E3 2012: Company spokesperson says Rhode Island-based RPG shop files for Chapter 7 protection, federal investigation into money management under way.
LOS ANGELES--Beleaguered Kingdoms of Amalur: Reckoning and Project Copernicus company 38 Studios has filed for bankruptcy, a spokesperson confirmed today to Rhode Island news outlet WPRI. This means the company has ceased operations and will be liquidated.
On top of this, the Rhode Island state police, the attorney general's office, the U.S. Attorney's office, and the FBI are launching investigations into the company.
According to documents obtained by WPRI, 38 Studios owes between $100 million and $500 million, spread across at least 1,000 creditors. The company estimated its assets at between $10 million and $50 million, saying in court documents that it does not have the funds necessary to make good on the payments.
38 Studios' Baltimore, Maryland-based outfit Big Huge Games owes between $50 million and $100 million, spread across at least 200 creditors, the documents show, with estimated assets at between $500,001 and $1 million. This company developed Kingdoms of Amalur: Reckoning, which shipped in February to a warm critical reception and sales of 1.2 million in its first 90 days.
Two other 38 Studios subsidiaries--Mercury Project LLC and Precision Jobs LLC--each disclosed $100 million to $500 million in liabilities and less than $50,000 in assets in court documents.
38 Studios' troubles first came to light last month, when reports from the Rhode Island government indicated the company had failed to make a $1.125 million loan payment to the state's Economic Development Corporation. The studio eventually made the payment, but it also enacted a round of unspecified layoffs. Reports also surfaced that 38 Studios could not pay its employees as scheduled twice in May and that some employees had been stuck with a second mortgage.
Eddie Makuch (Mack-ooh) is a News Editor at GameSpot. He works out of the company's Boston office in Somerville, Mass., and loves extra chunky peanut butter.
If the investigation discovers any financial crime by anyone associated with this whole sh**y business, I hope that person is going to prison. A lot of people, especially the residents of Rhode Island and some game devs, really lost out. They deserve a full accounting of what transpired between a promising game company with a promising game to bankruptcy.
I enjoyed KoA. It was nothing special in my opinion but it sucks what happened to the company and the game.
THIS IS WHY THE STATE SHOULD NOT GET INVOLVED IN ECONOMICS BUT ESPECIALLY VIDEO GAMES. Sorry for the all caps but i really needed to get this point across
I can understand a new company being rather inefficient when it comes to managing money along side of the whole process (while a more seasoned business will be much more efficient having gone through the process many times) but these numbers... are really rather high
They may have tried to use portions of that money to "prep" for enlarging their studio for the squeal or something. I just hope for everyone's sake there wasn't anything criminal going on
Why hasn't the CEO been arrested? To my knowledge its illegal to lay off more than 100 workers without six months notice.
1 Like FBI wan't to go on a Kingdoms of Amalur Adventure. there weapons of choice.Handcuffs & Big Sticks LOL :P
4 Like Wow these numbers expose how unfair the claims of KoA being unsuccessful were. 1.2 million was great for a new IP. The company was so poorly, perhaps even unethically, managed from these staggering numbers that even if KoA had sold 2-3 times that the company would still have been in trouble.
So, all together, how much is owed? Is it between $350 million and $1,600 million? Or am I completely missing how the accounting for these subsidiaries works?
2 Like 38 Studios will sadly one day end up in Case Studies in Business Text Books as a classic example of horrible horrible management decisions, and why you should not hire accountants are really high in cocaine . The sad thing is KOA was a good game .
Sounds like someone got greedy and ended up screwing many, many people in the process. I'm sure the CEO and executives all have mansions and plenty of money to go on without ever working another day in their lives, but screwed employees with 2 mortgages to get it (not to mention the people of Rhode Island). Hopefully the FBI is able to throw someone in jail for this.
3 Like @Vodoo Schilling ran out of funding because the game the company was created to make - Copernicus - took too long and cost too much to see it to fruition. This is a story of mismanagement, not a story of greed.
