Why 38 Studios’ Demise Demands Skepticism

We will probably spend years trying to figure out what exactly happened with 38 Studios. Lured away from its original Boston HQ by the promise of a guaranteed $75 million loan from the state of Rhode Island if, that is, it would relocate to the Ocean State, the developer collapsed spectacularly in May, 2012 when it could no longer meet its financial obligations. At the time, the company had received approximately $50 million of said loan; despite this, it desperately needed a huge infusion of additional funds in order to stay afloat, begging the question of what, precisely, it did with all the money. A back and forth blame-game between the studio and its governmental creditor has since ensued.

At the center of this blame game is 38 Studios co-founder Curt Schilling who, prior to his failed attempt to create a video gaming development empire, helped lead the Red Sox to their first World Series victory since 1918. For this he is a sainted figure in popular culture, which helps to explain why observers in both the media and citizenry assume that Schilling’s comments on the collapse of his company can be taken at face value. But if we’re ever going to learn how things got so bad, we have to start treating the matter with greater skepticism than we’ve so far seen. And that includes the statements made by Schilling himself.

The need for this skepticism was underscored sharply at the end of last week, when Schilling gave an interview to the Dennis & Callahan sports radio show on WEEI in Boston. Speaking at length about the mess for the first time, Schilling revealed some interesting, and humanizing, details about himself, and about the failure of his dream project.

He also inadvertently unraveled some of the contradictory claims made by himself and other 38 Studios bigwigs in the weeks since the company went belly up.

You’ll recall that soon after the studio’s first game, Kingdoms of Amalur, failed to sell according to expectations, it missed a scheduled May 1, 2012 payment to the State of Rhode Island, apparently without giving warning ahead of time. The company scrambled to make the payment, but did so at the expense of other obligations. This began its death spiral: On May 15, paychecks to 38 Studio employees bounced. Just over a week later, it was dead.

In the aftermath, the official party line, taken by Schilling and others, was that comments made by Rhode Island Governor Lincoln Chafee about the company’s health, just as they were set to receive an infusion of new investor funds, were the culprit. Chafee’s comments, so they say, made 38 Studios unpalatable to new investors. Schilling even repeated these claims in his interview last week. But it seems a bit rich for 38 Studios to blame their ultimate failure on the revelation that the company was in terrible straits, without explaining why it was in terrible straits in the first place.

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