giles: The Rhode Island government could have given them the 8 million, which was part of the money with-held from the loan. From what I heard earlier in this thread, i believe they said they would give them that 8 million if 38 made that loan payment, then they pulled a fast-one and changed their mind. Withholding that $8 million is going to put the taxpayers on the line for that $100+ million hook, hope they remember that when Chafee's re-election comes up.
I'm pretty sure the 8 million was an additional sum. 38 was supposed to be able to make the game with the 75 million loan, and has gotten 50 million of it, but the ship date slipped, and there is far more than the final 25 million in monthly burn left, even with 8 million more (which as was pointed out, would end up being less than 8 million after they were sold. They were essentially film tax credits, not really meant for videogames, but was a possible shoe-horn solution). I also believe the 1 million owed the state was an interest payment, something they had to know was coming, and if you haven't planned to have the funding for something that expected, it's worrisome.
The likelihood of another publisher picking up ever once they got the loan was low. why would a company like EA or really anyone buy on when there is around 75-100 million (interest remember) owed to the state of RI before the publisher could touch a cent. It was poisonous for 38 and RI.
I think Knomad layed it out excellently. Kurt's political affiliations are well known, and it's pretty easy to believe he and any management he'd hire would lay the blame on RI rather than themselves. The politicians wouldn't have had a chance to do anything if 38 had finished the game with the 75 million like they were supposed to be able to.
There will be plenty of blame to go around, on both sides. Chafee blurted out confidential deal-damaging info... the ship date, the burn rate, etc. Management not only bungled the operating budget, but also mismanaged the relocation mortgages, let the health insurance lapse, and provided no warning whatsoever for their employees of the impending problems.
There is blame to go around for sure, the governor let his emotions show, instead of being circumspect.
My contention though is that 38 studios basically put a gun to his head, getting to last million before they approached their main lender, and the entity that had most capital riding on their success. The 8, which would have been a drop in the 75-125m bucket more they needed (I'm citing figures i've seen saying you need 180m minimum for a new MMO), and kind of irrelevant TBH. Though if I was 38s leadership I'd probably do the same thing and blame someone else so as to not draw my employee's scorn.
I don't think the politicians are blameless, but I do think they bear significantly less of it than the CFO, or Mr. Schilling.
...but also mismanaged the relocation mortgages, let the health insurance lapse, and provided no warning whatsoever for their employees of the impending problems.
This is the part that makes me angry. Studios close and developers get laid off all the time - it's one of the risks that comes with the industry. It sucks, but guys can prepare for that. But telling someone that not only have they lost their job, but their insurance just got whacked at the same time and that a second mortgage gets tossed back to them like a hot potato... that's Just Not Right. I can't defend any employer that puts its staff in that kind of situation. I bet more than one former employee of 38 Studios is going to have medical bills he/she can't pay or have a home foreclosed on because they suddenly have an extra mortgage payment they can't make because of this.
The big issue for me is the fact that the employees haven't been paid for the last month and don't get any severance. Lost in all the talk about "oh, the employees are talented, they'll land on their feet" is that severance + paying out pto and vacation time is huge for someone to get enough breathing room to be able to find another job without facing financial hardship or taking on expensive debt. As anyone who has been laid off knows, unemployment benefits don't kick in until a few weeks after you are laid off, and even if you're renting, you usually have to pay several thousand dollars in order to break your lease.
That's very informative, but the bit about RI needing to yield capital to a private investor is just not fair. The likelihood of the project selling enough to make back both new investors money PLUS the 100 million RI loan is low (logically, or private investors would have no problems being a 2nd string creditor), so Schilling was basically wanting tax payers to lose so the company could continue. From a small-government "bootstraps" type person that is ridiculous, I certainly would never have signed on for a private investor to get first cut. Totally the right decision in my opinion. That is literally privatized profits, socialized losses
The end game aspect from RI politicians does sound like dirty politics, but the point remains that 38's management allowed it to get to the 11th hour of financial instability. Why weren't all these supposed investors (who the state investing advisor denies exist and Schilling won't name) brought into talks months and months ago well before there was any danger of running out of money? That 75 million loan was supposed to finance the *entire game* was it not?
