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38 Studios makes state payment, plans 2013 release for MMO
38 Studios makes state payment, plans 2013 release for MMO
May 18, 2012 | By Eric Caoili

May 18, 2012 | By Eric Caoili
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    28 comments
More: Console/PC, Business/Marketing



Kingdoms of Amalur developer 38 Studios made its first payment for the $49 million loan it received from the state of Rhode Island, and will seek private funding to continue operations.

The developer's financial difficulties came under increased scrutiny this week after it came to light that 38 Studios failed to make its first scheduled $1.125 million loan repayment, and could not pay its nearly 400 full-time employees.

Seeking to protect taxpayer money that went toward the loan, the state government said it would try to keep 38 Studios solvent, but it is unwilling to provide the company with more funds.

In a press conference streamed at WPRI on Friday afternoon, state Governor Lincoln Chafee announced that 38 Studios submitted a $1.125 million check for the late payment, which cleared. The developer is expected to make another $2.6 million payment in November, and then pay $12.6 million in 2013.

Chafee said 38 Studios will need to find private capital funding to continue its operations. "There's not going to be any money from the state. They're not coming here for easy money," he added.

The governor noted that the company intends to release its second game, an MMO codenamed Copernicus, in June 2013. 38 Studios released its first game, the Big Huge Games-developed Kingdoms of Amalur, in February and sold around 330,000 copies in the U.S. during its first week on sale.

Rhode Island is now looking to revise how it handles tax breaks and loans -- the state initially committed $75 million to 38 Studios, when it convinced the company to move from Massachusetts to Rhode Island two years ago.

And on Wednesday afternoon, Rhode Island's Economic Development Corporation executive director Keith Stokes, who was instrumental in coordinating the state loan that brought 38 Studios to Rhode Island, resigned from his position.

Though Chafee admitted the state would have benefitted much had 38 Studios become a huge success, when asked if the government would make similar deals in the future with other companies, he responded, "Never. Not on my watch."


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Comments


thay thay
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I don't see many private investors putting up the cash to save this company. If you look at the state of MMOs, most are struggling. So who in their right mind will invest in this company?

Curtis Conaway
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That depends on the mmo in my opinion, there is a huge market out there for the right mmo and plenty of untapped concepts that haven't even been attempted on a AAA scale... just because all the current mmos are struggling doesn't mean the mmo market is struggling. It just means that the current mmos are not innovating... I played wow, rift, and swtor and aside from the differences in the classes available and the stories, they all felt the same while playing... there is currently no innovation in the genre of mmo as of right now. If they could figure out a way to innovate the market, for that matter if anyone can figure it out ( I'm currently working on this right now), they can grab the market and take it over really easily. However it still isn't certain whether their mmo will be an imitator or an innovator in the market that is flooded with imitators.

[User Banned]
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Joe McGinn
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The smart thing would be to go free-to-play MMO - that is a growing market. Going for subscribers is a mug's game at this point.

Benjamin Quintero
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I'd hate to be captain obvious here but.. Given that Reckoning didn't even make it's money back, isn't this just an attempt to stall for time? Do we really expect this MMO to take over the market, to do better than SWTOR, WoW, Tera, Guild Wars, or any others in that crowded space?? This is bad news for R.I...

Wylie Garvin
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An Elder Scrolls MMO will not be a WoW-killer either. I predict it will be generic, it will be bland, it will be expensive and it will tank. I just hope it doesn't take Zenimax down with it.

[User Banned]
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Simon Ludgate
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It's important not to get caught up with the sunk costs fallacy though. What's spent is spent and is no longer part of the equation. What would it cost to take what they have NOW and turn it into releasable product? If it would could $20 million to produce a game that will generate $200 million in revenue, you ought to do so, no matter how much you've already invested; at the very least, you'll cut your losses by $180 mil, even if you don't make any return on your investment.

Of course, that ignores the potential risk of still not getting any game...

Joe Wreschnig
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"It's important not to get caught up with the sunk costs fallacy though. What's spent is spent and is no longer part of the equation."

This is opposite the usual meaning of "sunk costs fallacy." The normal definition of the sunk costs fallacy is assuming you are past the point of no return because of the large amount of money you have already invested.

http://en.wikipedia.org/wiki/Sunk_costs#Loss_aversion_and_the_sun
k_cost_fallacy

"Many people have strong misgivings about "wasting" resources (loss aversion). In the above example involving a non-refundable movie ticket, many people, for example, would feel obliged to go to the movie despite not really wanting to, because doing otherwise would be wasting the ticket price; they feel they've passed the point of no return... Colloquially, this is known as "throwing good money after bad"."

Your definition is further complicated by the fact the government ends up owning the IP if the studio defaults, and could very well make more money selling it to some other (hopefully private sector) sucker who thinks they can make an MMO. The "doing nothing" option results in non-zero value whether they finish the game or not.

David Fisk
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Two lessons to be learned here:
Government can't create jobs (seeing as 38 studios will probably not survive a year)

Private investors don't want to put huge money into a game studio. They'd rather invest in the mobile game market where a much smaller investment can potentially get huge returns. I'd never invest in a big MMO right now. That market is flooded.

Lance Thornblad
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On your first point, that's just silly. Tell that to the over 2.2 million government employees out there.

On the second, I agree. A studio trying to make a massive game like Copernicus for its first project couldn't find a way to do with at least $75M? That makes it a pretty tough sell. I sincerely hope it works out, though, for the sake of the employees.