We have every indication that the executives tried everything to save the company. Curt Schilling sank most all of his assets into the company since he started it back in 2006, and was constantly campaigning for funds throughout 2011 through this year, which explains why the company had so many creditors.
The REAL screw-ups here are the Rhode Island Economic Development Commission, who never should have funded this project in the first place. Desperate to bring jobs into the state, though, they made a supreme error in judgement, and heads are rolling, as a result.
1 Like 100 - 500 million $'s over 1000 creditors seems a bit odd, who the hell kept lending them money with so much debt piling up and only 3 projects on the go. Amalur was good for a first game, but for that price... Somethin really iffy going on there... Best of luck to the FBI and hopefully the hard working devs wont get caught up in it all.
@JimmeyBurrows Ted Nesi is the primary reporter covering 38 Studios for WPRI, and most of the information being disseminated to the public is coming from him. He has done an excellent job, but readily admits he does not have a clear understanding of the bond market and many financial nuances.
I believe he is, at times, using creditors interchangeably with debtors. Basically, he's saying the company owes over 1,000 entities money, which makes more sense when you take into account that 38 Studios still has unpaid wages, meaning 600+ of that 1,000 is its own employees.
I hope this helps!
Where did all my paper go? Does embezzlement come to mind? Is that why the FBI is involved?
1 Like THIS IS MADNESS!!... and no one respond to this comment with a bad 300 reference okay?
I just don't get the people of RI. They elect people who make the worst descisions and what do the people do? Re-elect them.
8 Like This is crazy. There's no way all that money was spent on their projects. I think this is a case of either A. REALLY piss-poor accountants or B. Some lucky few were siphoning off money into their private accounts to get rich. That is an insane amount of money even by gaming standards.
1 Like @Kravyn81 Totally agree. I'm very curious to hear more information about what really went on behind the scenes. I have a VERY hard time believing there isn't more to this story and where the money really went.
1 Like @Kravyn81 How they managed to spend so much money making their first game is beyond comprehension. In comparison, GTA IV cost around $100 million to make, but that was by a highly-successful company with a proven history, and they made back their money in spades.
38 Studios owes between $100 and $500 million to produce their first title. If their debt is closer to the high end of that scale, you have to wonder how the hell they managed to blow so much money on one title (two if you count the crappy trailer they made for Copernicus); potentially 5 times more than GTA IV's production costs.
1 Like @Valtero Exactly my thinking, I have very little idea how half a billion dollars gets spent making a game, and that really is just making it I assume since the publisher is on the hook for marketing costs. Though I think in the case of KoA those costs had to be really low too since I never saw marketing for it beyond trailers and articles on this site and ones like it. So really their expenses should have been equipment, payroll, licences if they used others' tech, and office/work space. Sounds like an awful lot of money was grossly misspent. But lets face it folks, even if there was malfesence, noone will see real jail time, the more money you steal the lighter the system goes on you.
Their CEO, CFO and other top brass already made a run for it and I hope that they get caught this time and made an example of for the other management world wide
You should not be able to get away with with ruining peoples lives to this extent for your own profit, just as an estimate how many peoples wages do you think $100 million to $500 million are? I can tell you that's a lot of affected people.
This is a prime example of why a private company should never accept money from the government, either Federal or state.
5 Like @Aggie1295 If you read the article you'd see that their total debt is estimated to be between $100 and $500 million, while the loan from the state of RI was $75 million, and there were at least 1000 creditors. That makes the government only 1 of 1000 sources of money for 38 Studios, and if the higher estimate is true, only a small portion of the money they borrowed.
38 Studios was obviously in way over their heads, taking loans from wherever they could, thinking they'd bank unreasonable profits on their first game. For the creditors and the state of RI this was a perfect example of venture capitalism gone wrong. The only real victims are the citizens of RI, whose state government decided to gamble with state funds to cash in. States should not be risking taxpayer money on venture capitalism.
