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

[Fabricated]

Starting to think that whole demotivational poster that says, "It could be that your only purpose in life is to serve as a warning to others" might be on to something. Good god.

[Lantyssa]

Did he not know the meaning of the word BUDGET?

Given he was a major pro ball player with an income well beyond the means of most Americans?  Probably not.

[shiznitz]

I have to admit that I defended what I thought was an honest effort to build something by a guy with money to spare. 

My Lord.  What a completely delusional moron.  It is one thing to want to make a video game because you are filthy rich and have nothing to do.  It is another thing to try and run the whole company when your resume includes nothing but throwing a baseball for 20 years.

Magic Johnson made more money from his business ventures than he did as an athlete.  It can be done right.

[Paelos]

I think the employees got screwed at the end, but I don't really feel that bad for most of them (except the ones that got hired in 2012). When you look at what he paid his people in perks and benefits from 2007-2012, they had it pretty good for a long time.

Curt was foolish, and he ignored warning signs. Still, down to it's core, it never should have gone this far. The reason this thing hit the epic amount of failure that it did can be put squarely on Rhode Island's shoulders when they not only gave money to a failing product, but also REQUIRED that he hire even more meaningless staff. If that money never comes in, this is just a small story about how a guy fucked up badly as an athlete in business. Not a complete destruction of several economies.

[IainC]

The reason this thing hit the epic amount of failure that it did can be put squarely on Rhode Island's shoulders when they not only gave money to a failing product, but also REQUIRED that he hire even more meaningless staff. If that money never comes in, this is just a small story about how a guy fucked up badly as an athlete in business. Not a complete destruction of several economies.

I have a hard time buying that version for a number of reasons. Firstly, the Rhode Island money was specifically to bring jobs to the state. That whole chest of money was part of a special fund that was intended to be traded in return for job-cretion guarantees. Initially there was a maximum amount that any single company could be eligible for but Schilling went to a bunch of power lunches and dazzled the RI guys with spreadsheets showing how WoW had made all the money that has ever existed therefore this was a totally safe bet. So, based on the gushing reports from the Economics committee, the previous governor took the brakes off and awarded almost the entire fund to 38 Studios.

So, while they certainly didn't do nearly enough due diligence on the investment, but the staffing requirements were up front. RI civil servants don't know about making games but Schillings directors should have and they should absolutely have looked at staffing levels vs project plans and realised that they couldn't afford to hire all those people. It's not as though RI held Curt down and forced money into his pockets, he knew what the money was for and what was expected, if he or his board felt that the requirements weren't achievable (and they absolutely should have) then they could have turned it down and sought funding from elsewhere.

The only ways in which it makes sense to take that deal from 38 Studios point of view is if either they had no clue what their project plan looked like and assumed they'd be finished much sooner than they were or if Curt was positive he could tap the state for more cash to save the company once the money ran out.

[Paelos]

Curt was running out of money. He would have taken free cash from the Devil himself if it was offered.

The idea of the government offering money to a startup corporation with the covenant that they are required to hire more workers is an inherently flawed economic idea. There was no actual product. There were no concrete sales. There was no equity cut of the company. Somebody, at some point, received a huge kickback, bribe, incentive, or promise to get this deal done since it doesn't make any sense on paper.

[kildorn]

From the article, it actually sounds like it was entirely poorly thought out by both Schilling and the prior Governor's office. The current Governor saying Fuck That Shit actually comes across as the most reasonable adult in the whole bullshit pile. Curt's just stuck trying to blame him when even before the comments the company was failing to pay bills, and from prior commentary in the article he always walked out thinking he had a deal ready to go with investors. He was in the start of a deal making offer with two other companies. He THOUGHT he had ink waiting to dry on the deals. This isn't a problem with the RI government or the Investors, it's a problem with Curt thinking raw willpower makes shit happen.

