Back back back back back… GONE

Let’s keep one thing in mind as we read this: a startup game studio failed to release a WoW-clone themepark MMO after spending 6+ years and north of $100m on it. Said startup also bought another studio that had a basically-complete game, and that game failed to sell enough to justify the price paid for the studio.

This article is embarrassing. To even remotely suggest that somehow someone other than 38 Studios screwed 38 Studios is atrocious. To believe that if only someone on the hook for $75m would have kept shut, and allowed another victim to toss money into the 38 black hole, everything would have worked out is crazy-talk.

Then we have this:

“I can say that the company didn’t spend money extravagantly at all,” he adds. “We didn’t have giant statues in the halls, or supercomputers with 30-inch monitors at every desk. We had what we needed to work on the game and that was it.”

Sound good right? Maybe one could even argue that had they had supercomputers, maybe it would not have taken 6 years to get (maybe) within one year of release, but whatever. Oh wait:

Schilling “went to lavish personal expense” for his teams, buying customized jerseys and other morale perks.

So no supercomputers or bigger monitors, but customized jerseys and other stuff. That makes sense. How many lines of code did those jerseys write? And before someone brings up that it was a ‘personal expense’ for Schilling, 38 Studios is also a ‘personal expense’ for him, so we are talking money from the same piggybank here.

“But in the end, his optimism turned out to be naivete, and it slowly killed us,” the source continues.

So Schilling is not the bad guy here, but at the same time he slowly killed 38 Studios. Neat.

On a higher level, what kind of business plan assumes you will just keep getting money anytime you ask, without first delivering anything, in an industry that has a track record a mile long of actually completed products failing horribly? What could possibly go wrong?

And why is Schilling, with $50m to invest in his gaming studio, setting out to create a game that is going to cost $150m+? Maybe, I don’t know, try to first design one for around $50m? Pretty sure it might be possible to clone WoW for that amount, just ask Trion.

It’s also crazy to hear that this could have happened to the studio before, but the previous time they were running on empty, someone gave them more money (how’s that working out for ya?).

More gems:

and to a perceived opacity about the higher-ups, whose roles sources say were unclear and led to jokes about a profusion of unnecessary VPs at 38.

The above begs the question; how many VPs does it take to not release anything? Apparently many.

Chafee also publicly claimed 38’s first release, the single-player RPG Kingdoms of Amalur: Reckoning, “failed,” artificially deflating its sales numbers and suggesting it was a commercial flop — which it wasn’t. It’s true that the game didn’t sell enough to fulfill a clause whereby publisher Electronic Arts would start paying a cut to the studio, but employees say potential profits for Reckoning were never part of the budgeting plans for 38.

What? So KoA:R did not fail, but 38 Studios never saw cash from it because it never crossed an amount that EA set? Call me crazy, but don’t we normally define a successful product by it generating profit? Is 38 Studios a charity venture? But no, 38 would have been just fine had someone who is on the hook for $75m not brought up the fact that the game from that studio they paid for did not earn them money. Total non-issue…

Because, you know, their “budget plans” looked something like this: spent money until we run out, ask for more, spend, ask, spend, ask, keep on keeping on, custom jersey, spend, ask. Oh and maybe finish a WoW-clone at some point. Maybe.

And again, it totally sucks that the ones ultimately screwed are the actual workers for 38 Studios and the taxpayers of RI. Schilling will be perfectly fine doing ESPN segments and calling local sports radio, and most of his VP staff will go on to do whatever it is they ‘do’. Or just do more of this:

Jen MacLean, former CEO of 38 Studios, informed Gamasutra after this report was published: “I left 38 Studios on an indefinite leave of absence on March 23, 2012, and resigned from my position as director, officer, and employee on May 17. I was not involved in any day to day company operations after March 23.”

Raise your hand if you have the option to take an indefinite leave of absence for almost two months and then bail? Anyone, anyone?

And the crazies part? I suspect this is only the first step down this epic failcascade.

About SynCaine

Former hardcore raider turned casual gamer.
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26 Responses to Back back back back back… GONE

  1. While I clearly do not have any details, it sounds like the KoA:R deal might have included up front money from EA… so something came their way… which EA would then recoup through sales, with profit sharing going towards 38 Studios after a sales threshold had been reached. This is not an uncommon deal structure in industries where the publisher tries to screw the artist as often and as deeply as possible by basically making sure they get paid for every possible cost first before the artist gets anything.

    Not that this, in the long run, changes anything.

    • Will says:

      So EA gives 38 studios several million dollars up front for a product with an uncertain future. And that is EA “screwing” 38 studios?

      You have some strange ideas about business.

