The company, which employed more than 400 full-time workers andcontractors, moved to Providence in April 2011 and by February ofthis year had released its first game, Kingdoms of Amalur:Reckoning. But 38 Studios missed its May 1 payment of $1.1 million to RhodeIsland and did not have enough cash to meet its payroll on May 15.To stay afloat, it asked Rhode Island for more money, applying for$8.4 million in film-tax credits, which it could then sell to othercompanies seeking to lower their tax bills. The company did not inform Rhode Island Governor Lincoln Chafeeabout the layoff. Chafee said the state has not been able toconfirm how many workers were let go and has struggled to get othercritical details since 38 Studios ran into financial trouble. Still, Chafee said he is open to working with the company to helpfind ways for it to survive.
“I have not given up,”” he said. “But I amalso a realist. What we”ve learned from [industry] experts isgrim news. Very, very grim.”” Chafee said he believes 38 Studios executives have tried hard tofind additional investors, such as venture capitalists, but havenot had any luck so far. Schilling has publicly said he already put$30 million into the company, and he told state officials he didnot have any more money to invest, despite a lucrative baseballcareer during which he earned $114 million.
“He says he”s all in,”” Chafee said.”Tapped out.”” Schilling could not be reached for comment. Rhode Island has already provided the company with about $49million of the $75 million loan. Chafee said he continues to opposegiving the company tax credits because of concerns it is likely tofail anyway and cost taxpayers even more. He added that the valueof the intellectual property and other assets probably would beminimal, reducing the amount of money the state could later recoup. Waterproof Sports Action Camera
The original loan package was approved under Chafee”spredecessor, Republican Governor Donald Carcieri; as agubernatorial candidate, Chafee had criticized the deal withSchilling. The fallout from the loan has already led to theresignation of two officials from the Rhode Island economicdevelopment agency. “If we could get some confidence that any further investmentwas going to lead somewhere profitable, I would be in favor ofthat,”” said Chafee, a former Republican member of theUS Senate, now a political independent. “That has just notbeen the case.”” Pressed at a news conference Thursday about how the company couldhave failed so quickly, and whether the state had not provided theproper oversight for its investment, Chafee said the company hadanticipated better sales from its first game. China Cellphone Signal Jammer
“The game failed,”” he said. “That wasintegral to the success of the company.”” Kingdoms of Amalur sold an estimated 1.2 million units, whichChafee said is less than halfway to the break-even point, accordingto experts the state has consulted. Schilling became a legend with Red Sox Nation in 2004 afterpitching through an injury complete with a bloody sock during theAmerican League Championship against the New York Yankees. Hetraded on his star power to build his company, which he renamed 38Studios LLC, a reference to his Sox jersey number. Schillingretired from baseball in 2009. GSM Listening Bug Manufacturer
The right-handed pitcher has said little to reporters, but hasrepeatedly taken to Facebook and Twitter to try to rally employeesand raise hopes for the company”s future. On Thursday, hetried to rebut Chafee”s repeated claims that thecompany”s first game was a flop. In a Facebook post,Schilling insisted the game “outperformed”” theexpectations of its publisher, Electronic Arts. Michael Pachter, a game industry analyst at Wedbush Securities inLos Angeles, said he was stunned by the failure of 38 Studios. Hesaid Kingdoms of Amalur sold well and should have provided enoughrevenue to help the company stay afloat until its major project,Copernicus, was ready for release.
Pachter said the company must have lost control of expenses.”Clearly they spent more than they took in,”” hesaid. “That”s just poor planning. What were theythinking?”” But there was no guarantee that Copernicus, an elaborate onlinerole-playing game set to be released in 2013, would be a big hit.Such “massively multiplayer online”” games arenotoriously costly and difficult to develop. Schilling estimated hemight need more than $100 million to complete the game. In addition to 307 workers in Rhode Island, 38 Studios had 106employees in Maryland, where it bought the video game company BigHuge Games in 2009.
“It”s an incredible tragedy,”” said BrettClose, a former 38 Studios chief executive who now works for FrogDesign in Austin, Texas. The company”s trouble is a”testament to how difficult it is to create that type ofproduct they were trying to build.”” Video game experts say that 38 Studios could try to find a buyer orinvestor to salvage the company and remain in operation, but thatscenario is unlikely. “The consensus seems to be that it”sdead,”” said Hank Howie, chief executive of BeachCooler Games, a mobile game start-up in Boston. Howie said part of the problem is that the company spent far toolong working on Copernicus, in part because 38 Studios may havelacked enough experienced managers.
He said the game should havetaken the company no longer than three to four years, since itdidn”t have unlimited funding. “There are clearly some major issues,”” Howiesaid. “You have to ship.”” Try BostonGlobe.com today and get two weeks FREE. Michael B.
Farrell of the Globe staff contributed to this report.Todd Wallack can be reached at . Mark Arsenault can be reached at .