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R.I. Feud With 38 Studios Hurts Chances Of Recovery

A screenshot of 38 Studios' "Project Copernicus." The so-called "massively multiplayer online game" was set to be released next year. (Courtesy)

A screenshot of 38 Studios' "Project Copernicus." The so-called "massively multiplayer online game" was set to be released next year. (Courtesy)

BOSTON — Rhode Island Gov. Lincoln Chafee says the state had no signs that 38 Studios was in financial straits. He told reporters Tuesday that, as far as he knows, state officials did everything right. The video game company was meeting its benchmarks for the state loan. But Chafee says he did not look at the company’s financial statements.

“No, but again, we have communities going bankrupt and budgets to write,” Chafee said.

Now, Rhode Island essentially owns a bankrupt video game company.

“When a company goes bad or starts to go bad, you try to sell off the assets,” said Alexander Sliwinski, a Boston-based editor at the gaming news site Joystiq.com. ”The assets for 38 Studios were put up as collateral against the loan from Rhode Island. So that’s a horrible place to be.”

So what kind of collateral is Rhode Island left with? A yet-to-be-finished so-called “massively multiplayer online game.” That’s an elaborate fantasy world where you play against other people over the Internet.

A preview video of that game — “Project Copernicus” — released last week shows a fly-through of the fantasy world.

“Yeah, I’ve seen the video,” said Kevin Dent, a video game company executive. “The video looked great!”

Dent invests in startup game companies. The video, he points out, just shows landscapes and a fortress city. It does not show characters or game play.

“Anybody could make that video and they’d probably be able to make it for $1 million,” Dent said. “Curt spent $75 million.”

“There is clearly an issue of business execution,” Sliwinski said. “This game should have been out by now. It’s been six years.”

And the release date had been set for a year from now. Meaning tens of millions more dollars would have to be invested to complete the game. The state of Rhode Island says it would allow Schilling to find such an investor or buyer if there is one. But Sliwinski says the market for these types of games is not good.

“As a fire sale goes, it could be worth a few million dollars,” Sliwinski said. “No one’s gonna pay the full loan amount, put it that way.”

Especially now that all of employees have been laid off, and are moving on. You need top talent to finish such a major release. That’s why Kevin Dent is even less optimistic.

“I want to be super clear here: This game is never going to see the light of day,” Dent said.

Dent thinks a white knight coming to buy the company and its property is fantasy.

“Curt Schilling is a baseball hero and he’s a video game villain,” Dent said.

But Dent has equally harsh words for Chafee. He says the governor should have spent less time talking about how he didn’t like the state’s economic development deal and spent more time trying to find a buyer before the company collapsed.

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  • Dankerthanclanker

    Well, I’m an avid Gamer and I fail to see why BHG had to go too. EA pumps way too much money into what is basically the same dross over and over agian.

    38 and BHG just made a game that sold, at the last count, 1.5 Millions coppies.  Assuming that they were all being sold at £40 stirling, it would make £60,000,000.

    If Copernicus were to be sold as much as that for roughly the same price and they made a third at a reasonable speed, it would soon level out.

    Frankly EA could have done just as well by buying up BHG and use them to pay off 38.

  • Steve Garson

    Dent’s comments are very apt.  When a company is running low on cash, a serious search for a buyer needs to start in earnest.  As the chief creditor, the state should have seen the cash flow forecasts long in advance.  I’ve been in this exact same position with an internet company in the boom/bust days.  A fire-sale of the company might have saved the jobs….but probably not the money the state guaranteed.

  • jefe68

    Bottom line here, the state of RI had no busniess of getting into this.
    If Curt Shilling’ 38 game company could not find private investors then he should have not even been able to move forward. He used a lot of his own money to invest and if you ask me he was either not on top of the issues in dealing with bringing a game to market or was being fed a lot of bad information. This game should have come out years ago.

  • Mike from Rutland

    Ironic.  I remember Curt stumping loudly for Republicans during election years.  When he’s on the sidelines of a decision, he’s not one to support government picking winning and losing companies.  Now when he’s the benefactor of a hand out, he’s prompt to take it and lose it on a fantasy (game).  This is another example of “horse and sparrow” economics.  Rich individuals and companies (the horses) consume large tax breaks and financial backing (oats) and whatever they don’t absorb they crap out on the sparrows (employees).   Curt certainly left a large steaming pile of sh*t on the backs of R.I. residents.

    • jefe68

      He sure did. I read he’s trying to spin this now against the Democratic Governor of RI. What a sportsman.

  • banter23

    Where did all that money go???????

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