That 1.1 million was always due, not granting a deferment is a dubious move, but remains legal, and could have been planned for *years* in advance.
well, I dont feel like its a healthy discussion fotr me to get into, ben, granted the emotional headache all of this has been. I will say the investors did exist and that I can stand up for Curt's personal character and honesty, regardless of his politics, regardless of this whole mess.
@blankslatejoe- understood. In no way do I believe this is anyone on the development team's fault -and it sucks you guys, the businesses around your offices, and the RI taxpayers bear the brunt of it.
Editor's note: Gamasutra received the letter below on Tuesday evening. In it, the wife of a former 38 Studios employee describes a uniquely heart-wrenching story about uprooting a five-person family for an exciting new opportunity in Rhode Island, where now-defunct 38 Studios was located.
The description of events differs from Gamasutra's previous report, due to its unique viewpoint from someone who didn't work at the company, but relied on it just as much as an employee. She wished to remain anonymous, but Gamasutra verified her husband's name and former position at 38 Studios.
Below is the "38 Studios Spouse's" full letter:
I want to tell a different, but not impartial, side of this story. I am telling this for two reasons. First, to raise awareness and help for any of the family or employees involved. Second, so other people know what companies can do.
I am not a 38 Studios employee, a big baseball star (who may or may not have trusted the wrong people), or some politician trying to prove a point. I am very involved though and affected by this disaster, as a wife and mother, who has moved the most important people in my life to a new state. I knew Rhode Island would be different, but hopefully still an adventure and maybe a home eventually.
We moved to Rhode Island at the end of December 2011. We opened our presents on Christmas Day, took down our tree on the 26th, and began packing and loading moving trucks on the 28th, all because my husband was hired by 38 Studios and told he had to start work as quickly as possible. We spent a month living out of a hotel searching day after day for a house to rent. My children could not get back into school and could not start a new life until we found a place to settle. Finally we found a place to live, paid deposits on the house, utilities, etc. and moved. We registered all three children at all three new schools, because we do have one in each - elementary, middle, and high school. Finally, our stuff is delivered and our life can start again. It's always hard to move and this is our second big move, but we finally made it to the point where we can re-build our support system and boy were we ready.
My husband has been in the gaming world for a long time. Most of his life has been spent working in this industry and he is well equipped to deal with the problems that go with it. He is usually hired when things are ready to be tied up and finished or they need someone with experience who can tell the left hand how to work with the right hand to meet the release dates set.
The first week he worked at 38 Studios he was concerned about the different teams and their ability to work together. He went to more than one executive during the weeks that followed encouraging them to make changes or deal with the release date issue. The company was not ready for him to do the job he was hired to do, therefore he was placed on other projects to wait it out.
Obviously, in the weeks to come our family had less trust in what we were being told. We did not have a chance to love 38 Studios or [founder and ex-baseball pro] Curt Schilling. We really only saw the landslide of mistakes and ultimate failure. We did not see this coming or could we have ever imagined how in 2012 a company could get away with treating employee's this way. There have to be laws or safety nets or something right?
So, on the 15th of May I sat down to pay bills and upon checking our bank account noticed we had not had our direct deposit made by 38 Studios. I called my husband and asked him to check on it when he got to work. When he came home that night he told me that he had to stay for a 5 o'clock meeting to find out they didn't make payroll. He was unhappy, but said that he was promised they were working on the problem and sure they would have it worked out by the next day.
The next day began at 7:30 am and ended at 7:00 pm. It took 10 1/2 hours to find out that they still could not pay him and didn't have any answers. On the May 16th-21st, my husband returned day after day, told to drive in to work and promised pay, but every day came home empty handed after late meetings and more promises. The longest day was 12 hours and each day we were spending more money on gas and more hope going out the window. During this time, we were also trying to keep our children from worrying while they spent each day hoping to catch a glimpse of their dad before they went to sleep.
