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Default 38 Studios - $1.125M Default

May 16th, 2012, 23:04
Joystiq reports a meeting to resolve 38 Studios' failure to pay the first $1.125M of their Rhode Island state loan - and 38's request for more money - didn't reach an outcome:
Today's emergency meeting by Rhode Island officials to determine what they are going to do about Curt Schilling's 38 Studios has concluded with officials freezing like deer in headlights. Nothing happened.

Rhode Island's Economic Development Corporation will take no immediate action to aid the developer, following a closed-door meeting attended by Governor Lincoln Chafee and Schilling, who asked for additional help to save the company. Schilling refused to answer press inquiries and officials wouldn't declare how much money the studio is seeking.

"How do we avoid throwing good money after bad?" Chafee is quoted by the Associated Press as saying after the three-hour emergency meeting finished.
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May 16th, 2012, 23:04
Wow this looks like a real business disaster behind the scenes.

If I'm right but there is no wife around to acknowledge it, am I still right?
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May 16th, 2012, 23:13
Ah ouch so they're not even making their first loan payment. A shame, I probably would have enjoyed the game more if they had paired down the more repettitive content and made a somewhat smaller but more focused game and world in total. Basically they could have probably made the game more cheaply and better at the same time.

A lot of their poor sales figures though might be related to the fact that the first quarter of 2012 has been a pretty awful quarter for AAA game sales.

http://www.forbes.com/sites/insertco…-year-but-why/

With April sales specifically now being analyzed as down 42% over last year.

http://www.forbes.com/sites/erikkain…ging-consoles/

Part of the decline is mentioned as related to the aging console hardware though the lack of new releases is also to blame. The current sales environment might have contributed to KoA:R's poor sales despite heavy marketing. Overspending on marketing (poor return on investment for marketting dolars) may also be partly to blame for the massive shortfall resulting in them failing to pay even their first loan payment. Defaulting on their first loan payment is pretty rough for the people of Rhode Island though as it means they are looking to be shafted on the entire loan ammount at this point, depending on what they can get out of the company if they do attempt to collect during bankruptcy or something.
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May 16th, 2012, 23:15
I wanted to like the game, but the demo put me off. It wasn't dreadful, just nothing amazing that I wanted to buy at full price.

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May 16th, 2012, 23:29
I bought, played and enjoyed KoA. It wasn't the deepest or most varied open-world game I've ever played but I felt like I got my money's worth out of it and then some. I'd like to see where they'd take it given a chance to make a sequel.

That said, the thing that boggles me about this is Lincoln Chafee suddenly worrying about throwing taxpayer money down a hole. *Now* he has a problem with it?
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May 16th, 2012, 23:41
Originally Posted by khaight View Post
That said, the thing that boggles me about this is Lincoln Chafee suddenly worrying about throwing taxpayer money down a hole. *Now* he has a problem with it?
Yeah - these are development loans. When it looked like it was a good investment it wasn't throwing taxpayer money down a hole, it was funding what appeared to be a good economic bet as per the mission and charter of such development banks. Continuing to throw money at a project that has failed to make even its first scheduled repayment is a different animal altogether.

Though the financial failure of the bet does mean that it was most likely a case of misjudging the prospects of the "visionaries" as they like to call themselves. They probably overestimated their business savvy and capabilities based on the big names they were able to bring to the table. So a bad bet in hindsight, but a far cry from continuing to throw money into a sinking pit hoping to get something out of it. That's the difference between misjudging an investment and falling prey to the sunk cost fallacy (the same thing that screws gambling addicts in the end.)

It does go to show why many state funded development banks tend to avoid such large bets for startups though and why many multi-million dollar kickstarter projects mention being unable to get this sort of funding themselves. Such development banks should generally avoid making such large loans for first time big projects so they are better able to distribute the risk in their portfolio; this is particularly important since this sort of development financing is inherently very high risk to begin with.
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May 17th, 2012, 00:54
I also wanted to like that game, but when I learned about endless mob respawning and a sidequest bug that removes quicktravel from the game that was not fixed before first DLC was released, I decided not to buy it.
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May 17th, 2012, 01:58
Moral Hazard, the Reckoning.
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May 17th, 2012, 04:05
Oh boy, another idiot Republican taking massive government handouts at the same time as actively campaigning against government spending and now he can't pay his debts so the state has to eat it.