      • No, I have seen how record and book publishing deals have worked for artists who are not top rank and the sort of things that the company then charges back before the artists draw is considered paid off. I have a very clear view of business.

        • Will says:

          Yeah, I know writers too. All of them took cash advances, none have made royalties (at least no yet), and gone back to their publisher again. If your expecting the the publishers to pay the author, pay the publishing expenses, take all the risk and then not take a large chunk of any profits then you are horribly naive, and you should never go into publishing.

  2. theJexster says:

    I still don’t get what qualified him for the loan. Other than he played MMOs I haven’t read anything about prior experience in running a studio or working with a game of any kind. Syn I think you need to get said loan, buy DF, rebuild and relaunch it.

    On a related note (and by related I mean path to failure) TESO will have 1 open world pvp town, and then a few instanced battlegrounds. From the interview I heard it was a lot of just like WOW, just like current mmos, and (no I’m not making this up) “Star Wars (SWTOR not Galaxies) was a fun game”. At least he said WAS but the fact that the head dev guy though it was fun scares the living hell out of me.

  3. Zyref says:

    In response to:
    “What? So KoA:R did not fail, but 38 Studios never saw cash from it because it never crossed an amount that EA set? Call me crazy, but don’t we normally define a successful product by it generating profit? ”

    Typically, in the publishing world, your artists will get an advance. Unless you out-earn the advance, you don’t receive royalties. The advance is the “expected sales number” in many cases, but not all.

    While success can be equated to out-earning your advance, not out-earning your advance doesn’t mean failure.

    An example of this is easily found in the book world. Hilary Clinton was given $9m for an advance of her book. She is expected to never out-earn that figure, and that is ok. That doesn’t mean that her book isn’t a success…

    Typically, you get larger than expected advances (in the case of 38 studios, 3m copies worth of advance) as a method to get a larger cut of the profits from the publisher. The publisher then in turn gets to still release a good product doesn’t have to factor in royalties into expenses.

    This is a good thing, and to say that Reckoning failed at 1.5m copies is a misstatement.

    • SynCaine says:

      Yea, I get all that. Obviously 38 got ‘something’ from EA…

      Problem is, the amount they paid was more than the amount given, otherwise they would outright call the game a success for 38 Studios.

  4. bhagpuss says:

    I’m a consumer. I don’t care. Sort yourselves out and sell me a game.

    Curt loves EQ. I love EQ. I’m about as sure as I can be that I could make an EQ-like to suit my personal specifications if I had $50m to splurge.

    I’m pretty sure I could do it for a fifth of that.

    And all that said I still would like to play the game they were making. It may have cost five times more than it was worth and it may have taken three times longer than it needed to but that money’s been spent and that time’s been taken.

    It’s a criminal waste not to finish the job now.

      • bhagpuss says:

        That’s an interesting link but I refer you to my first sentence. I’m not making an economic argument in favor or against writing off the costs to date. I’m not a 38Studios investor or an RI taxpayer. I’m a potential customer.

        The loss of a cultural artifact of potential interest and worth is all I’m concerned about. Maybe it wouldn’t have been any good but I’d like to have been able to make that judgment on more than a handful of screenshots and a video.

    • roqoco says:

      I saw somewhere a valuation of $20m for the IP & code. Not sure if anyone is rushing to buy it though. The chances that the result would be a AAA product that would attract subscriptions seem quite low and with a new team would probably need 2 years of development or so – if anyone was able to get developers competent enough to finish it.

  5. Whatever says:

    The poor citizens of RI seem to be on the line for about 50 dollars each. That’s a lot. They should whine about it endlessly.

    Remember, KICK DOWN.

    And, SUCK UP.

    Current Federal Government Debt is about 50,000 dollars per person.

    I know which one I’d think is the most important. It involves whose gots the tanks, it does.

  6. roqoco says:

    When 38 studios crashed they had 379 employees (and were still hiring as late as March). That’s substantially larger than either Arenanet (circa 250) or Valve. Since they had no visible sources of income it would hardly have been rocket science to do a forward cash flow projection and see that they couldn’t make ends meet. Since it was a “secret” in the company that Copernicus was delayed until the middle of 2013 at the earliest it should have been obvious that the company was going to fail a long time ago. So there’s something that doesn’t quite add up.

  7. Will says:

    “customized jerseys and other morale perks”

    I have a stack of free shirts and other such “perks” from old employers. 3 out of 4 are fine. The forth wouldn’t have been saved by a few thousand in extra polo-shirt-and-coffee-mug money.

    “with $50m to invest in his gaming studio, setting out to create a game that is going to cost $150m+?”

    Lots of ventures are funded in multiple rounds. Some fail.