A private company is not somehow a victim because a government entity offered them a loan they couldn't pay. Saying that private companies should *never* accept money from the government is foolish. It was federal funding that saved Detroit's auto industry and the catastrophic economic effects that would have unleashed on the state of MI.
In the case of the auto industry bailout, the government was saving 1000s of workers from unemployment and reviving a collapsing industry. In this case, the state of RI was rolling the dice on a start-up company with no track record of profitable ventures, along with 1000s of other investors that had no clue whether 38 Studios would turn a profit.
Want to blame someone? Blame 38 Studios.
@Valtero 38 Studios is just a name, not a person... Most of the people working for them will have had no idea what was going on with the money... I'd suggest blaming someone in the studio rather than everyone.
1 Like Who did they borrow money from, the mob??? gods that's a lot of cash or maybe the RI governor is making things out to be worse than they really are.....
No matter what happens getting every penny of that back will be like getting blood from a stone.....but that's Government for you.....
2 Like @MJ12-Conspiracy This is looking more and more like an MJ12 conspiracy. Probably been siphoning off funds for secret experiments in Versalife.Should check datacubes and hack computers to see what else you can uncover.
7 Like Getting 1.2 million in sales and still failing financially means that someone is doing something very wrong.
It was the simultaneous sinking of scores of millions into an MMO that really hurt them. They bit off way too much for a startup. If it was just Reckoning and Big Huge Games, they'd still be afloat.
5 Like I hope the feds are investigating the RI governor, too. What really went wrong can only be determined with a thorough investigation and that should include all the major players, not just the most likely culprits.
4 Like @deathstream I don't see how anything the RI gov did could possibly be construed as criminal especially considering he wasn't even in office when the initial deal to bring 38 Studios to RI was made.
1 Like @dcc0209 @deathstream There really should be some investigation into how RI was allowed to enter into such a risky business deal with $75 million in state funds. It was incredibly stupid to dump so much cash into a start-up company in a highly volatile industry. You'd think there would be federal regulations to prevent this kind of blunder from happening.
But no, you can't point a finger solely at the RI governor or even the state of RI. If you did so, then the other 1,000+ creditors would also be to blame. No, with the obscene amount of loans 38 Studios was grabbing at from so many sources, they're the primary culprits here.
@Valtero There is no federal oversight as to how a state spends its money. The only people in power to do something about this is the people of RI who vote idiots like these into office.
1 Like The game should have done better. While any of those in charge may be to blame, the gamer community is also to blame in large due to how many are so obsessed with only buying the same tired shooter rehash all the time while ignoring anything new.
KoA was a good game, the developers showed a lot of potential talent and skill with it and this should never have happened if the gamer community at large would stop with only going for shooter rehashes and would actually branch out.
1 Like @Smokescreened84 But the quests are boring, the story sucked, and the combat was too easy. Should gamers buy games that are good? Or should they buy games that are great, memorable, and fun? After playing Skyrim, Kingdom of Amalur was just not that interesting to me. If you and other people like the game, that's fine. But blaming gamers for the failure of a company to manage its debt properly is honestly quite odd. Poor management of resources is to blame, not gamers.
2 Like @Smokescreened84 It's not up to gamers to pay back this company's debt of at least $100 million. They either severely over-budgeted this game, or severely overestimated what the sales would be.
If the company had any sense of what the gamer community was into, they should have known the sales would not be phenomenal.
5 Like @Smokescreened84 You are kidding right? Who do you think you are that you can dictate what gamers should do or don't do? Who died and made you King of the Universe? Such a pompous ass!
7 Like @Smokescreened84 It's not fair to blame gamers for this. The game sold well enough to deserve a follow-up and that would be the case with the majority of studios out there. That's not the case here. Something clearly went very wrong internally. So wrong it would have taken an unrealistically high number of sales to fix.
Employees told by Kingdoms of Amalur: Reckoning studio that the company had sold their previous homes, now being contacted by banks looking for missed payments.
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