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[WallJump]

I posted one of these a page or two back but here's another bit from a blog called Vicarious Existence with some armchair salary analysis of 38 studios, which points towards the possibility that the incentivised $75 mil loan might have been what brought the company down.

Forward Planning

So what’s my point? That chasing 450 local jobs in order to get that US$75m loan from Rhode Island appears to have been a key cause in the current problem. I’m sure 38 Studios thought they were getting a good deal – lots of investment, no publisher to tell them what to do, plus they were getting paid to grow – as did Rhode Island – here comes a new, sexy, financially attractive industry that will create jobs – but the current situation shows the error in their thinking.

Big, one-off payments are attractive, but every one of those hired employees has ongoing and continuous costs associated with them. It may have made more financial sense (but would likely have had political ramifications) if 38 Studios had not hired as many people and just paid the $7500 per vacant position per year penalty.

Let’s pretend that once 38 Studios got to December 2011, they froze at 125 FTEs [Full Time Employees]. They’d lose that US$3.1m payment, plus be charged (125 x $7500) $937.5k in penalties at the start of 2012, but that’s a one-off cost that would be less than hiring the loan-required extra 125 FTEs for 4 months (and obviously those FTEs were hired for the full year, so would have cost a lot more than the penalty).

It would have kept costs under control, plus it is hard to know what those extra 125 employees have achieved given that Project Copernicus’ release date has slipped 9 months despite its employee growth.

Economics is sometimes about the alignment of incentives to achieve the desired behaviour. It looks to me like Rhode Island, in its eagerness to start a new industry, has ended up incentivising 38 Studios (and 38 Studios happily took that money) onto the brink of its own destruction.

 

[eznark]

I guess Schilling won't be posting on Gaf anymore.

He'll continue to use his alt: Sanjuro

 

[CecilRousso]

It´s alwaus a shame to see people loose their jobs, but for me personally I haven´t cared for BHG since they stopped doing their strategy games. I thought they were going to do something special with Kingdoms of Amalur, but I think they were let down by Todd McFarlane and R. A. Salvatore which created something so extremely generic with their work there.

 

[flkk]

Did Schilling refuse to give up any equity in his company or was it impossible for him to get financing? How can a studio crumble like this?

He loaned it $4 million. Reports claim he then used the state loan to pay himself back, although he disputes it.

http://www.examiner.com/article/sch...an-to-pay-himself-says-38-studios-will-endure

 

[daycru]

is that a real Curt Schilling quote?

if so, fuck that guy.

http://38pitches.wordpress.com/2010/12/19/cant-help-but-love-this/

 

[TriGen]

Man, that happened so quick. I figured they would be able to last a little longer then this.

 

[Data West]

Hey STALKER guys, you should definitely make your next game a MMO. It's a really, really good idea.

 

[diffusionx]

Normally a studio might do this to "go slim" and look for funding without burning additional staff funds. But in this case, with RI holding a ransom on the IP, it's hard to say what 38 can do apart from letting the time run down. I guess maybe this is just the hail mary play to look for funding, put pressure on the government, and hope not too much of the original team gets cherry-picked inbetween?

I think RI holding the IP tells the story.

The company will probably just be a shell that uses KoA money to repay RI as long as possible. The game is still out there and selling after all. I don't even know how much they owe RI so selling the IP may not be feasible. I doubt we'll ever see the MMO and I don't see 38 reconstituting itself.

 

[massoluk]

Did Amalur bomb that bad to take the whole studio down? Horrible news. It goes to show just how dangerous it is for new studios to attempt to become a AAA studio right off the bat. It's pretty much EA and Activision market.

That's the weirdest shit in this whole shitfest. Amalur sold pretty damn well, and the studio set the date for the MMO themselves for next year. Everything is exactly as they scheduled at least on the operating income side, yet they just folded. May be they were expecting more investors to chip in or something.

 

[Log4Girlz]

Man what a shame. I should finish KOA out of respect.

 

[ShinobiFist]

According to a recent tweet from Curt Schilling, KoA: Reckoning sold 1.2 million copies in its first 90 days of release. I have no idea how sales that good can still allow for such a tragic collapse.

If the budget was insane, it doesn't matter how many copies it sold. It's about making profit.

 

[Stumpokapow]

I posted one of these a page or two back but here's another bit from a blog called Vicarious Existence with some armchair salary analysis of 38 studios, which points towards the possibility that the incentivised $75 mil loan might have been what brought the company down.

