US Feature: Bad Business --- A Tale of Baseball, Video Games, and a Falling Hero (Miller)

Before the Fall: Curt SchillingIn 2004, Curt Schilling became a legend in Boston. Playing on a badly-injured ankle, he helped the Red Sox achieve one of the greatest comebacks in baseball history to defeat the hated New York Yankees in the semi-finals. The Red Sox then won the "World Series" --- Boston's first title in 86 years --- over the St Louis Cardinals.

And then was more: in 2007, Schilling's pitching took the Sox win to another World Series, finally changing the course of the Sox/Yankees rivalry after decades of cursed frustration for Bostonians.

Imagine the frustration, then, of many Boston fans when their hero badmouthed some of their best-loved politicians and used his fame to campaign for Republican candidates. And then you can appreciate the Schadenfreude at Schilling's failure to launch a successful computer game company.

As Robert Miller points out on The Boston Gamer, however, the reaction to Shilling's recent failure is a lot more than gloating or political squabbling. The collapse of 38 Studios has exposed the hypocrisy of politically-active citizens, the unscrupulous behavior of famous people with more money than brains, and the deeply flawed inner-workings of State Government and its business practices.

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We all know the story of 38 Studios by now. Curt Schilling helped win two world series championships for the Boston Red Sox and now he had a dream: to create a gaming company and make a groundbreaking MMO that will be the best anyone has ever seen. What resulted, however, was more like a nightmare.

Schilling left the Red Sox after making $8 million in his last full season. He started 38 studios and began to hire people to work on his new (and only) IP: Kingdoms of Amalur: Reckoning. He invested $3 million of his own money in order to get the company started (his net worth is $60 million) and set up shop in Massachusetts. In short order, 38 studios grew to over 400 employees and the company was in the end-run of the development of the game.

In November 2010, Schilling moved the company to Rhode Island to utilize a $75 million loan from the government at low interest (but, apparently, extremely high risk). Finally, the game was released on February 7, 2012 and sold 1.2 million copies. By May, however, unable to repay their loan to Rhode Island, and unable to make payroll, the entire staff of 38 studios was laid off.

Enter the first, and perhaps most glaring, problem - According to the Governor of Rhode Island, 38 Studios would need to sell 3 million copies of the game in order to have any return on investment. To put this in perspective, Final Fantasy XIII, a successful installment of an historically franchise, sold 4.82 million copies and is the thirteenth game in the series. For any startup company to expect to sell 3 million copies of a game with a new IP is, quite frankly, an insane notion.

There are lots of questions regarding where the studio went wrong, but there are a few things that have stuck out as red flags for the entire situation.

What does this show about what type of person Schilling truly is? While he was still playing for the Red Sox, he spoke out about his personal beliefs during the 2004 elections (Schilling actively campaigned for then President Bush’s reelection). His endorsement of such politicians as former President Bush, Senators Scott Brown and John McCain clearly indicate his Republican-leaning beliefs. The standpoints that all of these politicians have in common is the want for a smaller government. They believe that the government should stay out of people’s personal lives and shouldn’t be interfering with private businesses.

This completely contradicts Schilling’s history with 38 Studios, as his company not only willingly accepted, but campaigned to receive $75 million from the government. Furthermore, once Schilling received the money from the loan, he immediately repaid himself the $3 million that he initially put in. As a result, his company’s failure doesn’t affect him financially whatsoever. Now, while it is perfectly understandable that reimbursement should be given over the course of time, Schilling has shown that he values his own financial gains over those of his company or its employees. Instead of re-investing cash into his company to continue his “dream” of creating this new world of Amalur, he made decisions that bankrupted his company, failed to repay the state of Rhode Island, and has led to the layoff of more than 400 employees.

This development will put huge economic strain on not only the employees themselves, but the government as well. The state of Rhode Island now has to pay 400 people unemployment for upwards of 99 weeks, has given a company $75 million for investments that it cannot pay back (money which could be allocated to paying unemployment for said employees), and increases the unemployment rate in a state that is already under tremendous financial and economic stress.

Oh, and how did he let the employees know they were fired? A cold, calculated email to inform all of his employees that they are officially laid off as of that day:

"The Company is experiencing an economic downturn. To avoid further losses and possibility of retrenchment, the Company has decided that a company-wide lay off is absolutely necessary.

These layoffs are non-voluntary and non-disciplinary.

This is your official notice of lay off, effective today, Thursday, May 24th, 2012."

The outcome of this calamity is that Curt Schilling is the only person who has made out at all from the failure of his company. He has recently taken to twitter to promote the upcoming game in the Armalur series (code named Copernicus) and to try and make the case that he never received a bailout. Jason Mayo (@jay_mayo) asked, “Does that mean you're going to pay back your govt bail out money?” His response: Haven't received a penny of it, and have not asked for any.” The hypocrisy of this statement is astounding.

As an avid gamer and a Red Sox fan, I find myself enraged on multiple levels. Why didn’t 38 Studios start out with a smaller project (ala Minecraft, Braid, or I MAED A GAM3 W1TH Z0MBIES 1N IT!!!1)? Why didn’t they sell themselves out to other game companies to aid with the creation of their own games (Treyarch with Call of Duty: World at War, DICE with Battlefield 3, etc.)? Why didn’t Schilling invest more of his own money or seek funding from other professional athletes who also enjoy gaming? There are a million different things he could have done with his company to keep it afloat. The reality is that there are nearly 400 people who are unemployed in Rhode Island right now while their boss sits comfortably on a bed made of $60 million. If the game made money, he was set to make millions. It didn’t and Curt Shilling shares absolutely none of that pain. While some may make the argument that Schilling may have just been a bad businessman, this goes FAR beyond that.

Schilling isn’t the only one who deserves criticism, however. The state of Rhode Island loaned this money to the company without doing enough investigating into the business model of the company. By all accounts, the game’s reviews ranged from above-average to great, and its sales were extremely competitive for an initial release. Furthermore, the game received widespread publicity before this calamity just because of Curt Shilling’s name being associated with it. Anyone who knew what the company was planning to do and how much the company had spent on creating this game (which the government would have access to during the negotiations for the loan) and didn’t question the business model of 38 Studios deserves to be fired immediately.

The victims of this hypocrisy and insanity are the employees and the citizens of Rhode Island who had nothing to do with the collapse and mismanagement of this company. Thankfully, other companies are contacting former employees and telling them to apply to gaming jobs with them. However, that is not a guarantee of work. I truly hope that Schilling does the right thing and make amends with his past, but my hopes are not high. I, for one, will go out of my way to never support anything that Curt Schilling does for as long as I have breath in my lungs and a pulse in my body.

To quote Thomas Jefferson, “All tyranny needs to gain a foothold is for people of good conscience to remain silent.” Let us not be silent on this matter… while too many workers are unemployed, there may be many other famous people looking to 38 Studios as the perfect model, as opposed to a fantastic nightmare.