38 Studios is Working on a Game, Apparently, Afterall (Kingdoms of Amular)

[HaemishM]

He says 38 Studios didn't see any money out of Reckoning's sales and hadn't expected to - the money was committed to EA, which had paid $35M up front for it.

If true, not only is the EA exec in charge a FUCKING IDIOT, the people at 38 who signed that contract are COLOSSAL FUCKING IDIOTS. Sure, we'll take a lump sum for the game and if it sells 10 billion copies, we get fuckall from it. WHY NOT? WHAT COULD GO WRONG??

He said that on May 12 they learned that the president of "a video-game publishing company" (clearly EA) had approved a $35M deal for the sequel to Reckoning, but it fell apart with Chafee's public comments. Along with discussions with another publisher for $55M for Copernicus, and with a VC for additional financing.

He blames Rhode Island:

The Governor's statements were abso-fucking-lutely appropriate. If you have to delay a fucking loan payment just to make payroll, your company is not solvent and is in danger of becoming NOT SOLVENT. If I'm an investor thinking about giving you $35 million AGAIN to produce a game and I hear you can't make payroll, I'm not giving you a fucking dime either. As a governor who is supposed to be responsible for wisely using tax revenue, I wouldn't give more money to a company that can't make payroll. Let's say they sold those $8.2 million in tax credits for $8.2 million. That buys them two months of operation then they are right back in the same boat because that MMOG ain't coming out in two months.

"I'll gladly pay you on Tuesday for a hamburger today."

No, fuck you, Blimpie. Homey don't play that.

[Engels]

I wonder why they went with EA in the first place. I thought Mr. Bootstrappy would want to go indie, or at least a vestigial semblance of indie, via Steam, for instance.

Well, the silver lining is that one more republican may have learned that some people have problems making rent without a government handout :P

[Lantyssa]

I'm surprised you think he learned anything.

[Engels]

emphasis on 'may'

[jakonovski]

I'm pretty sure the Schilling's operating on IOKIYAR.

[IainC]

I had heard that EA was absolutely not interested in publishing a sequel to Reckoning. Also I heard somewhere that the publishing deal for Reckoning was a 90/10 split publisher/developer. So BHG would have got some cash from continued sales of Reckoning but not even close to enough to fund an operation burning $4m a month even if it was a breakout hit.

[UnSub]

My favourite bit of that interview:

At the April meeting with Chafee, says Schilling, 38 Studios’ executives said they needed to use $8.7 million in 2011film tax credits to provide that financial bridge and to meet the May 15 payroll.

They also discussed the need to lure private investors by giving them “senior security interests” in 38 Studio’s assets, most notably its intellectual property. That meant Rhode Island taxpayers would take a back seat to any private investor — something that Schilling says always was going to be necessary and had been discussed previously with the Rhode Island Economic Development Corporation, which issued the job-guarantee bonds.

Proving that no-one learns anything, 38 Studios were looking to hock the IP - that thing they thought was a big thing for their company and fans - for cash to keep things afloat. All aboard the Flagship, yet again.

38 Studios were so cash poor they were selling everything, getting other people to pay their debts, unable to meet loan payment requirements, yet it is somehow RI's fault for not quietly slipping them more money under the table.

[HaemishM]

That would have totally invalidated the goddamn loan guarantee if a private investor had any stake in the IP. I'm not surprised Chafee told Schilling to go fuck himself. The IP was what 38 used as collateral for the fucking loan.

[Raguel]

So to recap:

EA committed 35 million
Curt used 38 million + 12 million in personal loans
RI provided 75 million (~40 million actually received)

That's past WOW and into SWTOR territory. I don't understand how someone didn't see this coming.

[satael]

If true, not only is the EA exec in charge a FUCKING IDIOT, the people at 38 who signed that contract are COLOSSAL FUCKING IDIOTS. Sure, we'll take a lump sum for the game and if it sells 10 billion copies, we get fuckall from it. WHY NOT? WHAT COULD GO WRONG??

Well, for 35m you probably could actually pay off the cost of buying BHG (THQ would have closed it if noone was going to buy it) and pay the salaries of the 70 employees 38 Studios kept from BHG for a while so I wouldn't call the people at 38 Studios idiots...

[Chimpy]

They may have made an awesome place to work, with amazing benefits. But the problem is they couldn't afford said setup and ran out of cash. I can understand being unhappy at losing a sweet deal, but I do find it a bit odd that all the ex employees seem to be blaming the state for the company failing to pay them.

I would venture a guess that a lot of the people who went to work for 38 probably share Curt's political viewpoint to some extent. And that political philosophy is to spout "personal responsibility" when someone else runs into trouble, and to blame the big bad government when something goes wrong for you.