He still refused to responsibly wind down the company or admit that they had fucking problems. I fault him entirely for the implosion instead of just another company dying. He set the company up to fail by both appointing family to key business roles, and by taking a deal he clearly couldn't actually uphold (bad loan for RI to offer, bad loan for Curt to take. You can blame the bank for offering me a car loan, but you can ALSO blame me for not paying it and acting shocked that it wasn't just free money).

I also fault the C level staff for not going around him and at the very least leaking to the staff that they were fucking broke and not making payroll or paying benefits. That is not something any ethical person would let sit on the meeting room table as "let's just not tell them, kay?"

[shiznitz]

The other lesson in this is that 20% equity in a business worth something > than 89% equity in a business worth nothing.  I love how at the very end when it was clear there was no value, he was finally willing to give up equity.

[Paelos]

I also fault the C level staff for not going around him and at the very least leaking to the staff that they were fucking broke and not making payroll or paying benefits. That is not something any ethical person would let sit on the meeting room table as "let's just not tell them, kay?"

They missed payroll and told the staff they could stay home if they wanted in the interim. People chose to come in of their own volition.

Also, your point about the blaming the bank for making the loan is exactly what put us in the housing crisis. Banks are supposed to be the ones that understand the financial ramifications and requirements of their loans. When you make loans to people that have no real means to pay you back, even on paper, that's the bank's fault.

It's just as much RI's fault for loaning this company money completely independent of economic reality. I would bet a paycheck right now that the reason the deal got done was because one of those politicians got a sizable donation to their slush fund.

[kildorn]

They were not making payments before payroll bounced (health insurance, all of the benefits companies), and didn't say they bounced payroll until the day after it bounced. That's not responsible, that's "well, we're caught now because they've noticed their bank accounts didn't go up this week, guess we HAVE to say something"

And I'm not saying the old RI government isn't at fault for an idiotic loan. But I am saying it doesn't Curt immune to blame for taking a loan he knew he couldn't make the terms of. "It's this or close the company down" isn't a legitimate rock and a hard place. "It's this or I can't eat" is something pressing. A company folding is just something that fucking happens.

[Numtini]

They didn't even tell the staff their health insurance wasn't being paid, the staff only found out when someone's OB/GYN told her the insurance was cancelled and they'd need to make other arrangements for the next appointment.

What I took away was pretty much what I'd guessed. Schilling doesn't really understand that it's hard to earn money. Some of the stuff, like not understanding a work week, is kind of mind boggling. Wouldn't you pick that up from TV or your parents working? But of all the stuff in the article, for me the most damning thing was his desire to become Bill Gates rich and his apparent cluelessness that this would be difficult. I just can't get over that. This is like someone who's an 8 year old.

I always figured he was in charge not the CEO. He comes across like a newb small business owner: trying to run everything, playing favorites, overturning managers decisions, wasting money on stuff he doesn't need and skimping on what he does, eating up time with stuff he wants that's not on the production schedule. I worked in a pizza shop where the owner was like that and while I was reading the article I just kept nodding my head. But he just lost a couple of hundred grand of his parents money and cost a dozen people their jobs. Schilling literally ruined peoples lives and blew a hole in an entire state budget.

They should have been shopping for someone with pockets to take it over last fall and winding it down in January, not hiring people. To convince people to move across country at that point should be a criminal offense. Hearing him bellyache about being down to his last million is nauseating.

Great writing on the article. I love the way the author made the subtle connection between Schilling thinking that his pitches were bringing in the investors and the final claims that a white knight was moments away if Chaffee hadn't spoiled it.

[Paelos]

I guess I disagree that he ruined a bunch of his worker's lives. He ruined his own life sinking millions into a failed endeavor. The state ruined it's own budget by approving his loan. Meanwhile a large sum of grunt level people worked in an idyllic environment for years and years while getting pretty amazing perks.

