Friday, May 25, 2012

No Re-Spawn For 38 Studios


There was disappointing news from Rhode Island today as it become known that troubled developer 38 Studios had laid off its entire workforce (that's 379 employees including those from subsidiary Big Huge Games) in an attempt to stave off bankruptcy.

For those unaware, 38 Studios has an interesting history behind it.  Founded by former professional baseball player Curt Schilling in 2006, the company received a $75,000,000 loan from the state of Rhode Island to relocate from Massachusetts; in theory bringing jobs and economic resources into Providence where they would move.

38 Studios had ambitious plans to parallel-develop two games, one a traditional RPG and the other an MMORPG (codenamed Project Copernicus) set in the same universe as the single-player RPG.  The single-player game, Kingdoms of Amalur: Reckoning, was released in February of this year (readers may recall it made my list of the top 10 games to watch for in 2012) to generally favourable reviews (it currently has a rating of 81 over on Metacritic which I would say is a solid score for a new IP from a rookie studio).  With people such as R.A. Salvatore and Todd McFarlane in the mix it seemed like a sure-fire hit.  Indeed, it has sold approximately 1.2m copies to date, which, again, for a brand-new IP I would say is impressive.

News of problems began to swirl a couple of weeks ago, when the first installment of 38 Studios' loan repayment to the state of Rhode Island became due.  They missed the initial payment date, and only through not making payroll (i.e. not paying their employees) were they able to subsequently correct this and make the first payment a few days past due.  Clearly, not making payroll was a problem and the rumour mill continued to swirl for the past week, indicating the company was in dire financial straits as well as revealing that several top-level executives had left.  This culminated in the news today that all of 38 Studios' employees had been terminated with immediate effect.


At this point it seems that 38 Studios is very close to bankruptcy, and although they are not there yet it may only be a matter of time, especially since they now have no employees with which to further develop assets.  The terms of the loan from Rhode Island dictate that if the developer defaults on the loan (as it seems very likely to do when the second payment becomes due) then all of 38 Studios' IP is transferred to Rhode Island, and the state will essentially own both Reckoning and Copernicus.  This is a novel situation, and I can't really think of anything to compare it to in recent history.

So what next?  Well it seems that there will likely be no more DLC for KOAR since there is no-one left to develop it.  What happens to the MMORPG is a little more murky.  In theory if the company somehow manages to remain solvent it could perhaps sell the entire IP for both games to a third-party, and then presumably use the revenue received from the sale to help pay back the loan to Rhode Island.  The problem there is that at least one industry analyst (the ever-quotable Michael Pachter) believes that the IP is worth perhaps $20m at best, leaving quite a shortfall on the loan.

The other, and probably more likely option, is that 38 Studios defaults on the loan and the IP is then transferred over to the state of Rhode Island.  At that point they would likely auction it off to the highest bidder (in order to try and recoup some of their losses) and you would then end up with the same outcome of the IP belonging to a new third party.  Hopefully this would be someone who was committed to continuing to develop Copernicus, and indeed they may even turn around and hire some of 38 Studios' former employees to help complete the game in a similar way to what happened when Realtime Worlds exploded and APB was sold to K2 then later retooled as "APB Reloaded" (which is apparently doing quite well now).


Either way, it's a sad day for gamers and in particular MMO gamers.  Copernicus was one of the last big-budget blockbuster MMOs, and its failure is only going to encourage publishers and developers to either scale back their projects or perhaps just not make them in the first place.  Indeed, a brief teaser video was released for Copernicus just a few days ago showing some impressive visuals if nothing else (this is embedded below).

The Governor of Rhode Island, Lincoln Chafee, other than having an awesome name, was quoted as saying that KOAR needed to sell 3m copies just to break even, and the fact that it did not meet this requirement meant that "the game failed".  In today's economy, a brand-new IP from an unproven studio selling 3m copies is simply unrealistic.  Indeed, I am surprised that it has sold the 1.2m copies that it has to date, as those are very respectable numbers for a new game.  Needing to get 3m though?  That was never going to happen.  The fact that 38 Studios gambled on that - and lost - is a substantial failure that most people familiar with the gaming industry would have been able to predict.  Certainly it's easy to look back on these events with hindsight, but still you get the feeling that there were perhaps some misguided decisions by upper management at 38 Studios if their entire business plan essentially came down to a bet on Reckoning.

Perhaps in some parallel universe we are all busy driving our flying cars, discussing the 17th season of Firefly and marvelling over the 12m copies that Reckoning has sold to date, but somehow I doubt it.

As promised, the short teaser for Copernicus is embedded below.  It certainly looks nice enough, and I hope that in the fullness of time it winds up at a developer able to give it the finishing touches it needs.

I can hope, right?

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