By the 22nd we were really scared and feeling lied to, my husband decided it's time to work from home to save the gas money as did many others at the studio. At many times it occurred to us to just give up and move on, but we didn't. There was one main reason. If we left the company we would be responsible for the relocation costs of moving to Rhode Island from just five months ago and we did not have the funds to pay for that after not receiving paychecks. From May 22nd-24th, my husband worked from home trying to come up with ideas to get anything out the door and bring in some money to save 38 Studios. We also get another kick while we were down on May 22nd, when one of the employee's wives is at her pregnancy check up and is told that her insurance company has notified the doctor that it was ending at midnight on the 24th of May. When confronted, 38 Studios admitted they had been aware since the 21st of May that due to lack of payment for several months, insurance was going to be canceled on May 24th.
Again, they knew the problem existed and chose to not tell us or give us any notice. On the 24th of May, my husband was laid off officially after six days of wasted gas, with no payment of wages for all of May (1st-24th), no insurance, slim chances of ever seeing any money since the State of Rhode Island would be paid first by all asset sales, and had to drive in once more to get his belongings and attend a meeting on unemployment benefits.
Ok, so time to lick our wounds, get back on the horse, and find a new job. At least we stuck it out and won't have to pay back our relocation costs according to the Chief Operating Officer. Wrong! On June 1st, we get a letter from Atlas Van Lines with 10 days to pay our overdue moving bill of a sizeable amount. Six months has gone by since our move. There was no notice at any point that this had not been paid and now we get a bill with 10 days to pay. Why now? Haven't they had 6 months to collect this? Didn't the company say we would be let out of our contract since they folded? Couldn't they have given us a head's up at any point before we were broke and our savings gone to feed our children? After all, a head's up on this might have alerted us to a problem with 38 Studios before we got to this point. Well on one page in a series, of approximately 45, we signed a document stating in tiny print that we would be responsible if the company does not pay. I don't know if most people are aware, but moving with three kids, a dog, and a cat from one coast to another is a bit tiring and this document was of course presented on the day our stuff arrived in Rhode Island, which was chaos.
So, there goes our credit rating no matter how hard we are trying to still pay for all bills with no income. We have no income, no time to prepare, and I will not let my children starve to pay for a move that did not exactly work out. Why hadn't Atlas collected from 38 Studios? We were told by an Atlas representative that they had a special working relationship with Curt Schilling, therefore they were trying to work with him. Must be nice to have at least 30 days, let alone six months to pay for this bill.
Am I angry? You bet! I have been taken for a ride and am having to take a handout from the government for the first time in my life. Who do I get to direct my anger at? Nobody! The ones responsible aren't around to chat with or pay for the consequences of their actions. At moments I think Curt Schilling trusted the wrong people, but at least he is having to deal with this mess too. At other times, I am angry and think Curt Schilling is a smart man and should have done better!
Where will we go and what is next? I have no idea and am just trying to feed my family and love them and hope moving my kids again won't completely break their trust in us or hurt them too much. I think we could have liked Rhode Island. I think of all the supportive people and friendly faces and how much kindness we have been offered since this happened from people we barely know. We will probably be moving away from this state and paying taxes and working somewhere else soon. It is a shame that certain politicians couldn't get past the need to prove a point about being against 38 Studios and see they were harming their state in the long run. I mean 38 Studios was already here and the way I see it anything that could be done to make it a success would only benefit Rhode Island. As it stands, there are close to 300 very talented people dispersing all over the country and out of Rhode Island. There is an empty building with no game to be sold and a bunch of equipment that will not come close to paying for what is owed more than likely. And worst of all, there are some great people here in Rhode Island that will not benefit from the boost in economy.
My husband is interviewing daily thanks to an amazing industry trying to make up for what has happened. He is a talented man, who feels somehow responsible for moving our family into this mess and wishes he could have saved this company and every person at 38 Studios jobs. He is just trying to take away what lessons he can and move on.