Do we simply say he ruined their lives because during the last couple of months it crashed and burned? I guess maybe the case could be made for anybody that was hired away from a great job in 2012 and relocated, or for the people that are left holding the bag for their mortgages (I don't think that's actually legal, btw, what they said in that article). Even so, the article indicated there were still plenty of people that worked for Curt who defended him to this day.

Personally, I think he was a misguided fool who had never failed at anything before. He thought he had the Midas touch. I've seen this mentality with pretty much every real estate developer I've ever met or done business with, and the result when the market falls is always the same. They are leveraged to the hilt throwing good money after bad to escape the last deal they doubled down on.

[Ingmar]

I think you're letting him off too easy on the ruining lives front; the part where they're luring people across the country with relocation offers that they couldn't pay for I think gets awfully close to fraud. The only thing I can think of in defense of that is maybe he just didn't really know what was going on and other executives might deserve more of the blame, but even so, he's the guy in charge, he's supposed to know/understand what is going on.

[Amaron]

I guess maybe the case could be made for anybody that was hired away from a great job in 2012 and relocated, or for the people that are left holding the bag for their mortgages (I don't think that's actually legal, btw, what they said in that article).

Someone explain the bit about the mortgages.   Why do these people now have two?  Did 38 promise to sell their old house or something?

[HaemishM]

Curt was running out of money. He would have taken free cash from the Devil himself if it was offered.

The idea of the government offering money to a startup corporation with the covenant that they are required to hire more workers is an inherently flawed economic idea. There was no actual product. There were no concrete sales. There was no equity cut of the company. Somebody, at some point, received a huge kickback, bribe, incentive, or promise to get this deal done since it doesn't make any sense on paper.

Yes. That deal with RI got done because 1) Curt is a well-known celebrity and 2) he's an outspoken Republican backer and the governor was a Republican looking at re-election in shitty economic times. It was the worst kind of glad-handing influence politics, and it ought to be illegal if it isn't because they even got the law changed to make the deal happen.

Schilling took the Rhode Island money because he viewed it as free money where he didn't have to give up any equity. He didn't give two shits that the strapped state government would be on the hook for his fuckup, and he obviously didn't listen to the CFO who probably told him "We can't fucking hire that many people and still make a game."

[IainC]

I guess maybe the case could be made for anybody that was hired away from a great job in 2012 and relocated, or for the people that are left holding the bag for their mortgages (I don't think that's actually legal, btw, what they said in that article).

Someone explain the bit about the mortgages.   Why do these people now have two?  Did 38 promise to sell their old house or something?

Basically as part of the relocation package 38 Studios offered to buy the homes of new employees so that they could relocate to Mass/RI without having to sell in the middle of a shitty housing market. What actually happened was that they retained an agency to list the houses and take over the mortgages until they were sold. Of course they stopped paying this agency back around Christmas (even though they were still making new hires and offering them these terms). The houses didn't sell, and the agency handed them back to their owners complete with mortgages. Of course since that time many of the new arrivals had bought new houses so now they found themselves on the hook for a second house that they thought was someone else's responsibility.

Schilling took the Rhode Island money because he viewed it as free money where he didn't have to give up any equity. He didn't give two shits that the strapped state government would be on the hook for his fuckup, and he obviously didn't listen to the CFO who probably told him "We can't fucking hire that many people and still make a game."

It's worse than that even. The loan from RI was secured with the Amalur IP. Which, shitty and generic as it may have been was the only thing of value that the company had given that Curt wasn't going to hand over any equity. This means that he was asking angel investors to come in and hand over cash with no kind of collateral at all. If the company went down then the only real asset was already in hock to RI so investors would walk away with nothing. That's not exactly the kind of deal that makes hard-boiled VCs cream their pants.

[Paelos]

Basically as part of the relocation package 38 Studios offered to buy the homes of new employees so that they could relocate to Mass/RI without having to sell in the middle of a shitty housing market. What actually happened was that they retained an agency to list the houses and take over the mortgages until they were sold. Of course they stopped paying this agency back around Christmas (even though they were still making new hires and offering them these terms). The houses didn't sell, and the agency handed them back to their owners complete with mortgages. Of course since that time many of the new arrivals had bought new houses so now they found themselves on the hook for a second house that they thought was someone else's responsibility.

