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The Game Effect News

The State of Rhode Island May Soon Own 38 Studios

If the studio closes RI will have to pay for a bad bet

By Daniel Jones on 5/17/2012
Curt Schilling is the owner of 38 Studios, baseball bloody sock wearer, opinionated republican and an all around interesting personality with a tendency to make people angry. Usually it's just democrats or Yankee fans but this time he's managed to piss off the entire state of Rhode Island. Granted, it's a tiny state, but still... that's pretty bad. How did he do this? Well since you asked...

Last year, Schilling tried to start a bidding war between the state of Massachusetts where 38 Studios currently resided and Rhode Island in an attempt to receive state aid to "kickstart" the business. While Mass didn't bite, the Governor of Rhode Island at that time saw this as a huge opportunity for the state to gain jobs and tax dollars. So naturally, he decided to throw $75 million of taxpayer dollars towards the company. The stipulation was that 38 Studios would pay that money back, at around 7% interest, after they started to make a profit.

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The problem is, after Kingdoms of Amalur: Reckoning's not-so-impressive sales figures (around 500,000 copies since its February launch), and taking into account the big names on staff and sharing the profits (and cost) with Big Huge Games, the developer most likely didn't break even on the epic fantasy-RPG.

So on May 1st, the studio had to default on their loan after they were unable to pay $1.125 million dollars to the state. Now the state and the current Governor Lincoln Chafee (who opposed the loan from the outset) are working with Schilling and the studio's investors to resolve the issue. The most likely outcome is that 38 Studios will have to close, and forfeit all of their assets to the state of Rhode Island. Meaning RI would own the rights to the unannounced MMO "Copernicus" and be able to sell that property to the highest bidder. However, that debt, including interest will all become inherited by the state's taxpayers, coming in at a grand total of around $112 million by 2020. That's a big chunk of change.

While most states are willing to give game companies tax breaks in order to attract that business, RI was the first to just outright invest in a studio. Given how this has turned out, don't expect other state governments to ever try this move again. That's probably a good thing, since the games industry can be very unpredictable and making a bet on what might seem like a sure thing is still a risky bet in a constantly changing playfield. Had Amalur released before Skyrim we may not be talking about this. We are following this situation closely and will post more as we learn it.

Source WPRI 
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Elleyena on May 19, 2012
They probably should have gone with Kickstarter for their project, rather than the government. Then they'd have set buyers.

Thanks for keeping us updated

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