I know for a fact that I would probably not apply to a place that I knew the founder was a blowhard wannabe-politician with views that are diametrically opposed to my own.

[IainC]

If Salvatore is to be believed then apparently most of the workforce were a long way to the left of Curt's political beliefs. Then again, I guess that anything economically left of the Ferenghi would be left of Curt's political beliefs.

[Numtini]

If the deal was that bad, why make KoA at all?

Then why not, the whole thing seems to be idiocy.

[kildorn]

Political leaning doesn't seem to matter here. People are just bagging on Curt because he was pretty public in his beliefs and seems to actually follow none of them.

I'm just shocked people are assigning blame outside the company when their damned checks bounced. I just can't follow that logic. Did the feds freeze your company's accounts? No? Then it's not the government's fault that your paycheck didn't clear.

[HaemishM]

If the deal was that bad, why make KoA at all?

Apparently, it was already in development when 38 bought Big Huge Games, they just repurposed it to fit the Copernicus IP.

I'm just kind of flabbergasted at the numbers being thrown around about these games and this development studio. $35 million from EA for an unproven IP from a neophyte dev team headed by a baseball player. They sold 1.2 million units - to break even on that deal with that many units sold, they had to be getting almost $30 per unit sold or thereabouts? On a $60 game? I suppose it's not out of the realm of possibility for them to get a deal like that from the retailers, but that's just breaking even. If the video game industry is anything like the book industry, they can expect to get 50% of the revenue at best. I'm thinking EA broke even on the deal, which would make it even less likely they'd sign off on a sequel for the same amount of money, especially if they got a hint that the dev studio couldn't make payroll.

As for the 38 Studios end of it, if they got a flat fee with only 10% of the backend, how the fuck were they expecting that to help with the development of Copernicus? That's not nearly a lucrative enough deal. At $3 a disc (10% of the $30 revenue EA got), that's only $3 million - which is not enough to fund an entire month of the MMOG development. I just don't understand how anyone signed off on those deals.

[kildorn]

The BHG buy makes no sense with the deal bits we know. It was a huge chunk of cash to buy a company and keep it's employees/payroll expenses. All to publish with a shitty recurring revenue stream, and some bizarre marketing tie in later?

The game was okay, and worth publishing. But I can't see what 38 was trying to get out of the deal besides a higher burn rate on their remaining funding.

[Outlawedprod]

http://espn.go.com/boston/mlb/story/_/id/7982623/gov-lincoln-chafee-curt-schilling-wrong-blame-rhode-island-woes

Bill Thomas, 38 Studios president, told The Journal that the state was notified of the layoffs on May 25 because the company "wanted our employees to hear it from us first."

Fukkin' LOLd

[Soln]

None of this story makes sense or adds up.  I don't fully believe RI, but don't believe anything at all from CS.  There was way too much money in this deal that got lost and used.

[Falconeer]

4 millions a month. For a game. Fuck you, it makes me so angry. The fact that said game doesn't even exist is a only a rage bonus.

[shiznitz]

Also, after watching and reading a bit more on this:

What kind of Kool-Aid did they have in house? I am flabbergasted by some of the loyalty. Raise your hand if you think business is about more than money. Anyone? Bueller?

Only when the business is philanthropy.

[Numtini]

4 millions a month

Can you imagine what you could do in terms of building a game development hub if you took that and gave it to little indies putting together games in the 500k to 2m budget range?

[Ingmar]

It's just utterly baffling to me how they could burn through so much. It has to just be sheer incompetence at an operational level.

[Trippy]

It's really not that hard with that many people employed. I've mentioned this before but the old rule of thumb* in the Bay Area for VC-funded startups was a burn rate of $10K per person per month. This included salary, benefits, facility costs, overhead, etc.

* I no longer follow the VC business as closely as I used to so I don't know what the number is these days

[Tannhauser]

http://espn.go.com/boston/mlb/story/_/id/7982623/gov-lincoln-chafee-curt-schilling-wrong-blame-rhode-island-woes

Bill Thomas, 38 Studios president, told The Journal that the state was notified of the layoffs on May 25 because the company "wanted our employees to hear it from us first."

Fukkin' LOLd

Yeah, your employees wanted to hear it from you via a terse email.    Class act management.

And these film credits?  Nice work getting that tax credit 38 Studios.  Nice and bootstrappy there.

[Outlawedprod]

http://www.youtube.com/watch?v=20KsVav96wQ#t=1109s

I can tell you that when we launch Copernicus we will change the mmo space forever.

