Amid Controversy, 38 Studios Declares Bankruptcy - UPDATED

Amid Controversy, 38 Studios Declares Bankruptcy - UPDATED

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State and federal authorities are now investigating the final collapse of the Kingdoms of Amalur studio.

Like the high-speed train wreck it so closely resembles, the grinding collapse of Curt Schilling's 38 Studios is hard to stop and getting uglier with every passing second. Today, the studio officially declared bankruptcy, and not the Chapter 11 kind, which allows companies to continue functioning while they get their finances sorted, but Chapter Seven, otherwise known as a one-way trip to Liquidation City.

"This action comes after several weeks when the company has reviewed, considered and received the recommendations and advice with respect to potential avenues for relief that are currently available," a company rep told the Providence Journal. "After ongoing negotiations with the State of Rhode Island and potential investors and other interested parties, the Company has been unable to find a solution to the current stalemate."

Unfortunately for all involved, the end of 38 Studios doesn't mean the end of the unpleasantness. The Rhode Island State Police, the FBI, the U.S. Attorney's office and the Rhode Island Attorney General "are working together to investigate activities that have recently come to light at 38 Studios," according to State Police Colonel Steven O'Donnell. Those "activities" relate to the $75 million loan guarantee that brought 38 Studios to Rhode Island in the first place, plus another $8.5 million loan from Bank RI that was only recently disclosed, based on state film tax credits that had not actually been issued to the company.

And in case that's not bad enough, the Journal also reported that according to court documents, 38 Studios' Baltimore location, formerly known as Big Huge Games, has liabilities in excess of $100 million and assets of only $500,000 to $1 million.

Rhode Island Governor Lincoln Chafee has scheduled a press conference for later this afternoon. We'll update with further information as it becomes available.

UPDATE: Conflicting reports about the actual state of 38 Studios' debt have surfaced, as WPRI has chimed in with a different, albeit still very ugly, set of numbers. According to that report, 38 Studios Baltimore LLC owes only $5.5 million, while the company's total debt is just over $150 million. $115.9 million of that is a secured debt owed to the Rhode Island Economic Development Corporation, while the balance, including unpaid wages to former employees, is unsecured and not expected to be paid. Whatever the specifics eventually turn out to be, it's a lot of money, and a lot of people are going to lose out.

O'Donnell also clarified that the investigation into 38 Studios actually began on Wednesday, and is not connected to today's declaration of bankruptcy.

Source: Providence Journal, WPRI

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I imagine it's a very wonderful feeling knowing that you're suddenly liable for around 100x your own worth.

The government isn't even going to get its money back either.

...Everyone wins!

Andy Chalk:
...based on state film tax credits that had not actually been issued to the company.

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

Azuaron:

Andy Chalk:
...based on state film tax credits that had not actually been issued to the company.

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

Agreed.

OT: Well that sucks, although I get the feeling that the governor is putting 38 Studios under the screw to try and gain as much money as possible to look good to the voting public.

Azuaron:

Andy Chalk:
...based on state film tax credits that had not actually been issued to the company.

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

Does that change anythin to do with the 100 million dollar liabilities they had in Baltimore or the inability to pay back the 75 million dollars given before?

The answer is no.

Azuaron:

Andy Chalk:
...based on state film tax credits that had not actually been issued to the company.

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

It was pulled because they failed to make their May 1st loan payment. Part of the stipulation for the tax credit is that you're not in default. You also don't go up to your creditor on the 30th to tell them that you can't make the payment on the 1st. They were burning over 4 million a month most of it on salaries. If they were running the business properly they had plenty of time to adjust their burn rate so they could actually make that May 1st payment.

Is this Rhode Island's payback for when the Protestants kicked them out of Massachusetts?

shintakie10:

Azuaron:

Andy Chalk:
...based on state film tax credits that had not actually been issued to the company.

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

Does that change anythin to do with the 100 million dollar liabilities they had in Baltimore or the inability to pay back the 75 million dollars given before?

The answer is no.

I'm pretty certain they didn't get all 75 million Rhode Island promised them. I think they got something like 48.

As for the "100 million in liabilities" that shouldn't even really be mentioned here. It's from a studio that was under 38 Studios, Big Huge Games. They were operating long before 38 existed and was bought up by Epic a few days ago so now it's in their hands, not 38's.

"thhhhhhhhhhhhhhhhhhhhhhwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww POW"
That sound you hear when something is slowly but surely crashing.

Have we now reached the pow or are we still at the wwwwwwwwwwwwww part?

Well that sucks. So I guess that means the Amalur IP is now property of the US government? Fantastic... I'm sure they'll know exactly what to do with it.

this is such a shame. They had potential

I think they really dropped the ball by making the tutorial so short on this game. After the 2 hour or so game, I felt very disappointed, but recently I've started playing the real game and noticed that after 8 hours or so the gameplay gets a bit more interesting. Games like these need a bit of time to ramp-up, and a lackluster tutorial is probably more damaging than none at all.

Azuaron:

Andy Chalk:
...based on state film tax credits that had not actually been issued to the company.

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

Wow, no. Did you read Schilling's interview in the Providence Journal the whole way through a couple of weeks ago, or whenever it came out? Unless you have a hard copy of the paper, it's unlikely, thanks to the ProJo's payway. But I do and I did. In it, he's quite clear that the governor tried to approve those tax credits, but that Keith Stokes, the RIEDC's executive director who cut the deal in the first place, missed a deadline and so they were no longer eligible.

shintakie10:

Azuaron:

Andy Chalk:
...based on state film tax credits that had not actually been issued to the company.

