed because people saw EQ or WoW printing money and wanted to get into the action, but Schilling was doing this because he's a fan. Unfortunately he isn't a businessman, which is what this company needed.

I suspect 38 Studios will go down as the Ion Storm of the era: in both cases the people at the top had a lot of enthusiasm and dreamed big but no management of buisness skill. Ion Storm got away with murder because Eidos was pumping them with money, Schilling didn't have this luxury.

There are plenty of tech stories where the executives leave with a year's worth of fat paychecks while the investors have nothing, but I suspect Schilling actually lost money in this or broke even. Although this is just speculation, I'd be very curious to know what the truth it. Given how he's treated the situation I wouldn't be surprised if he sunk his piggy bank into this or if he drew a stupidly huge paycheck.

 

Reply to Thread

Log in or Register to Comment
Have an account? Login below:
With Facebook:Login With Facebook
or
Username:  
Password:  
  
Not registered? To sign up for an account with The Escapist:
Register With Facebook
Register With Facebook
or
Register for a free account here