The answer is simple though. You walk away from the houses in RI and hand them back to the bank. You move back into your old location and resume your life, chalk it up to experience, and get a new job.

[IainC]

The answer is simple though. You walk away from the houses in RI and hand them back to the bank. You move back into your old location and resume your life, chalk it up to experience, and get a new job.

And then you hope you never need credit for anything ever again.

[Lantyssa]

And that the original house wasn't forclosed on considering it was 5 months overdue.

[Amaron]

Basically as part of the relocation package 38 Studios offered to buy the homes of new employees so that they could relocate to Mass/RI without having to sell in the middle of a shitty housing market. What actually happened was that they retained an agency to list the houses and take over the mortgages until they were sold. Of course they stopped paying this agency back around Christmas (even though they were still making new hires and offering them these terms). The houses didn't sell, and the agency handed them back to their owners complete with mortgages. Of course since that time many of the new arrivals had bought new houses so now they found themselves on the hook for a second house that they thought was someone else's responsibility.

Everything I've read makes it sound as if these people were surprised that they had two mortgages though.  Under the system you describe they should still know that they had two mortgages even if somebody else was paying for one of them.

[Severian]

I guess I disagree that he ruined a bunch of his worker's lives. He ruined his own life sinking millions into a failed endeavor. The state ruined it's own budget by approving his loan. Meanwhile a large sum of grunt level people worked in an idyllic environment for years and years while getting pretty amazing perks.

I had the same thoughts, but then it occurred to me that most people in the industry, at that level of the industy, aren't in it for the money. The money isn't their reward. What they are creating is the reward. From the article:

Meanwhile, as the media swarmed outside the 38 Studios office, employees inside began to realize that the company could be done for. Wanting the world to see their work, a few grabbed an old Copernicus trailer and began to brush it up. As they worked, colleagues crammed into a small set of cubicles, packing in 50 to 60 deep.

When the two-minute trailer ended, people lost it. “We’re all leaning on each other,” says Jesse Smith, the designer. “A lot of us were crying, a lot of us were happy. And after it happened, there was just an uproar of applause.”

All the work represented by that brief trailer - years' worth of creative effort - will never see the light of day thanks to the business acumen of Curt Schilling, Delusional Moron.

[Soln]

These are good points all round.   And there is plenty of blame to go around (like Paelos is noting with RI).  But Curt is the center of that blame.   He is the Alpha and Omega for this failure.  Anything else -- his mgmt team, typical politicians, etc. -- doesn't clear the fact that Curt is the one that continued the delusion (and lies?) that caused people to be sucked in or attracted to the deal, and to linger on in the hopes of something to happen.  Everything traces back to him, which is clearly the way he wanted that place to run. 

[Cadaverine]

Everything I've read makes it sound as if these people were surprised that they had two mortgages though.  Under the system you describe they should still know that they had two mortgages even if somebody else was paying for one of them.

According to this article about it, the employees say that they were told that 38 Studios had sold their homes.  From other articles on the subject, it looks like it was only done for some employees that were underwater on their mortgages. 

I don't know if 38 Studios had them sign some papers that looked like they were selling the home to MoveTrek, or if they were just ignorant of how such things work, or if they figured they were getting out of an underwater mortgage, and didn't look a gift horse in the mouth, or what.

[Numtini]

We can agree to disagree on someone in mid-career leaving a job, selling a house at a $15,000 loss, moving their family across country, and being left high and dry 3 months later counts as ruining their life. However, I think having someone lose their health care a week before their partner's bone marrow transplant has a pretty good chance of meeting anyone's definition of "ruined their life."

