Chasing dragons: The 38 Studios debacle
Rhode Island's $75 million gamble on Curt Schilling's video game company now stands as a cautionary tale on overreaching expectations in a misunderstood industry.
"I said, 'Well, what are you doing?' And he said, 'I've got this business, this company, creating video games.' Which I knew nothing about -- my grandkids know more about it than I do. But he was describing it. He said: 'It's a great little company, it's growing,' et cetera. And he was looking to grow it further."
That's the point where trouble should have been apparent to anyone and everyone.
The rest of the story focuses mainly on Rhode Island politicians, some apparently wanting to score a win against their "one-sided rival" Massachusetts. There was something delicious about taking a Boston Red Sox player and funding his tech startup so that it would bring hundreds of jobs across state lines. It was a win for everyone. After all, how hard could it be to make another World of Warcraft?
That's a question that would make anyone with even a passing interest in gaming burst out laughing. The real story here is how badly everyone involved in the 38 Studios debacle misunderstood the gaming industry. Rhode Island greenlit a $75 million investment in 38 Studios. The company ended up with $130 million in debt. Now how did that happen?
"According to the state's pending lawsuit, Mr. Esten was alarmed that 38 Studios' worst-case projection for its business seemed to rely on releasing a successful game every two years -- a track record that most gaming companies can only dream of."
"I don’t think I can support a $75 million guarantee to any single company in this industry due to the wide volatility in commercial success of game releases," Mr. Esten told his bosses in an e-mail."
Wow, not even basic fact-checking here: on the small scale, it's Ken ROLSTON, not Ken Roston, who was with a team that 38 Studios acquired, part of a company in Maryland called Big Huge Games, originally founded by Brian Reynolds, who'd gained claim to fame by designing, under Sid Meier's active guidance, Alpha Centauri, meant to be a sci-fi version of Civilization (which did okay, for its time, but netted Reynolds a far larger reputation than in hindsight he probably deserved).
Anyways, by the time Schilling helped out Big Huge Games by keeping them going near the end of a long, exhausting development cycle in a genre that was already dying on the vine -- the single-player RPG, which only one company continues to survive at all on, Bethesda (Skyrim) -- he'd already sunk all the money, and time, and fame into Todd MacFarlane et al for an entirely DIFFERENT game and team, located originally out in Maynard, MA, which was supposed to be the WoW-killer. And that project was started around the same time many other companies went after the same idea, around the world, not realizing except in hindsight how unique and unrepeatable WoW's success really would be (Star Wars: the Old Republic came closest, in scale and ambition and support and talent, and look how well that did).
Paul, you really need to learn Journalism 101. Not even an amateur game website reviewer would get the basic facts wrong as badly as you have done.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Start investing in technology companies with help from financial writers and experts who know the industry best. Learn what to look for in a technology company to make the right investment decisions.
Starting next summer, every smartphone sold in California must have an anti-theft device. But many users don't have to wait to safeguard their phones.
VIDEO ON MSN MONEY
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'