Ugh. 38 Studios Situation Gets Worse
 

I know, I know. You're all sort of sick of the 38 Games story by now. Trust me, no one is more tired of this story here than I. When news came yesterday that all of the nearly 400 employees at 38 Games and subsidiary Big Huge Games were terminated, I thought the story was (mostly) over. Apparently I was wrong, it's not over and it may get even worse. What's worse than losing your job? How about having a second mortgage you knew nothing about tossed in your lap with the pink slip.

This story goes back a couple years when Rhode Island first lured 38 away from their suburban Boston digs with a promise of tax breaks and that ill fated $75M loan guarantee. To help ease the transition the studio offered to help sell their Massachusetts homes. When the studio swung the axe yesterday numerous employees who thought that their former homes had been sold were informed by banks that they hadn't and they were now once again on the hook for those mortgages, on top of whatever mortgages they took out on their new homes. It appears that 38 had been paying those mortgages while realtors were attempting to sell the homes, which could explain where some of the loan money went. One of the remaining officials at 38, speaking anonymously, said they hoped to have the situation resolved soon.

I'm tempted to say that this story can't get any worse, but that may be tempting fate.

Source - Polygon

That is just fucking bullshit.

If this is true, then we've passed the 'lawsuit' stage and are approaching the 'felony prosecution' stage. Apparently by not telling RI about the layoffs, the studio has once again defaulted on the loan agreement.

WELL THEN I GUESS THEY CAN MOVE HOME AGAIN hooray?

On a more serious note, what in the fucking goddamn fucking bullshit damned ninth level of fucking Hell happened?!

FUCK Rhode Island. I lived in Providence for three weeks once. Bullshit town.

Stick a fork in 38 Games, Big Huge Games and Rhode Island - they're all done.

Somebody get some popcorn.

Big Huge didn't move right? They are where they always were.

That is pretty crazy to hear. I don't really care about the company but I feel very sorry for the employees. Hard enough to lose your job but now you also have to pay for two houses that is crazy.

I'm not sure how much worse this situation can get without some kind of eldritch horror being involved.

Cops go into the basement of the studio and there's an exsanguniated goat and an open portal to The Old Ones.

No need to go supernatural. If they found a bunch of skinned coeds in the basement, that'd make the situation worse.

So far as I know, yes. Some people may have moved, but the team that made Reckoning is local to me. They're still fucked and laid off without getting their last paycheck, severance, PTO, etc. (I heard reports of people with 500+ hours of vacation time that just went poof.)

This whole thing is so FUBAR'd.

Wow, that's just fucked up. And it's just feels like something that laws should protect us from. I know that's just emotion fueling my words, but still...

On a side note, Kingdoms of Amalur was fantastic. I love the game. Let's hope somebody buys the IP rights, hires the entire staff, and we get a sequel to the game and the staff at 38 studios get their financial problems ironed out and can pay the bills. And they ride off into the sunset. I can dream right?

Jesus, the situation just keeps getting worse. Is the way 38 handled the move normal for companies, or is this a new thing?

I'm also agreeing with you Wolvie, the way that people can be just so utterly fucked by a company without any true recourse (as the company can cease existing) is fucked up. Maybe companies should be forced to have the money required to set off all their employees in case of things going to hell like this. As I mean, if a company doesn't have the ability to do that, they are already in dire straits.

You know, I just wish alamur and big head could be reform and be reunited. It one of those franchises that can go bigger the next go round. They team had cohesion. The rest of 38, I hope land on the feet. Poor Rhode Island though.

Which felonies are you thinking of? Fraud is the most obvious, but a criminal fraud prosecution requires intent to defraud the individual at the time the deal was made (as long as you enter the deal in good faith, your later decision to default on the agreement is non-criminal). If 38 was paying for the mortgages while trying to sell them, that hardly demonstrates an intent to extract anything of value from anyone. It's stupid, not criminal.
Back in the '90s, my mother's company offered her that deal: relocate right now, and we will cover your mortgage for x number of months while we arrange to sell it. It's a very generous offer, usually only extended to high-value employees.
I doubt I could name ten companies in the world that have the assets to "set off" all their employees in the event that they went into liquidation. Also, this proposal would mean no company could ever borrow money, since any creditor would have first claim on any assets before the employees would.

From the quotes it sounds like the people getting saddled with another mortgage were told outright that their former homes had been sold. That sounds to me like it's borderline fraud.