What a repugnant scumbag.
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May 17th, 2012, 04:11
Originally Posted by regomar View Post
Oh boy, another idiot Republican taking massive government handouts at the same time as actively campaigning against government spending and now he can't pay his debts so the state has to eat it.

What a repugnant scumbag.
While Curt Schilling has actively campaigned for Republican candidates in the past, I don't think he's ever had a problem with what is effectively the foundation of state-backed small business and economic development loans. I suppose his backing of Scott Brown might be seen as hypocritical given some of the rhetoric involved, but I think the problem of this loan and his inability to live up to the terms of the development board and repayment plan aren't a political issue in and of themselves. Well that is unless perhaps there were evidence that the loan was made in part due to political favoritism and thanks for his past support; though I don't think there is any evidence of such cronyism at this point.

Basically it's too early to be trying to make political hay out of this and it seems a bit crass to be shoving what information we do have through a partisan filter. Perhaps there is cause to question the wisdom of state-backed loans of this size going to ventures as speculative as this one (though the names attached to it would have gone a long way to making it seem less risky for investors who actually did do their research.)
Last edited by jhwisner; May 17th, 2012 at 05:00.
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May 17th, 2012, 05:15
I really hope this doesn't mean the end for these guys, even with flaws their first game was great for a first title. it would be a shame to lose another rpg company.

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May 17th, 2012, 05:21
Originally Posted by rune_74 View Post
I really hope this doesn't mean the end for these guys, even with flaws their first game was great for a first title. it would be a shame to lose another rpg company.
Yeah the game got very boring for me by the end, but it showed some definite promise. It would be a shame if we didn't get to see what they could do building on the things they got right and learning from the things they didn't do so well. Sad that the business management side of things so overextended themselves on a first title.
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May 17th, 2012, 06:30
The game sold something like 500K copies and they can't pay their loans? What were they expecting?

As for the game itself, I bought it and managed to finish the game, but it was rough because it was probably the most boring RPG I've played in at least 10 years.
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May 17th, 2012, 06:33
Originally Posted by Stingray View Post
The game sold something like 500K copies and they can't pay their loans? What were they expecting?

As for the game itself, I bought it and managed to finish the game, but it was rough because it was probably the most boring RPG I've played in at least 10 years.
Yeah come to think of it, it sounds like they might have had a bit of trouble repaying the loan even if they sold more than a million copies if the loan payments were intended to start today on a 75 million dollar debt.
Last edited by jhwisner; May 17th, 2012 at 07:03.
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May 17th, 2012, 08:59
They sold 410.000 retails in US, not including Europe, AMEA and digital sales. It should be more than 1 Mio. copies.

Rhode Island now owns all of 38 Studios' IPs.
http://www.joystiq.com/2012/05/16/rh…tual-property/

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May 17th, 2012, 10:02
Originally Posted by khaight View Post
I bought, played and enjoyed KoA. It wasn't the deepest or most varied open-world game I've ever played but I felt like I got my money's worth out of it and then some. I'd like to see where they'd take it given a chance to make a sequel.
I'm in complete agreement.

The build up from the development team was excellent as well - the regular Q&As were some of the best I've seen and gave great insight into the process and game. But as I mentioned back then as well, the game marketing just didn't seem to be penetrating large audiences - other gaming forums I mentioned the game on had never heard of it
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May 17th, 2012, 12:31
I got 60 hours of enjoyment out of this game before the sheer amount of unimaginative repetitive questing got to me. A shame I guess.
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May 17th, 2012, 13:16
Originally Posted by Avantenor View Post
They sold 410.000 retails in US, not including Europe, AMEA and digital sales. It should be more than 1 Mio. copies.
The game sold more than 1 million copies worldwide (1.25m according to some stats I found), which technically make this a "success", but I suspect most of the money went into EA's pocket.
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May 17th, 2012, 13:19
Does a game need to be a Skyrim to be a success these days?

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May 17th, 2012, 14:21
Originally Posted by darklord View Post
Does a game need to be a Skyrim to be a success these days?

Daniel.
It does if it costs as much to make. KoA did sell ok. It just didn't sell well enough to offset the ridiculous amount of money they spent between making it and start dev on the mmo.
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