Rhode Island Sues Over 38 Studios

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Nimzabaat:
...In the mean time 38 Studios produced a pretty damn awesome game (Kingdoms of Amalur was basically everything the Fable series could have been, if Fable had ever been done well, but that's another story)...

I believe another problem was that actual sales of Kingdoms of Amalur were low and failed to meet expectations. I think they ended up far short of what would have been their break-even point.

i kind of miss the old title, "rhode island sues everybody"

i'm just leaving this for posterity should this ever come up again

although now it sounds like rhode island is suing more than 38 different studios so i guess this is satisfactory

Nimzabaat:

Andy Chalk:

Nimzabaat:
So... the guy that sabotaged the company, is suing the company he sabotaged because he sabotaged it... Only in America. I was hoping Rhode Island would sue the governer. That would be justice.

If that's what actually happened. A lot of people think he saved the state from losing millions more by throwing good money after bad. The lawsuit will hopefully clarify a lot of what actually went on, including Chafee's role in the mess.

So far my understanding of the situation (which may not be accurate) is that the state of Rhode Island gave 38 Studios a loan. Rhode Island didn't give 38 Studios the entire loan (this part gets glossed over a lot, but it is a really important part to the story. The State of Rhode Island never came through with the money promised). In the mean time 38 Studios produced a pretty damn awesome game (Kingdoms of Amalur was basically everything the Fable series could have been, if Fable had ever been done well, but that's another story). Before Rhode Island finished giving 38 Studios the money they were promised, the new governer sabotages the studio by saying they're having problems. Thus causing the problems. There was no mention of the studio having problems before. 38 Studios was still waiting on money from the State of Rhode Island to complete their next project, which based on Kingdoms of Amalur, would have made a lot of money for Rhode Island. Then Rhode Island wanted 38 Studios to start paying back the loan that they've never fully received (again really important. If a bank gives you half of the loan they promised you, they can't just decide to start charging interest until you have the whole thing). Now this is just a basic summary based on what i've read about the situation on the Escapist and other sites. But if that is the case, somebody should indeed be getting sued, just not Curt Schilling. The name does have a "C" and an "H" and rhymes with Afee...

From what I understand 38 Studios received all the money they were eligible for under the loan agreement. The way the loan was structured, some of the money was reserved for various fees and obligations and was never available directly to the company.

The hoopla that brought down the company was over some film tax credits that 38 Studios was supposedly eligible for. Schilling made a deal to sell off the credits to raise more cash for the company but the governor refused to issue them the credits since the company was essentially bankrupt at that point (the have stopped paying many of their outstanding bills months before). Things get murky here since it is not 100% clear if they were eligible for the credits or if the governor had the right to refuse to issue the credits. There are also questions about the legality of the deal to sell the credits to a third party.

Another problem 38 Studios had was that they did not have any revenues coming in from game sales. They got large advances from their publisher and they were not going to get more money until the sales of Kingdoms of Amalur hit a new level. Their publisher seemed unwilling to give them an advance on the unfinished Copernicus MMORPG.

Nghtgnt:

Nimzabaat:
...In the mean time 38 Studios produced a pretty damn awesome game (Kingdoms of Amalur was basically everything the Fable series could have been, if Fable had ever been done well, but that's another story)...

I believe another problem was that actual sales of Kingdoms of Amalur were low and failed to meet expectations. I think they ended up far short of what would have been their break-even point.

From what I understand, they made a fair bit of money from the game but it was all in advances and they already used up all that money. The game sold well enough to cover the advances but not well enough for them to be eligible for more money from the publisher right away. In these types of publishing deals the payouts tend to be spread out over long periods of time unless sales figures significantly exceed expectations.

Scrumpmonkey:
Well Rhode-Island, maybe next time you will think twice before you make a bad investment. This isn't kick-starter, studios who need substantial capital but fail to raise it normally tend to do so for a reason. Putting all your money into one massive money-making project ot reallt linked to your expertise is a bad way to go.

image

Zombie_Moogle:
Sour Grapes, Rhode Island. Next time, have a clue what you're investing in

Both of you do realize that was a loan and not an investment, right? Do you know the difference, or do I need to explain it to you?

Rhode Island is doing exactly what any of you would do if you loaned someone money and they didn't pay you back. 38 studios deserves everything it has coming to them after squandering tax-payer money on a grossly mismanaged game studio.

alphamalet:

Scrumpmonkey:
Well Rhode-Island, maybe next time you will think twice before you make a bad investment. This isn't kick-starter, studios who need substantial capital but fail to raise it normally tend to do so for a reason. Putting all your money into one massive money-making project ot reallt linked to your expertise is a bad way to go.

image

Zombie_Moogle:
Sour Grapes, Rhode Island. Next time, have a clue what you're investing in

Both of you do realize that was a loan and not an investment, right? Do you know the difference, or do I need to explain it to you?

Rhode Island is doing exactly what any of you would do if you loaned someone money and they didn't pay you back. 38 studios deserves everything it has coming to them after squandering tax-payer money on a grossly mismanaged game studio.

They didn't loan grocery cash to a friend; they gave money & tax-credits to tempt a business into moving to Rhode Island, stimulating the state's economy. Not a bad plan in & of itself, but it gets shaky when we consider "Governor Lincoln Chafee, who was against the deal that brought 38 Studios to the state before he took office and who, he said, was at the head of 'a concerted effort to make this not succeed.'" (source: http://www.escapistmagazine.com/news/view/118682-Curt-Schilling-Opens-Up-About-38-Studios-Collapse). Not to mention that deciding who to invest in/loan to is really on the one righting the checks, & maybe they should have looked into it a bit before deciding who got a fat chunk of the tax-payers' money.

Not saying 38 Studios shouldn't pay back it's debts, buuut...

"Named in the suit are 38 Studios founder Curt Schilling, 38 Studios board member Thomas Zaccagnino, Chief Financial Officer Richard Wester, Chief Executive Officer Jennifer MacLean, former EDC Executive Director Keith Stokes, former EDC Deputy Director J. Michael Saul and Antonio Afonso Jr. and Robert Stolzman, lawyers for the state who helped put the deal together. Also named are Wells Fargo Securities, Barclays Capital, First Southwest Co., Starr Indemnity and Liability Co., and law firm Adler Pollock & Sheehan."

suing their own lawyers because Rhode Island signed a deal that went bad? Like I said, sour grapes

Zombie_Moogle:

A much better statement than before.

I agree with you that it was irresponsible of Rhode Island to loan that sort of money on the tax payer's dime. Quite frankly, the amount of money does seem pretty outrageous, but from what I understand, states do this sort of thing a lot. I probably should get more into the nitty gritty details of this, but I still find it a bit perplexing that a publisher like EA was involved after the state gave 38 studios $75 million. This entire thing was a money sink from the start. However, according to Rhode Island, certain information about the project was withheld during exchanges of money, and they did give 38 studios a loan after all, not an investment. I still think Rhode Island is entitled to try and get back every last dollar they could.

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