Second, there's a question about whether the mortgage payments came out of the $75M loan. If that's the case then the lawyers Joystiq and Gamasutra spoke to say it would be fraudulent use of funds.

Seriously, this is fucking bullshit.

You know, way back when they announced who the principals were behind this studio, I was pretty sure it was probably a doomed enterprise, but I can't say as I expected quite such a catastrophic end to the story. Jeebus.

I guess it depends. From the article you can't really tell if they were outright led to believe their homes were sold. From what I've read, I can certainly surmise that they believed so but I haven't seen anything indicating that the company misled them. What it sounds like to me most likely is just poor communication from the company where they said they would take care of the sales and then kept up the payments. People assumed their home had been sold.

I'm not a lawyer, just a copper with some good fraud investigations under his belt, but that would depend on the stipulations of the loan. I don't do civil fraud though, just criminal. The company moving HQs would encompass assisting employees with real estate. I don't see how it could be a fraudulent use of funds unless there were exact stipulations or clauses that are being breached. From reading the circumstances surrounding the loan, I can't imagine the loan not being in-part given to assist with the move.

Ox is dead-on of course whether civil or criminal fraud.

In my own opinion though. They invested a lot into the IP so that it could support a wide breadth of titles for years to come. I don't see how they could hope to be profitable off one game and recoup the entire development investment. Let alone making their second title off it an MMO that typically requires massive investment. *scratches head* In hindsight, I guess they probably should have been developing dlc and maybe an expansion to expand brand recognition and sales, completely cutting out the mmo development for the time being. All around it just feels like they bit off more than they could fund at one time. Poor management and strategic planning.

Makes me wonder, what state were they in when they first thought about moving to RI. Also, how the fudge did they go this long without a publisher? I wonder if they planned on doing that themselves.

As I understand it, the responsible investors and possibly publishers allegedly kept telling Schilling that his idea was full of shit. Then he and the idiots in RI got together; he spun a "good" unrealistic tale and they not knowing their ass from a hole in the ground bought it. This is of course speculation of the highest degree and assumes that only idiocy was involved and not outright fraud or bribes or something else nefarious.

Holy CRAP. That's horrible news. "Bob, you're fired. Also, you, now that you lost your source of income, we're giving you back your mortgage."

That sounds just as likely. I wonder if they were about to fold before this RI stuff went down. I'm still shocked. These motherfuckers shut down in like two weeks. Just bad.

Hopefully someone decent gets the IP since so much has been invested in it.

Good god, I would go mental. :eek: You just lost your job, you don't get your last paycheck, any built up vacation you had is gone and your old mortgage handed back to you as a final parting gift?

Happens all the time. And the employees are usually last in line for any compensation when the company's remaining assets are sold off. Happened to me and my coworkers at Acclaim Entertainment when they finally went under. That's two weeks pay I never saw, and I imagine it was even worse for people with more benefits.

Didn't want to start a new thread, so, question:

If I buy a new copy of Amalur, who/where does that money go to?

I imagine EA get's their cut and the rest probably goes to RI.

Everyone in Rhode Island should buy a copy of Kingdoms of Amalur: Reckoning so they can pay off that loan before it gathers too much interest.

EDIT: I just looked up the population of Rhode Island, and it seems that even if they all bought a copy at full price ($60), they wouldn't pay off the loan by the time the publisher got their cut.

awful awful awful. Jesus Christ, awful. :(

Actually seen a couple more of these around the net with folks from 38 talking about the end of days. Namely Chafee being more obstacle than not.

-Creative director Steve Danuser, source Gamespot.

-Gamasutra

More from Schilling at Providence Journal.

If that's true, I foresee a lawsuit against the state of Rhode Island in the future.

Wait I should have kept my score card up to date!

I though this governor was anti loan?

Didn't the independent audit point out 38 was just a few weeks from shuddering?


Hey, guess what I figured out...

It's time for everyone's favorite show: The Blame Game!

Looks like the previously-forthcoming patch for Reckoning is probably dead in the water, as well, along with the sequel.

Not that that's a huge surprise at this point.