But at $5,000 a man-month, 125 employees * 4 months = 500 man months = $2.5 million. At $10,000 a man-month, 125 employees * 4 months = 500 man months = $5.0 million. I'd say that's a good lower and upper range for man-months costs for those extra 125 employees from December 2011 to the point where they stopped getting paid.

So the blog's hypothesis is that it'd be easier to pay a $4 million penalty than shoulder $2-5 million in burn rate? Seems like a pretty weak hypothesis to me. First, $1 million didn't bankrupt the company. Second, it's quite possibly hiring the employees for this portion of the year has been cheaper than the penalty.

 

[Jtrizzy]

Feel bad for those who lost their jobs, and I thought Reckoning did some nice things with it's controls. That said, I remember when this started, and thinking it would fail. It just seemed like an addicted WOW fan with the political resources and fame to get something like this done, thinking he could get involved in an industry he probably had very little knowledge of.

 

[digita1alchemy]

Stories like this are why, even though I love making games, I am ok with not having a job in the industry anymore. Same thing happened to me.

 

[ultron87]

That's the weirdest shit in this whole shitfest. Amalur sold pretty damn well, and the studio set the date for the MMO themselves for next year. Everything is exactly as they scheduled at least on the operating income side, yet they just folded. May be they were expecting more investors to chip in or something.

Yeah, it is so weird. Surely they must've known that the MMO wasn't going to be ready anytime soon and when the loan payments were due.

 

[border]

http://38pitches.wordpress.com/2010/12/19/cant-help-but-love-this/

Not his words -- that's obviously a corny chain e-mail from years ago.

Though if it's on his blog then I imagine he believes some or most of it anyway.

 

[Patryn]

But at $5,000 a man-month, 125 employees * 4 months = 500 man months = $2.5 million. At $10,000 a man-month, 125 employees * 4 months = 500 man months = $5.0 million. I'd say that's a good lower and upper range for man-months costs for those extra 125 employees from December 2011 to the point where they stopped getting paid.

So the blog's hypothesis is that it'd be easier to pay a $4 million penalty than shoulder $2-5 million in burn rate? Seems like a pretty weak hypothesis to me. First, $1 million didn't bankrupt the company. Second, it's quite possibly hiring the employees for this portion of the year has been cheaper than the penalty.

I think the idea is that it would only cost $7500 for the YEAR to have one less person. Compare that with a person with an average salary of $65,000 (which I believe was the minimum average salary they were required to have).

It would mean that 38 would save $57,500 per year, per each employee under the required minimum level of the contract.

 

[LCfiner]

http://38pitches.wordpress.com/2010/12/19/cant-help-but-love-this/

uuuuggggghhhhh. that’s the worst.

 

[DopeyFish]

But guis we must keep the used market around just so we get a few more bucks in our pockets!

 

[jbug617]

Great to see all of these studios reaching out to the people who lost their jobs today.

 

[dskillzhtown]

Despite the quality of Kingdoms of Amalur, I'm a bit surpirsed at the amount of sympathy being extended to 38 Studios. All evidence points to mismanagement of funds, extensive deceit or negligence, and hundreds of thousands of taxpayer's money being thrown to the wind. The dissolution of these studios is not the end of this saga; the Rhode Island government looked extensively into 38 Studios progress the past week and STILL decided to let them sink. I expect we'll being hearing a lot more about 38 Studios in the courthouses these coming years.

Damn dude. We have sympathy for the employees that are now looking for work.

 

[Patryn]

But guis we must keep the used market around just so we get a few more bucks in our pockets!

What does the used game market have to do with this?

 

[Data West]

But guis we must keep the used market around just so we get a few more bucks in our pockets!

Gamestop killed Curt's dreams.

 

[Cheska]

Crap, horrible news all around

 

[Deadly Cyclone]

That #38Jobs hashtag on twitter is why I love the industry. So many places reaching out with jobs.

https://twitter.com/#!/search/%2338jobs

 

[Elginer]

Fucked up way for it to end. Reckoning was a fun ass game, really feel bad for all of those laid off. That's some bullshit and even more for management just BOMBING their ass with it.

 

[KuwabaraTheMan]

Sucks for everyone who lost a job. It's kind of shocking to me how quickly everything seemed to unravel for them.

I hope the laid off employees manage to find new work before too long.

 

[goldenpp72]

But guis we must keep the used market around just so we get a few more bucks in our pockets!

Yeah i'm sure that's the reason the company is dead.