    “perceived opacity about the higher-ups, whose roles sources say were unclear”

    Every company past the garage stage will have a lot of managers who get payed above the company average and don’t contribute directly. It’s called management.

    “led to jokes about a profusion of unnecessary VPs at 38”

    Tell me honestly that you have ever worked for a company where the Plebe’s didn’t crack jokes about the managers.

    “Raise your hand if you have the option to take an indefinite leave of absence for almost two months and then bail”

    I’ve known people that took extended leaves of absence, some decided not to come back. It’s also worth noting that at the VP level people are frequently allowed to resign or given time to find a new job instead of being let go or fired, so it might not have been voluntary.

    Games are a high cost, high risk industry and people lose large sums of money all the time. I think the difference is that instead of losing joint venture money or publisher advances, 38 studios managed to lose taxpayer money in an election year, and that is unique. Also they had some big names on the project that weren’t big names from the games industry. It’s lead to a lot of internet drama (not just here).

    Every time anyone gets into the details it sounds like the exact same gripes from every other studio, both the failures and the successes. It’s the industry and there are enough studios that do the same sorts of things AND make money to keep the whole mess rolling. Bitter inside accounts of a companies incompetence aren’t unique to the failures. Spend 5 minutes of glass door if you don’t believe me.

    • roqoco says:

      The thing is though 38 studios didn’t even give it itself a chance to succeed. At least someone in the company must have known at the time they got the loans backed by Rhode Island that they wouldn’t be able to finish Copernicus without much more funding, which would be very hard to obtain, particularly considering that the terms of the RI backed loans required for the creation of many more jobs. And at the same time the company was spending money like water: $1.2m to Salvatore for lore etc.

  8. Azuriel says:

    Call me crazy, but don’t we normally define a successful product by it generating profit?

    You don’t.

    • Bristal says:

      Bravo. Was waiting for that. You continue to argue that EVE is a more successful game than WoW despite having 5% of the subscriber base, now you’re on about financial metrics defining success?

      • SynCaine says:

        Did I now? Can you find me the quote where I say EVE is more profitable than WoW?

        • “MMOs like EVE or Rift are doing well. MMO-lite titles like SW:TOR and current-day WoW are not.”

          So by your definitions, a game that is ‘doing well’ is growing in subscribers, whereas one that is a ‘successful product’ is generating profit. Is that correct?

        • SynCaine says:

          So no ‘EVE is more profitable than WoW’ quote? Pity.

          Did you miss the “WoW is losing subs” memo? Notice in the quote you did bring, it says “current-day WoW”? And that ‘doing well’ is not just about current (and for WoW, past) profits?

          Good effort and all, but reaching just a little too much here.

        • Anonymous says:

          Nonetheless, I take it you would agree that WoW is a more successful MMO than EVE, having generated far more profit than EVE has or ever will? Even if WoW drops to zero subscribers tomorrow, you cannot really suggest EVE is likely to come close to the money WoW has made for Blizzard – can you?

        • SynCaine says:

          The numbers are not a debate. WoW has made Blizzard a silly amount of money, everyone knows that.

          But company profits and player opinion/satisfaction are two different things. For instance, who feels better about the future of their MMO right now: WoW players or EVE pilots?

  9. Antivyris says:

    Is it me, or is something a little fishy here…

    38 Studios opened circa 2006, announced Copernicus was in production/pre-production. In 2007, BigHuge announced it had a single player RPG in production. Salvatore and McFarlane were with 38 Studios, in 2006. Supposedly, Copernicus was worked on since 2006. So, when 38 bought BigHuge in 2009 and ‘finished’ Amalur, what the heck did they actually work on?

    I mean, follow me on this one. If you purchased essentially a single player engine and applied only your lore, that means it took three years to redo just the lore on a game that was already finished (At least, it was due to finish in 2009). If you purchased the game and lore and over-wrote your own lore on your MMO, then you essentially re-started half your MMO when you purchased BigHuge.

    There’s not really even a middle ground there, as I don’t see any information out there that Salvatore worked with BigHuge. If either of these were the case, then I’d wager that the BigHuge purchase was the downfall of both.

    Because, in truth, if either the MMO has spent money worth 6 years, but restarted mid-way, or they completely redid a completed single-player game that was finished and doubled the time it took to make it.

  10. And in the strange but true category, Derek Smart seems to have one of the better views of the whole situation.

  11. Tuck says:

    I have a suspicion that there was something illegal going on with the finances at 38 Studios. This financial funny business is what caused the downfall of the studio. There is a stink coming from upper management and the State and U.S. attorneys general in addition to the FBI is planning an investigation of 38 Studios. I think they will find more than a few cat turds under the rug.

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