I'm not saying Chafee was an angel in all of this, but what was he supposed to do? By all accounts 38 was circling the drain. They couldn't muster $1.125M - which really isn't a lot for a company of 400+ - and pay their employees. The story came out and it was a huge deal in RI. The governor had to comment on it. If you read the Gamespot article the CD says that "We just needed a little more help, and we thought the state would have our backs on that." So after the studio defaulted on the loan the state should have, what, given them another loan? Toss good money after bad?

Maybe they had a deal to publish Copernicus which fell through because of the publicity, but after reading all of this does anyone think it would have helped save the studio? Maybe they would have collapsed in July instead of May, but I don't see how it would have made a substantive difference, other than adding another creditor to the pile.

I don't think anyone could claim the Chaffee is fully responsible for the collapse of the company, but it's pretty clear that he has sabotaged them publicly to make sure that they went under. That much was obvious almost from the beginning.

It certainly doesn't look to me like Rhode Island is at fault, based on what I've seen at this point, even if Chaffee was clearly antagonistic towards them. I mean, the company borrowed a lot of money. They made a really expensive game that didn't sell well enough to make back its costs, and were gearing up to make at least one, maybe two more really expensive games on top of that. While not being able to pay their employees. Or the mortgages they assumed from those employees when they took them on in the first place.

I'm not a businessman, but it is my understanding that throwing money at a failing business does not, of its own accord, make a non-failing business. And as much as I like some elements of KoA: Reckoning, there's no reason that game deserved to sell as many copies as they apparently needed to sell to make back their costs. I'm surprised it sold as well as it did, actually.

Because he wanted nothing more than to have a huge owed debt in his political history?

The way I read things, Chafee saw the writing on the wall and believed the studio was going down no matter what anyone did, and tried to distance himself as much as possible from something that hadn't been his decision in the first place.

Not a saint, but from what I've seen not the villain either.

Yeah. That is a sizable debt for a small state at a shitty time in the economy. If he doesn't paint broad strokes to separate himself from them he'd have a rough time in terms of political opposition. This kind of thing gets remembered.

Maybe they still would have collapsed in July or just maybe them motherfuckers could of got shit back on track. Who knows though. Well like Schilling said, he thought he was close to a deal to get an infusion of cash for a sequel to KoA. So maybe going along with deferring for a month wouldn't have been the end of days. Maybe not taking the tax cuts off the table to a company that's about to die. Making it work out didn't seem to be like something he was interested in.

Giving them more money? Fuck naw. But he almost got tough to the point where he steered them right into an iceberg.


Shit's happened. How this doesn't hang on his neck regardless would shock me. Wouldn't be the first time someone suffered from the sins of others.

Seems more like he wants to point out the mistakes of his predecessor, and say "I told you so."

I'm no fan of Chafee, but to pin the publisher pulling out on Chafee's comments is fucking pathetic.

How 'bout the fact that you are out of money and your MMO is a year away from being done? Since THAT TOO is common knowledge, are you gonna pin the blame on your goddamned accountant for being honest?

Schilling, you've always been a tool, and now you're a lying tool. Your company was screwed since the day you founded it, you just managed to use your stardom to bilk sucker after sucker into trusting you.

Hell - as far as I can tell from stuff so far is the reason Schilling went for public money anyway was because venture capitalists won't give him any - BECAUSE THE WEREN'T STUPID. Chaffee might have put the nail in the coffin, but it was a long road of incompetent decisions on just about everybody else involved - especially Schilling. Schilling and his cronies need to stop pointing fingers.

I know it's a really really dead horse I'm beating, but seriously, any publisher who is paying attention isn't gonna fund a sequel to Amalur at this point because they know their money isn't going to be spent on Amalur 2, that money will get sucked into the black hole that is Copernicus. It's good money after bad, and a surefire way to lose $35 million dollars.

38 Studios was/is mismanaged. There can be absolutely no doubt on this.

Chafee's comments certainly did not help, but I'm pretty sure the fact that you couldn't pay your employees was THE BIGGEST FUCKING RED FLAG IMAGINABLE to any Amalur 2 investors.

Wasn't shit to pay attention to until it was taken to the streets. I think both RI (people who made this deal) and Schilling are stupid as heck. I do add Chafee to because he came out villainous. He didn't try to make this work at all.

Like Doctor said, they go down now or July. But what if they hadn't been shamed in the media? Got some money to do a sequel. Keep the company a float. Thing is would a month defferal had hurt them RI any more? Would letting them keep the tax benefits been so bad? Damn giving them more money.