Me? I blame a company named 38 Studios and all of their executives for moving so many families while knowing they weren't paying bills, weren't going to hit their dates, and were running out of money. Learn this lesson from our struggles so you never have to experience it first hand. Protect yourself and family any way you can, read the small print, and realize no matter how big the company is if they run out of money there is very little you can do to get what is owed to you.
I'm afraid that is an all too common occurrence... My heart goes out to them and makes me give careful consideration to staying in the industry if my current job ever dries up. I've been here for 6 years and its a great job but things don't last forever.
As much as I love what I do, I can't put my family through something like that.
Indeed. It's worrying to think that some folks may not find their feet for some time.
It's also an example of why you make sure you get that contract well in advance and read it through before you sign it (and get a lawyer to look over anything you're not sure of). Here in the UK you have to have this time to take it in by law.
That story above basically echoes everything I have made my family endure the last 3 years until I landed here at Treyarch. It really is crushing. I hope they find something soon.
It's also an example of why you make sure you get that contract well in advance and read it through before you sign it (and get a lawyer to look over anything you're not sure of). Here in the UK you have to have this time to take it in by law.
Here is a post from another forum that sums up why I think this "you should have known better" attitude is incorrect.
The thing is though, having been in this situation myself, you can't just say "Well, this seems a little bit risky, so I won't do it."
You are being reassured by a large company of 350 people that this is OK, and that it's required for employment there anyway, so it's easy say "Well don't do it then", but if you need the job and it's the only one you can get, and it solves a bunch of immediate problems, then you do it.
It's so easy to back seat this and say "Well, that seems inherently risky, why did you do it?" with no understanding of the uniqueness of the situations you are when you make that decision. You don't KNOW that company is going to go out of business; indeed, it's getting loans from all over the place and buying other companies and looks like it's doing well. Had I been in the same situation (and indeed, I have been), I would have done the exact same thing.
The fact that there is no safety net is neither here nor there; you can't make a decision on that because most of the time, there's not really a decision TO make. It's either take the job and survive, or be wary of any risk and never take any job.
I totally get where she is coming from. I don't think there's actual malfeasance on any of the 38 studios directors per-se, but there is MASS incompetence and refusal to look facts in the face. And their employees were put in the difficult position of underwriting those refusals to look facts in the face, often without even knowing they were, which is completely inexcusable.
As is often the case, it's those who don't have the power to hit back (or have actively had that power removed by the turn of events) who pay the heaviest price. I highly doubt that Ex-CEO is going to worry about where her next mortgage payment is coming from.
Personally, what annoys me about this stuff is our society's insistence that contracts trump anything. As if as soon as you put ink on paper, you validate any kind of behavior. Sometimes it feels like people would sell their soul to the devil just because it's written somewhere.
Like in this case, it says in the contract that the people are responsible if the company doesn't pay. So what? Just because it's written that doesn't make it right. I think any self-respecting judge should simply ignore that part. Of course that's not going to happen... But still, I wish it would.
It mostly boils down to 2 types of decision making processes that don't always connect...
...and people losing track of the larger ethical questions and really wanting to help the person right
in front of them which actually ends up working out badly for all involved most of the time.
Toss in a politician who can't be trusted and who isn't interested in helping anything that could be used as a talking point against him in the next campaign cycle and you have 38...
It mostly boils down to 2 types of decision making processes that don't always connect...
...and people losing track of the larger ethical questions and really wanting to help the person right
in front of them which actually ends up working out badly for all involved most of the time.
Toss in a politician who can't be trusted and who isn't interested in helping anything that could be used as a talking point against him in the next campaign cycle and you have 38...
Just finished listening to this. Super interesting article.
"You don't KNOW that company is going to go out of business"
that is an extremely risky mindset to have in any industry right now - it's better to operate under the idea that you don't know the company is going to stay in business.
That's all fine and dandy, but when the bosses are blowing continual sunshine up your ass about how great everything is while they're defaulting on all of their loans, it's not the victim's fault that they were put over a barrel.
