Why 38 Studios’ Demise Demands Skepticism

Further accusations made by several people within 38 Studios hold that the final collapse happened because the state of Rhode Island failed to honor a promised tax cut. One of them even went so far as to claim that the tax credit was a guaranteed part of the loan agreement, which is to say, it was Rhode Island, not 38 Studios, who first reneged on the deal. A review of the loan documents suggests this is, to put it politely, bunk. And now with this latest interview, Schilling himself has all but confirmed it.

In the interview, Schilling said that “at the end,” an unnamed investor offered to give them $15 to $20 million that might have salvaged 38 Studios. However, the investor would only do so if A) Rhode Island agreed to provide a $6 million tax credit, and B) Rhode Island agreed to renegotiate the loan guarantee to allow him to be repaid first. “If that happened,” Schilling said, “he would come in and save the company.” In cother words, Schilling admitted that it is 38 Studios, and not the State of Rhode Island, that tried to back out of its obligations.

It has been pointed out again and again that Schilling recently decryed government involvement in business while running a business that depended on government involvement, a business that failed when said government started demanding results. But even if Schilling is a hypocrite on that matter, he’s still a sympathetic figure, having sunk his entire vast fortune into 38 Studios. “I put everything in my name in this company,” He said. “I believed in it. I believed in what we built. I never took a penny in salary. I never took a penny for anything.” This cost him dearly, as Schilling confirmed during the interview that he told his family, “The money I saved and earned playing baseball was probably all gone. Life is going to be different.”

Indeed it will, assuming he isn’t exaggerating his financial losses. Just life will be different for the employees who were given same-day notice of their termination, along with the immediate cessation of their health benefits. But neither Schilling’s newfound pauper status, nor any of the claims made regarding Rhode Island’s culpability for his company’s demise, answers the single biggest question: What the hell happened to all the money in the first place?

Schilling and the rest of 38 Studios’ brass have not made themselves widely available for comment on the company collapse, and it should be noted that for this analysis, Game Front relied solely on comments available in the public record. But even with this limitation, information about the company’s failure seems to reveal that its operations were a hamfisted mess at best. Previous high profile company collapses have typically revealed significantly unethical, often criminal behavior. While we cannot claim to know this will be the case with 38 Studios, we can safely say that the information available so far frequently contradicts the official company line. That, at least, ought to be grounds for not taking anything former 38 Studios associates say at face value.

Schilling may indeed be as much of a victim as his former employees, but until real, tangible data is available, or until he and other company management submit to greater scrutiny, we should be looking critically at what has been a traumatic event for hundreds of employees, and the economy of an entire state. We must, in short, let the investigation play out and stop assuming the best simply because we like Schilling personally.

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