Curt Schilling’s video game company 38 Studios is having severe financial difficulties. Unfortunately, it’s not just his problem. 38 Studios received an incredible $75 million in guaranteed loans from Rhode Island as part of a job creation deal. The company cannot meet its payroll and defaulted on a $1.1 million loan payment.
On Wednesday, the state economic development official who oversaw the loan guarantees resigned abruptly. In a bizarre twist, at one point Thursday, company representatives hand-delivered a check to the Rhode Island Economic Development Corporation, apparently to cover the late $1.1 million payment, but then later said the company had insufficient funds to cover it.
38 Studios owes $5.3 million for the rest of the year in loans and interest and $12.7 million per year through 2020. The financial problems come despite the company selling around a million copies of its $60 role playing game “Kingdoms of Amalur.”
According to the Boston Globe, Schilling invested $30 million of his own money. Before the Rhode Island deal he had difficulties raising the $48 million in venture capital he was seeking.
“More than one VC who has met Schilling has come away with the impression that an investment would require quite a bit of ‘babysitting,’ ’’ noted a trade publication, Private Equity Week, at the time.
Their business projections were just a tad optimistic.
He had massive ambitions. The company promised each of its original 37 employees a bonus of $1 million if 38 Studios reached $1 billion in value, a huge stretch for a start-up. By comparison, Warner Bros. agreed to pay as much as $160 million for Turbine Inc., one of the Boston area’s largest established video game companies.
Why did Rhode Island get involved and commit $75 million? The Sawx, basically.
“I had heard rumors that both the governor and House leadership were desperate to cut a deal with Schilling,’’ Watson said. “Nobody was admitting to anything at the time. Frankly, Keith Stokes [director of the Rhode Island Economic Development Corp.] and Governor Carcieri’s office were full of obfuscation, camouflage, and possibly outright lies.’’ Watson said he opposed the program as “a scandal waiting to happen.’’