Gamers Should Be Mad About 38 Studios' Failure

This afternoon, 38 Studios officially laid off their entire staff of 380 people and is closing both their studios. This after running out of cash following a rather public scene with the Rhode Island Economic Development Corporation, a state agency which loaned them almost $75 million dollars to relocate there and to fund the development of their long cooking and until recently, never shown MMO Project Copernicus. Employees are due almost a month’s back pay that they likely won’t get, their health insurance lapsed two days ago and they reportedly only found out when a staffer’s pregnant wife was told by her doctor. The Rhode Island taxpayers are also now on the hook to absorb the cost of the loan which is going to end up being $100 million after interest.

38 Studios was started by former Boston Red Sox pitcher Curt Schilling. When he retired from baseball, he wanted to take his love of video games and do something big with it so he started up a studio to make an MMO. He staffed it with top talent and brought on Todd McFarlane and R.A. Salvatore to help create the vast universe for it.  It was a big deal and got a lot of people excited include yours truly. A couple of years later, they bought Big Huge Games who were about to be shuttered by THQ. Big Huge Games was working on an RPG for PC and consoles and the idea was to take that game and retool it to be part of their new universe as a lead-in to the MMO. It was a big, grandiose plan and it was a breath of fresh air to see a new AAA studio start up with big ideas. In 5 years, nothing was seen of Project Copernicus but in January, Big Huge Games’ project was released as Kingdom’s of Amalur: Reckoning. I haven’t played it beyond the demo but it was well reviewed and sold nicely for a new IP, exceeding publisher EA’s expectations. Fast forward to now and the studio is collapsing, a lot of people are out of work and health insurance in a very small state that now has to absorb the cost of that, all we’ve seen of Project Copernicus is one rushed trailer that showed little and the Rhode Island government revealed that even though Kingdoms of Amalur: Reckoning sold 1.2 million copies worldwide, it would have needed to do three times that just to break even.

Despite this very public and abject failure, some people are still trying to defend the company, Curt Schilling and his management. I admit that most of what we have to go on is accounts of the battle with the state in the press but we do know a fair amount of reliable information. I will also admit that I’ve been personally burnt by bad management who got away scott free before so I do have a bit of my own emotional influence in this situation.

But even based on the sparse details we know so far, they all point to a company that was horribly managed and screwed a lot of people who can’t afford it while the top dogs basically walked away from the smouldering wreckage. That’s not defensible and it really burns me to see people try to defend it. Let’s break this down some.

To their credit, 38 Studios saved Big Huge Games from being closed by an at the time schizophrenic THQ who bought them just a year prior and was already trying to dump them, seemingly not confident in what they were working on. No one knows what that deal was worth but given that Kingdoms of Amalur: Reckoning apparently needed to have blockbuster sales that are almost never seen be a new IP, chances are it and the continuing development costs were in the many millions. Still, they gave them the time they needed and a good game came out of it. Concurrently with this, they were developing a AAA MMO with the same new IP, at a time when the common MMO business model was still to charge people to buy the game plus a monthly subscription fee. In the years since, this model has been proven impossible for any MMO that isn’t World of Warcraft and many failures litter the genre as proof. Even Big Huge Games’ former owner THQ recently took their long in development MMO and made it not an MMO anymore. Still, 38 Studios continued to plug away at Project Copernicus, saying nothing about it, even as they were in a financial death spiral which they obviously knew about. I’m sure they spent this time trying to secure more funding but no one wants to invest in AAA MMOs right now. Instead of adjusting their business goals to something that may have a better chance, they continued pouring money down the sinkhole and now Project Copernicus will likely never see release. All the creative effort is for nothing and a lot of people now have to hope they don’t get sick while trying to find work in an industry that’s not very healthy in general right now. This will also likely dissuade Rhode Island from ever investing into the video game industry again and will shake general investor confidence in AAA game development even more. When a team of supposedly top talent backed by a multi-millionaire fails so spectacularly, what would you do if asked to bankroll a new AAA studio?

Meanwhile, what’s Curt Schilling lost? Not much really. He apparently has put a chunk of his own fortune into the company but used the Rhode Island loan to pay at least some of that back. He still has substantial wealth from his baseball career and while his employees bounce rent cheques, he will still be living very comfortably. There’s also the irony of Schilling being a huge proponent of small government but his politics don’t matter much here. Many Kingdoms of Amalur fans say that he was very passionate about the company and their games and regularly engaged with his community on forums and the like. I applaud him for that, it’s more than many developers do. But creative passion often distorts reality–something it certainly seems to have done for him–and passion doesn’t put roofs over your employees’ heads or food on their tables. And it certainly doesn’t magically complete an MMO that was started 5 years ago and yet not even announced or named yet.

It frustrates me to see people defend this train wreck. Sure, we don’t know all the facts but we know enough to see that many poor decisions were being made at 38 Studios and that they must have known for a long time now that they couldn’t survive to see Project Copernicus released. Yet they made no substantive changes to their scope and their employees and Rhode Island taxpayers were left in the dark until it was too late. Now they’re all screwed but the people at the top are walking away with very little lost beyond pride. I’m sorry, that’s wrong. When similar situations happen at Enron or the banks (yes, on a much larger scale), people are rightfully furious but when it happens to a place that put out a game some enjoyed, apparently we should sympathise with the company and to not do so is to take shots at at the people who made the game. No, that’s not how it works and it’s possible for rational people to separate the talent from the management and the latter is what failed catastrophically here.

Having been where the 38 Studios employees are right now, I feel horrible for them and all the hard work they have devoted to a creative project that will likely never see the light of day. Big Huge Games in particular has been through a roller coaster ride the last few years and has been one of the most under-appreciated developers in the industry. I hope that a competent company will pick them up and give them a stable home but with most of the big publishers terrified of risk and AAA development shrinking, I don’t see that happening.

The Project Copernicus team are also now stuck in a state with virtually no other game development jobs and no shipped project to put on their CVs. Schilling and his failed management team will likely not be formally held to account for this and they don’t deserve anyone’s sympathy. What happened here may be common practice in modern business but that’s exactly the problem, especially at a company headed by people who are supposedly so passionate about what they were doing. The people at the top are supposed to have final accountability and should be the ones that absorb the brunt of the hits, not deflect them downwind to the rank and file. When my previous business failed, my partner and I had no other employees besides ourselves but we ran the place and ultimately, it was our failure and I will always see it as such. This is no different but where my business was barely a blip of an entity, 38 Studios was a large company and like all large things, fell hard.

This was a business disaster, one that’s done substantial damage to an already frail AAA industry and gamers who still want to see these kinds of games get made by independent studios should be mad about this. To treat Schilling and his management team as the victims here is disrespectful to those who just lost their livelihoods. I wouldn’t wish their circumstances on my worst enemy and it infuriates me to see people standing up for their failed leaders. There’s no doubt that game development of any kind is a risky business and I’m sure many of these employees had a good idea of the potential hurdles. That doesn’t make keeping them in the dark until a taxpayer-funded loan payment bounces any more excusable. If Schilling and the management didn’t want to be in the crosshairs for this loss, then they shouldn’t have been the management and Schilling shouldn’t have put his former jersey number in the logo and put himself out there as the face of the company. They let a lot of people down, they deserve to feel bad for it and we as devoted followers of this industry shouldn’t sympathise with their failure.

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One Response to Gamers Should Be Mad About 38 Studios' Failure

  1. Pingback: This Was a Surreal Friday « Geek Bravado

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