[Numtini]

The BHG buy makes no sense with the deal bits we know. It was a huge chunk of cash to buy a company and keep it's employees/payroll expenses. All to publish with a shitty recurring revenue stream, and some bizarre marketing tie in later?

Another thing that strikes me as odd about the BHG purchase is they didn't move the company to RI to meet the loan's "jobs created in RI" requirements (which virtually required an unsustainable burn rate), nor that I could see did they have any plans to do so.

[Ingmar]

It's really not that hard with that many people employed. I've mentioned this before but the old rule of thumb* in the Bay Area for VC-funded startups was a burn rate of $10K per person per month. This included salary, benefits, facility costs, overhead, etc.

* I no longer follow the VC business as closely as I used to so I don't know what the number is these days

I guess part of my WTF is the number of people they had in the first place - I see that they had a requirement to create X jobs but that just raises more questions about why they agreed to that or how they thought they could pay that many people for as long as it would take to actually get the product out the door.

[Rendakor]

I think someone was fed too much "You can be anything you want when you grow up" when they were little.

This is an unsurprising attitude from someone who literally got rich playing sports.

[UnSub]

It's really not that hard with that many people employed. I've mentioned this before but the old rule of thumb* in the Bay Area for VC-funded startups was a burn rate of $10K per person per month. This included salary, benefits, facility costs, overhead, etc.

* I no longer follow the VC business as closely as I used to so I don't know what the number is these days

That also roughly works out for 38 Studios (i.e. $4m / month divided by 389 employees = $10.5k).

Other publicly available information indicates the average salary at 38 Studios was in the realm of $88k per year and I suspect they were actually paying rent on the the full 100k-odd sq ft building they were housed in.

From what 38 Studios people are saying, it was a dream location to work. High salaries, apparently a full insurance package, lots of talented staff and a management team that backed them up. It looked like people really liked it there. Which makes it hard to switch from one day, "This is the best job in the world!" to "They were lying to my face."

Also: this thread title needs a change. 38 Studios is working on a drama right about now.

[Falconeer]

It's really not that hard with that many people employed. I've mentioned this before but the old rule of thumb* in the Bay Area for VC-funded startups was a burn rate of $10K per person per month. This included salary, benefits, facility costs, overhead, etc.

* I no longer follow the VC business as closely as I used to so I don't know what the number is these days

Does that mean, for example, that those 250 secretly employed guys and girls at Zenimax Online have been burning 2.5 millions a month for the past few years? Even if they had been working on Elder Scrolls Online for two years (and it has been hinted that it's more than that) it would be about 50 millions. So far. Does it make any sense? Or were they using disposable diamond keyboards to code stuff at 38 Studios.

Also, I know nothing firsthand about developing big huge AAA MMORPGs, but having 400 people working on it shouldn't speed up the development somehow?

[Yoru]

Also, I know nothing firsthand about developing big huge AAA MMORPGs, but having 400 people working on it shouldn't speed up the development somehow?

Depends on a lot of factors. In the early stages, more hands makes you move a lot slower. Remember that more hands usually equals more process and more bureaucracy, regardless of the company.

Later on, when you're on to the stuff that requires a huge staff, more hands can speed you up. Parallelizable stuff like art, marketing and web presences come to mind. This is why the general game dev cycle is project inception > small core team for a proof-of-concept/first-playable > slightly larger staff for a vertical slice > go wide with a huge team for beta/release > mass layoffs of non-senior talent. Successful MMOs get around the last phase (sometimes) by repeatedly releasing expansions and updates, funded by your subscription/microtransaction money.

[Yoru]

4 millions a month

Can you imagine what you could do in terms of building a game development hub if you took that and gave it to little indies putting together games in the 500k to 2m budget range?

Sadly, that doesn't work as well. You generally want a few large studios to anchor a hub; they (ostensibly) provide job security and (definitely) provide training and career-entry opportunities. Indies tend not to be able to accept too many recent graduates or provide many entry-level opportunities. The indies tend to be composed of folks with a few years under their belt who've broken off from the larger studios to go their own way.

Rhode Island's basic idea was sound (attract one large studio in the hopes of attracting a few more), but their implementation sucked.

[HaemishM]

They attracted the wrong studio. A game dev founded by an ex-baseball player/celebrity makes great headlines, but wasn't a sound investment. If they wanted to create a hub for video game development, they'd have done better attracting one of the major big bucks studios like EA or Activision to locate a studio there. The game might have sucked, but it would have been a safer bet.

[Mrbloodworth]

They could have gone with Turbine.

[Stormwaltz]

A big team can be useful if you're at the point where you know exactly what you're doing and need bodies to crank out art and content. Any game is benefited by the former, and themepark MMORPGs in particular require vast amounts of the latter.

My opinion only, of course.