It's always best to look out for yourself and keep some caution, in any aspect of life. That doesn't make what 38 did reasonable, just, honorable, ethical, or most likely legal, its beginning to sound like.
Blaming the victim is never a justifiable stance to take.
That's all fine and dandy, but when the bosses are blowing continual sunshine up your ass about how great everything is while they're defaulting on all of their loans, it's not the victim's fault that they were put over a barrel.
It's always best to look out for yourself and keep some caution, in any aspect of life. That doesn't make what 38 did reasonable, just, honorable, ethical, or most likely legal, its beginning to sound like.
Blaming the victim is never a justifiable stance to take.
That's the problem, victim blaming is the new thing that people seem to be doing because we want to see others burn and suffer, hence why all this issues are becoming more dragged out then before.
Simply put, 38 Studios was a quick way for the city to up it's status on how many peeps it had employed, on a political level. Sad to see that bleeding out to your peeps who didn't deserve it.
And c'mon, USA's regulations can go and suck on the dick-cheese of a menopausal Valkyrie romping a horse, because throwing the peeps under the bus at this point financially is a dick move.
Schilling said an investor “at the end” promised to write a check for $15 million to $20 million to salvage 38 Studios if the state of Rhode Island agreed to give the company $6 million in tax credits and renegotiate the loan guarantee so the investor was first in line to be repaid. “If that happened, he would come in and save the company,” Schilling said. But the state refused.
Really is a shame if they were so close to pulling through.
I honestly don't understand why anyone would think this part: "...renegotiate the loan guarantee so the investor was first in line to be repaid...." is something the state should have done? That is just RIDICULOUS. That would mean that the state basically would never get any of their money OR any of the physical assets, which they now own as well as the IP and anything else possibly salvageable.
I had a friend limp back to the west coast from that disaster - his first job out of school. no pay for a month and now owes moving fees. Says he paid $5000 to leave everything he owns in RI - directly after proposing to his girl.
The question remains, how much can you possibly get for an incomplete MMO and another with no proven track record?
If a developer was really interested in purchasing these assets, wouldn't it require that same developer to strip everything down and rebuild it from scratch?
Seems it would be cheaper just to start a new project, and let the 38 stuff fade to dust.
On the Epic front though, why do I get the feeling that they just picked up a AAA team that was out of work and started something amazing?
Replies
I'm pretty sure the 8 million was an additional sum. 38 was supposed to be able to make the game with the 75 million loan, and has gotten 50 million of it, but the ship date slipped, and there is far more than the final 25 million in monthly burn left, even with 8 million more (which as was pointed out, would end up being less than 8 million after they were sold. They were essentially film tax credits, not really meant for videogames, but was a possible shoe-horn solution). I also believe the 1 million owed the state was an interest payment, something they had to know was coming, and if you haven't planned to have the funding for something that expected, it's worrisome.
The likelihood of another publisher picking up ever once they got the loan was low. why would a company like EA or really anyone buy on when there is around 75-100 million (interest remember) owed to the state of RI before the publisher could touch a cent. It was poisonous for 38 and RI.
I think Knomad layed it out excellently. Kurt's political affiliations are well known, and it's pretty easy to believe he and any management he'd hire would lay the blame on RI rather than themselves. The politicians wouldn't have had a chance to do anything if 38 had finished the game with the 75 million like they were supposed to be able to.
My contention though is that 38 studios basically put a gun to his head, getting to last million before they approached their main lender, and the entity that had most capital riding on their success. The 8, which would have been a drop in the 75-125m bucket more they needed (I'm citing figures i've seen saying you need 180m minimum for a new MMO), and kind of irrelevant TBH. Though if I was 38s leadership I'd probably do the same thing and blame someone else so as to not draw my employee's scorn.
I don't think the politicians are blameless, but I do think they bear significantly less of it than the CFO, or Mr. Schilling.