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

Does that change anythin to do with the 100 million dollar liabilities they had in Baltimore or the inability to pay back the 75 million dollars given before?

The answer is no.

First, they hadn't been given $75 million, they'd been given something like $50 million, and it wasn't all due at once.

Secondly, they don't have $100 million in liabilities in Baltimore, they have more like $5.5 million in liabilities in Baltimore.

Thirdly, yes, having money lets you make your loan payments. Duh.

Fourthly, they were close to getting additional investors when the governor denied their tax credits and started yelling about how everything was terrible and going to fail, which promptly scared all the investors away.

The 38 Studios debacle can be mostly laid at the feet of a governor who wanted to kill a project facilitated by the previous administration. If 38 Studios had stayed in Massachusetts, it's likely they'd still be working on Copernicus.

Scrustle:
Well that sucks. So I guess that means the Amalur IP is now property of the US government? Fantastic... I'm sure they'll know exactly what to do with it.

Yea, sell it to the highest bidder to try and recoup their losses.

DVS BSTrD:
Is this Rhode Island's payback for when the Protestants kicked them out of Massachusetts?

You mean when Roger Williams ripped a chunk of Massachusetts off and turned it into a seperate colony? Because the protestants were pretty angry about that.

I am kinda confused by what those 'state film tax credits' actually are? Is this a tax refund? Credits that they can use for their next tax return? How could they get a loan against those credits now?

You know what 38 studios needs right now? A good represenative. I recommend Paul Christoforo. Great guy, maybe you've already heard of him?

But seriously, thank god for the #38jobs thing.

I wonder why employee wages are always "unsecured". They did the work, damn it.

mindlesspuppet:

shintakie10:

Azuaron:

That should read, "...based on state film tax credits that had been promised to the company, but the governor withheld without cause."

Does that change anythin to do with the 100 million dollar liabilities they had in Baltimore or the inability to pay back the 75 million dollars given before?

The answer is no.

I'm pretty certain they didn't get all 75 million Rhode Island promised them. I think they got something like 48.

As for the "100 million in liabilities" that shouldn't even really be mentioned here. It's from a studio that was under 38 Studios, Big Huge Games. They were operating long before 38 existed and was bought up by Epic a few days ago so now it's in their hands, not 38's.

That not exactly correct, Epic quickly announced a new Studio in Baltimore and have offered Big Huge Games employees jobs at the new studio as many as they could afford to start working on an Epic IP. Epic Baltimore does not have a physical studio workspace yet.

So much for nationalizing the arts. ;)

Those kind of numbers in liability are really cringe-worthy, especially in our economy.

I'm just wondering how a simple bankruptcy spiraled into such a big loss of money the only way you could possibly lose any more that fast was if you remade the Titanic and sent it directly to the Arctic Circle.

if anything, this was just a hideous waste of time and money caused by whoever was leading the charge for investing that much in a stale idea

we can't even say that it was worth the risk because they didn't bring anything new to the table

Hate saying it but I expected this to happen to the company. It developed an excellent game in my personal opinion but you don't come up with 75 million dollars out of thin air. RoK; you IP you, you made a wonderful game. May you rest in peace.

Damn, I had no idea they were so far gone, financially anyway.

Hopefully things don't get any worse. >_>

this is just one giant financial clusterf*ck

KOA would have been decent had they included any type of keyboard/moue binding. A huge game in scope i am told. I had 20 folks talk to me about this title, we all agreed it was a poor PC port from a console game and did not allow a huge number of keybinds, many of them hardcoded to what the devs wanted, primarily a gamepad setup. This contributed to the games huge failure, which in turn resulted in massive loss of revenue to 38 studios.

Word of mouth comes back to bite devs in the ass, yet they never learn.

No doubt many sleepless nights are being had by more than a few people over this mess.

They went in too big, too fast. They should have started slightly smaller, built up a few good games and a reputation so that they wouldn't have to essentially risk it all developing an MMO.

Apparently, they only made Kingdoms of Amalur as way to secure more funding for their MMO, which was the original goal of the studio. Not only that, but their deal with EA stipulated that in return for a chunk of money for the MMO, 38 Studios would relinquish all sales profits and royalties generated by Kingdoms of Amalur to EA. So essentially, their one game that they put out was done so in return for some funding.

The MMO dream is like a deep sea angler fish, luring you in with promises of WoW like money. Few ever get it. It's a bad idea to leap into business with the sole intent of making an MMO right off the bat. I'm not saying it can't be done, but it's a bad idea.

This thread title had me slightly worried for a while there, I thought it meant 38 different studios had suddenly gone bankrupt. But no, it's just some guys who I've never heard of, crisis over.

Well it seems that all we can hope for is that the creative minds that resided at 38 studios can move on to bolster our other favored developers, no? As the studios have even before this well and truly sunk.

Graill:
This contributed to the games huge failure,

The sad thing is that the game sold somewhere in the region of 1.3 million which in normal circumstances would be considered a fantastic return for a brand new IP

After read the sort of seemingly unending supply of industry horror stories that accompany a new Trenches webcomic every update, it sort of makes me wonder when companies like 38 Studios go under whether they crashed then burned precisely because right up to the point that they ran out of money the company was actually doing everything by the book, crossing their t's and dotting their i's by paying their workers the right wage for the hours worked and not leaning on people for unpaid overtime and the like.

Moral of the story:

MMO's suck, don't make them.

 

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