[User Banned]
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TC Weidner
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http://www.census.gov/govs/apes/

first off government directly creates over 20 MILLION jobs, add tens of millions of more private sector jobs which rely and work on government contracts.

So stop the silly talk about govt not creating jobs.

Lance Thornblad
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Oops, I meant 22, not 2.2. But hey, close enough for government work? :P

Ryan Christensen
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They really should kick out some other games at this point. Once stress happens on finances with an MMO the gameplay suffers and that in the end is all that matters.


I worked at Cheyenne Mountain Entertainment and 38 Studios looks to be in a similar shape. Skilled people, new studio, big names (sometimes too many cooks in the kitchen leading to design warring unfortunately), first game as an MMO, beautiful levels, awesome art, nice tech, no fun game after a few years... yet. CME had Stargate IP though which had it made it would have propelled quite nicely, 38 studios doesn't have a big IP (although they won't have the royalty hit - neither did WoW). But MMO's take so much money and time and the problems will start happening when people start exiting that will be too great to weather unless they get 6 months to a year of investment, a month or 3 months does not calm the group.


Another problem with MMO development today is that everyone thinks WoW was a big operation like this. A relatively small team (25ish) developed that game/pre-production on an already killer IP that they owned, not as a first game. Once the game was ready for production then they ramped up. Here it seems like MMO companies after, trying to chase WoW, thought competition was on team size and production before gameplay and systems are ready. Gameplay is king in any market first! That is why games like Runescape are still one of the biggest MMOs. It is why games like Minecraft are a phenomenon. They are fun but not always beautiful...


Probability is leaning they aren't going to make their money back. The plan should be to get out small titles across their 380+ employees in up to 20-30 small teams. Curt even has a sports following so maybe some sort of matchup competitor to Home Run Battle 3D. You can build amazing small games in a year on scrappy small teams and scrappy budgets but you can't build an MMO without money. It is about focus now, that is all the focus a financially strapped company can take. This won't make all the money back but it is better than not shipping anything.

I hope it turns out different for 38 studios and their MMO but that seems to be the script. The levels and designs so far do look beautiful, I wonder about performance and how that is meshing with gameplay. I wonder if they will be able to pay their server bills, employees, and pad runway enough that employees aren't fleeing. They really should dedicated a few employees to getting out gameplay videos if they want private investment. Concern only goes up when the latest release is just a fly through: http://www.giantbomb.com/news/38-studios-unveils-its-first-look-a
t-project-copernicus/4162/

Todd Masten
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Those 2.2 million 'jobs' are taxpayer funded, non-revenue generating positions that serve only to consume taxpayer dollars. Do not confuse private sector job creation that BUILDS wealth with government job growth that consumes wealth.

Joe Wreschnig
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"Do not confuse private sector job creation that BUILDS wealth"

Like 38 Studios!

"with government job growth that consumes wealth."

Like how your drinking water isn't essentially poison!

Joe McGinn
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"Government can't create jobs "

Change that to "INCOMPETENT Government can't create jobs" and you'd have a point. Montreal is one of the few thriving and growing game development hubs in the world, 5,000 working professionals and growing. Ontario is picking up the trick and they are next.

David Phan
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Any chance we're going to see the arrival of the most epic Kickstarter campaign ever for Copernicus in the next few months?

Eric McVinney
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Even if there was a Kickstarter campaign, would they actually spend the money wisely and invest in better management?

[User Banned]
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thay thay
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Kingdoms of Amalur: Project Copernicus trailer has arrived! The WoW killa...the MMO to end all MMOs..the show stopper...(insert cliche here)!!

http://www.youtube.com/watch?&v=xUpXeegLGXs

TC Weidner
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Looks very nice, some very talented people working on the world design.

Heng Yoeung
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Anybody ever thought about making a sports MMO? I was thinking along the lines of the Olympics games. I would imagine it would be close to monumental to make because of the variety, but...if someone could do it, they will come. Wait, isn't that from a movie? Nevermind. Just a thought.

Matthew Mouras
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I wonder when Schilling is scheduled to hit the stump and start blasting Obama and state-bailouts again. That was classy.

Michael Grimes
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I'm following this story closely......new kids on the block seem to not be sticking around for that long...and yes, they mismanaged everything it seems.....

I saw the trailer for KOA when i met Schilling in person....and after seeing the game I originally thought it was an MMO....now an extension of the hack n slash?

hrmmmm..

oh well....it was fun playing games eh?

Maria Jayne
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I find it an odd situation to be so obviously struggling to make their FIRST repayment on the state load unyet they plan on taking another year to release an mmo even though they can't afford to pay their staff right now either.....

I understand the company wanting to imply it has a future for investors to feel is worth sustaining but how many months ago could they have started looking for investors BEFORE their staff started not getting paid and BEFORE their first loan repayment was due?

Epic failure in money management right there, if you want to attract investors, probably should do it before everyone knows you have no money and your staff aren't getting paid so have no reason to stick around.

Christopher Thigpen
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Here is a great idea.... since we are so deep in debt...why don't we make the riskiest of game ventures and create an MMO in an already saturated market, so we can lose even MORE money!!!!

Sorry people at 38, that is a ridiculous idea. You are not Blizzard....just ask SW: TOR

Don't be the buffalo.


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