[Paelos]

The answer is simple though. You walk away from the houses in RI and hand them back to the bank. You move back into your old location and resume your life, chalk it up to experience, and get a new job.

And then you hope you never need credit for anything ever again.

Hope you don't need another house for 7 years. Which is fairly avoidable considering you still own one. If you think people will take the credit knock seriously long-term after the shitstorm we've been through? Nobody would ever get a loan again.

[Paelos]

We can agree to disagree on someone in mid-career leaving a job, selling a house at a $15,000 loss, moving their family across country, and being left high and dry 3 months later counts as ruining their life. However, I think having someone lose their health care a week before their partner's bone marrow transplant has a pretty good chance of meeting anyone's definition of "ruined their life."

Wouldn't they be eligible for COBRA in that case?

[Amaron]

According to this article about it, the employees say that they were told that 38 Studios had sold their homes. 

Yea but that's fairly confusing too.  If someone claimed they sold my home I'd damn well ask for the moolah and pay the bank.  If they sent it to the bank directly I'd call the bank and make sure the damn loan was paid off.  Either these people were grossly negligent or possibly something rather illegal happened here.   The whole thing half sounds like the banks finding a loophole now that they can't get the cash from 38 directly.

[Chimpy]

We can agree to disagree on someone in mid-career leaving a job, selling a house at a $15,000 loss, moving their family across country, and being left high and dry 3 months later counts as ruining their life. However, I think having someone lose their health care a week before their partner's bone marrow transplant has a pretty good chance of meeting anyone's definition of "ruined their life."

Wouldn't they be eligible for COBRA in that case?

How would they be eligible for COBRA if the company is not paying for the plan anymore? The whole COBRA thing is that you pay to stay on your employer's plan. If the entire group is cancelled, I am pretty sure you would be up shit creek.

[Paelos]

How would they be eligible for COBRA if the company is not paying for the plan anymore? The whole COBRA thing is that you pay to stay on your employer's plan. If the entire group is cancelled, I am pretty sure you would be up shit creek.

Yeah if the entire group is cancelled, you are right. I forgot this was Chapter 7, not Chapter 11 bankruptcy.

[Cadaverine]

According to this article about it, the employees say that they were told that 38 Studios had sold their homes. 

Yea but that's fairly confusing too.  If someone claimed they sold my home I'd damn well ask for the moolah and pay the bank.  If they sent it to the bank directly I'd call the bank and make sure the damn loan was paid off.  Either these people were grossly negligent or possibly something rather illegal happened here.   The whole thing half sounds like the banks finding a loophole now that they can't get the cash from 38 directly.

I agree.  Something doesn't add up.  If I were having my house sold, I would expect to see some sort of paperwork from the bank stating that the house/mortgage was no longer mine, and 38 Studios, MoveTrek, or whomever was now legally responsible for it.  I'm guessing more than a couple figured they were getting out of an underwater mortgage without paying out of their own pocket, and didn't think that the gravy train would ever end, so they left and never looked back.  The only other option would be a breathtaking amount of ignorance, or naivety, on the part of the employees.

Though, I wouldn't put it past the banks to be pulling some vaguely nefarious shit, either.

[UnSub]

I guess I disagree that he ruined a bunch of his worker's lives. He ruined his own life sinking millions into a failed endeavor. The state ruined it's own budget by approving his loan. Meanwhile a large sum of grunt level people worked in an idyllic environment for years and years while getting pretty amazing perks.

I'm not sure that pulling your family up to move across country, buying a house in the new area, starting to get settled in after (say) 12 months only for the company to crash and burn, leaving you with no job in an economic environment is hard, a mortgage you can't pay and the potential to have to leave with your family and start again somewhere else is worth the "pretty amazing perks".

Iif you are a video game designer, where are going for work? Is it another shift across the country? Commute to Boston? Get out of game design and start programming bank software in RI? Plus then there are all those documents you signed saying,"I earn $X a month" to get that mortgage / any other loan, and suddenly you aren't earning that money any more. The people you owe money to still want to be paid.