This is the part that makes me angry. Studios close and developers get laid off all the time - it's one of the risks that comes with the industry. It sucks, but guys can prepare for that. But telling someone that not only have they lost their job, but their insurance just got whacked at the same time and that a second mortgage gets tossed back to them like a hot potato... that's Just Not Right. I can't defend any employer that puts its staff in that kind of situation. I bet more than one former employee of 38 Studios is going to have medical bills he/she can't pay or have a home foreclosed on because they suddenly have an extra mortgage payment they can't make because of this.
https://www.dropbox.com/sh/ecgvyvdlybq2xku/TRMprbX_iV
The end game aspect from RI politicians does sound like dirty politics, but the point remains that 38's management allowed it to get to the 11th hour of financial instability. Why weren't all these supposed investors (who the state investing advisor denies exist and Schilling won't name) brought into talks months and months ago well before there was any danger of running out of money? That 75 million loan was supposed to finance the *entire game* was it not?
That 1.1 million was always due, not granting a deferment is a dubious move, but remains legal, and could have been planned for *years* in advance.
Easier to read version, fwiw
http://ireader.olivesoftware.com/Olive/iReader/ProvidenceJournalWithAuth/SharedArticle.ashx?document=TPJ\2012\05\29&article=Ar00100
'38 Studios Spouse' speaks out
As much as I love what I do, I can't put my family through something like that.
It's also an example of why you make sure you get that contract well in advance and read it through before you sign it (and get a lawyer to look over anything you're not sure of). Here in the UK you have to have this time to take it in by law.
Don't agree with this though, anyone who has been laid off with a family to care for is in a tough situation.
What a bad situation for them : \
Here is a post from another forum that sums up why I think this "you should have known better" attitude is incorrect.
Like in this case, it says in the contract that the people are responsible if the company doesn't pay. So what? Just because it's written that doesn't make it right. I think any self-respecting judge should simply ignore that part. Of course that's not going to happen... But still, I wish it would.
http://www.npr.org/2012/05/01/151764534/psychology-of-fraud-why-good-people-do-bad-things
It mostly boils down to 2 types of decision making processes that don't always connect...
...and people losing track of the larger ethical questions and really wanting to help the person right
in front of them which actually ends up working out badly for all involved most of the time.
Toss in a politician who can't be trusted and who isn't interested in helping anything that could be used as a talking point against him in the next campaign cycle and you have 38...
Just finished listening to this. Super interesting article.
that is an extremely risky mindset to have in any industry right now - it's better to operate under the idea that you don't know the company is going to stay in business.
It's always best to look out for yourself and keep some caution, in any aspect of life. That doesn't make what 38 did reasonable, just, honorable, ethical, or most likely legal, its beginning to sound like.
Blaming the victim is never a justifiable stance to take.
That's the problem, victim blaming is the new thing that people seem to be doing because we want to see others burn and suffer, hence why all this issues are becoming more dragged out then before.
Simply put, 38 Studios was a quick way for the city to up it's status on how many peeps it had employed, on a political level. Sad to see that bleeding out to your peeps who didn't deserve it.
And c'mon, USA's regulations can go and suck on the dick-cheese of a menopausal Valkyrie romping a horse, because throwing the peeps under the bus at this point financially is a dick move.
Really is a shame if they were so close to pulling through.
Honestly, it sucks big time. I have no idea what the State wanted from them at that point.
That is just not a smart business move, at all.
...hail to the suits.
Rhode Island takes possession of 38 Studios assets
38 Studios burned through $133M before going bankrupt - report
Why Schilling didn't tell his staff about 38 Studios' demise
Schilling owns up to his many mistakes at 38 Studios, blindsiding employees
http://epicgames.com/news/epic-games-announces-impossible-studios/
If a developer was really interested in purchasing these assets, wouldn't it require that same developer to strip everything down and rebuild it from scratch?
Seems it would be cheaper just to start a new project, and let the 38 stuff fade to dust.
On the Epic front though, why do I get the feeling that they just picked up a AAA team that was out of work and started something amazing?
This warms the cockles of my heart.
http://kotaku.com/5937855/the-amalur-mmo-was-fun-says-former-employee-and-here-are-three-gameplay-videos-to-prove-it/gallery/1
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