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38 Studios burned through $133M before going bankrupt - report
38 Studios burned through $133M before going bankrupt - report
July 25, 2012 | By Eric Caoili

July 25, 2012 | By Eric Caoili
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More: Console/PC, Business/Marketing



Newsbrief: Kingdoms of Amalur developer 38 Studios burned through $133 million -- much of that on an MMORPG that it didn't stay alive long enough to release -- before declaring bankruptcy.

Analysts claim that amount is in line with how much a developer would expect to pay a big team of developers working on an online title for six years (as was the case with 38 Studios), according to a report from WPRI. Others like Rhode Island Governor Lincoln Chafee, however, have accused the company of "living high on the taxpayer's dollars."

"38 Studios was hemorrhaging cash -- our cash," said Saul Kaplan, who heads the Rhode Island group that loaned $75 million in taxpayer money to the developer. "The thing that is most amazing to me is their burn rate was about $5 million a month all through 2011, heading into 2012, and it didn't slow down even when they knew they were running out of cash."

Documents obtained by WPRI show 38 Studios projected it would make back $109 million this year from Kingdoms of Amalur's sales. The company overestimated demand for the game, though, and it sold only 1.3 million copies of the game instead of the 2 million minimum 38 Studios needed to cover its advance from Electronic Arts and begin earning royalties.


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Comments


Todd Boyd
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Sheesh. I feel bad for the employees -- big boss man didn't even warn them that their death was around the corner. :(

Eric McVinney
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Yea, really. It shows that the people in upper management either had illusions of grandeur and the game would sell beyond the 2 million minimum, or that they knew that they were screwing over those below them and opted out on leaving before the ship sunk (i.e. Jennifer MacLean's "maternity leave" (Great excuse there)).

John Kuempel
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Yeah, she planned that pregnancy _perfectly_ to coincide with the demise of the company.

Eric McVinney
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Planned or not, she could have done a better job of letting someone else take her place. In fact, how could she not warn others about what was going on? Again, it doesn't matter if she was pregnant, everything was turning sour MONTHS before she left.

Craig Timpany
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I love the way you put maternity leave in scare quotes as if it later turned out that she was wearing a medicine ball under her top the whole time. Ah, gamasutra comments.

Eric McVinney
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Ah, people with little insight into the business world :)

Anthony Boterf
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So far, the best and most informative article I have read was the interview with Schilling [ Schilling owns up, link at end of this current article, has the link to this interview]. The employees loved the man for the most part, but alot of that was exactly due to the extravagances he showered on them (like laptops for every employee one Christmas). What I took from that interview, was that he wanted everyone in his company to feel the same way he had all his career in baseball...like a really valuable part of a team... and pampered them lavishly. Granted, much of these extravagances came out of his own pocket;but these same pockets could have kept them going just long enough for another investor to step in.

Of course, Chaffee's political maneuvering certainly was a serious detriment, almost as if he WANTED the company to fall, in order to say "I told you so!" The stipulations of the RI contract to have 'x' number of employees hired to release each tier of funds served only to bloat an already overworked payroll into the $1.5-2 million a month behemoth it became at the end, and without adding comparative value to the daily operations.

In the end, an upstart minor league team tried to jump straight into the major league playoffs, and went down swinging.

Link to article/interview: CURT SCHILLING ON D&C: ‘I’M NOT ASKING FOR SYMPATHY’ AFTER LOSING $50M IN BUSINESS COLLAPSE

Anthony Boterf
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Ok, can't seem to get this link to work, so copy/paste it from here, or use the link under "in his first interview" in the second paragraph of the article linked at the bottom of this blog post titled " Shilling owns up..."

http://fullcount.weei.com/sports/boston/baseball/red-sox/2012/06/
22/curt-schilling-on-dc-im-not-asking-for-sympathy-after-losing-5
0m-in-business-collapse/


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