The viewpoint of one 38 Studios Spouse is captured here. If you want to argue semantics than maybe 'ruined' is too strong a word (right now) but the sudden collapse of 38 Studios left a lot of employees stressed, scared and uncertain about how they dig themselves out of that particular hole.

Paelos, perhaps you are in a situation where if the company you worked for folded tomorrow without paying you that you could just chalk it up as a learning experience and move on. Not everyone is in that same position, particularly when they've financially committed a lot to moving / staying in one location.

[Azazel]

I'm fairly sure that Paelos is (relatively) young and single. Perspectives change a lot when you get a bit older, have a family, etc.

[IainC]

According to this article about it, the employees say that they were told that 38 Studios had sold their homes. 

Yea but that's fairly confusing too.  If someone claimed they sold my home I'd damn well ask for the moolah and pay the bank.  If they sent it to the bank directly I'd call the bank and make sure the damn loan was paid off.  Either these people were grossly negligent or possibly something rather illegal happened here.   The whole thing half sounds like the banks finding a loophole now that they can't get the cash from 38 directly.

I agree.  Something doesn't add up.  If I were having my house sold, I would expect to see some sort of paperwork from the bank stating that the house/mortgage was no longer mine, and 38 Studios, MoveTrek, or whomever was now legally responsible for it.  I'm guessing more than a couple figured they were getting out of an underwater mortgage without paying out of their own pocket, and didn't think that the gravy train would ever end, so they left and never looked back.  The only other option would be a breathtaking amount of ignorance, or naivety, on the part of the employees.

Though, I wouldn't put it past the banks to be pulling some vaguely nefarious shit, either.

Basically, 38 retained Movetrek to list employees houses and pay the mortgages on them until they were sold. Movetrek stopped being paid by 38 Studios several months before the final implosion and,when it was clear that there was going to be no settlement of accounts, advised the owners of the houses that hadn't sold yet that Movetrek was no longer trying to sell them and that the mortgages were once more the responsibility of the owners.

Movetrek didn't buy the houses directly, it just took over mortgage payments while it was retained by 38 Studios. That's why the employees never saw a transfer of the title or a big chunk of cash. I'm guessing that a few of them didn't know that the arrangement was structured like that and just assumed that Movetrek had been paid upfront for services rather than on a retained basis.

[Numtini]

How would they be eligible for COBRA if the company is not paying for the plan anymore? The whole COBRA thing is that you pay to stay on your employer's plan. If the entire group is cancelled, I am pretty sure you would be up shit creek.

This is the whole reason they should have been winding down the company back in say January. But instead they were still moving people across country at that point. The final sequence was they stopped paying for insurance, the insurance was cancelled as of Date X, and employees found out their policies had been terminated for non-payment (from memory) 3 days before they were ended only because one of their doctors told them they'd been informed the plan was no longer in effect.

The other kick in the ovaries here is that had the company remained in Massachusetts, they would be able to obtain a reasonably priced individual plan through the exchange.

[Paelos]

Paelos, perhaps you are in a situation where if the company you worked for folded tomorrow without paying you that you could just chalk it up as a learning experience and move on. Not everyone is in that same position, particularly when they've financially committed a lot to moving / staying in one location.

Of course not everyone is in that position. I didn't say that. You cherry picked the part of me talking about workers that had been there for years already as working in a pretty great environment, and applied it to people that just up and moved. It's not the same thing.

I understand that he fucked over people who moved there in 2012. I said as much in the actual post. What I'm commenting on is two fold: One, I don't think after working anywhere for 3 years or more if the job suddenly goes tits up in the last month that it makes it a horrible experience. Two, the people that uproot their families, lives, jobs, and kids to gamble on an unestablished business of any kind better be largely aware that it could explode at any time. It was a huge gamble on their part, as opposed to moving somewhere to work for Coke or Lowes.