 

[LiK]

Fucked up way for it to end. Reckoning was a fun ass game, really feel bad for all of those laid off. That's some bullshit and even more for management just BOMBING their ass with it.

exactly

 

[eznark]

But guis we must keep the used market around just so we get a few more bucks in our pockets!

The secondhand resale of unreleased vaporware must be outlawed!

 

[Jtrizzy]

Not his words -- that's obviously a corny chain e-mail from years ago.

Though if it's on his blog then I imagine he believes some or most of it anyway.

Shilling is well known for using his fame to tastelessly promote his political views.

 

[Jugendstil]

uuuuggggghhhhh. that’s the worst.

Gross. The guy seems like such a phony and hypocrite.

 

[AndyD]

Sad to hear.

 

[ultron87]

The secondhand resale of unreleased vaporware must be outlawed!

Obviously they closed up in anticipation of all the funds they would lose from people reselling copies of their MMO.

 

[Patryn]

Just saw the layoff e-mail sent to the staff from a friend who knew people who worked at the studio.

My favorite bit was justifying the layoffs to avoid further losses.

That's brutal.

 

[SolidSnakex]

That #38Jobs hashtag on twitter is why I love the industry. So many places reaching out with jobs.

https://twitter.com/#!/search/%2338jobs

Lots of nice job offerings there. Irrational, Insomniac, several SOE studios, PopCap, EA, Gearbox etc. So, at least it looks like many of them will be able to land another job relatively fast.

 

[Derrick01]

Sucks for the workers but it's too bad the people in charge of this fuckup won't get any damage probably, as is the case with most rich people in this country. Amalur was a decent game but Curt with his quotes and actions reeeeally fucked this up.

 

[SirButterstick]

So I guess there'll be no patch?

 

[Seda]

That #38Jobs hashtag on twitter is why I love the industry. So many places reaching out with jobs.

https://twitter.com/#!/search/%2338jobs

This is a bit heartening.

 

[WallJump]

That #38Jobs hashtag on twitter is why I love the industry. So many places reaching out with jobs.

https://twitter.com/#!/search/%2338jobs

That is really cool. I love seeing Twitter used for good.

 

[border]

I think the idea is that it would only cost $7500 for the YEAR to have one less person. Compare that with a person with an average salary of $65,000 (which I believe was the minimum average salary they were required to have).

It would mean that 38 would save $57,500 per year, per each employee under the required minimum level of the contract.

Stump's point is that hiring fewer people wouldn't have saved them anyhow, though. It would have made more sense over the long term, but in the course of the last 6 months it would have cost roughly the same to hire more people as it would cost to not hire them.

 

[Wag]

For once I feel good to be a MA taxpayer.

 

[Hero of Legend]

Aaaaand Kirkhope moves around again. Where will he end up this time?

 

[SquiddyCracker]

This whole affair is a big shame.
I thought Amalur was a pretty promising new IP, it was a pretty neat open-world game with fun combat.

 

[DjangoReinhardt]

I'm just happy that a multi-millionaire was able to live out his manchildish dream at the expense of taxpayers and his employees. Really warms the heart.

 

[Cameron122]

Really enjoyed LoA's ideas hopefully everyone finds jobs soon!

 

[Fine Ham Abounds]

Not his words -- that's obviously a corny chain e-mail from years ago.

Though if it's on his blog then I imagine he believes some or most of it anyway.

Of course he does. This whole endeavor has been a nice little dose of reality for him I'm sure. He's worked with a diverse team for half a decade and seen that real people aren't political action figures, and I do wonder how he feels right now. If he goes home and wallows in comfortable self pity while his former team are out scrambling for the next few months, that'll say more than anyone else could about his legacy.

That #38Jobs hashtag on twitter is why I love the industry. So many places reaching out with jobs.

https://twitter.com/#!/search/%2338jobs

This is great, but part of me wishes the industry always came across like this.

 

[Meier]

Rise of Nations was one of my favorite "last-gen" PC games. I wish Brian Reynolds would quit wasting everyone's time and get back to making real games.

 

[Hero_of_the_Day]

Oh Curt.

Fuck this guy. I hope he never finds a job in the industry again.

 

[Cat Party]

I posted one of these a page or two back but here's another bit from a blog called Vicarious Existence with some armchair salary analysis of 38 studios, which points towards the possibility that the incentivised $75 mil loan might have been what brought the company down.

Great analysis in that article. The amount of staff they carried was ridiculous, and its clear the people who negotiated this agreement didn't pay full attention to the risks involved for both parties.