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Reader Comments (19)

Posted: Jul 27th 2010 7:32PM karnisov said

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i knew it. lol

Posted: Jul 27th 2010 7:45PM Dandmcd said

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Nice, hopefully with strong leadership like Ken Rolston, and great art and story directors, the extra funding will allow them to bring out an Oblivion like AAA MMO. While the trailer for the game was a downer, I believe they got a great team that will wow us next year when their next trailer or gameplay video starts popping up.

Posted: Jul 27th 2010 8:22PM (Unverified) said

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It's closer to Yankee territory, but I'll forgive Curt for that.

Posted: Jul 27th 2010 9:47PM (Unverified) said

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Cinematic was great, imo.

Great to see them secure their future in a creative way. Looking forward to trying out the RPG as well as the MMO.

Posted: Jul 27th 2010 10:02PM ed511df3 said

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"Now he has to come up with 450 job openings to get his $75 million, and he has to get those people from Rhode Island. Yeah, a LOT of talent there. lol"

There's plenty of jobs to be had in an MMO company that don't require a lot of experience. If the bulk of those jobs are customer service reps, they can literally pull people off the street to fill those positions. They can also sponsor any computer programs at the universities that will bring in the sort of talent they can use to actually work on the game.

Where ever they setup shop, that community is going to be like a boomtown for the next few years. Hopefully the game that comes out of this will be good and continue to keep people employed.

Posted: Jul 28th 2010 2:54AM Gildas said

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um there's plenty of talent here. If anything, it's due to the fact that there was not a major studio here that a lot of our talent would move to other states (like Mass). There are some really great people graduating from RISD who have been connected with 38 studios since before any of this happened. Many of the current workers in Maynard are RISD grads. As someone who has actually done creative work with some of these grads as well as with the people at Hasbro studios, I can assure you that this state has plenty of talent.

Posted: Jul 28th 2010 3:54AM (Unverified) said

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Um why do they need a state govt loan when Schilling is rolling in doe? If they can't cut it by giving a presentation to a VC firm, then maybe they shouldn't be developing anything? Just food for thought.

Posted: Jul 28th 2010 10:16AM (Unverified) said

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Because you want to minimize your personal risk. Investing oodles of cash from your own pockets can get hairy in corporate structures and I doubt he has up to 75M just lying around in his swimming pool of money. He is one of the smarter pro athletes that decided to invest in something so when the days of glory ended, he wouldn't be living in his car begging the MLBPA for handouts.

These business loans are not lump sums either, so you would not be taking 75M home after signing the documents to dump into the next project. They generally act as a line of credit, allowing you to withdraw what you need as needed up to 75M. They are often low interest and sometimes backed by organizations like the SBA as an incentive to attract industries to an area.

He is making a smart move for his company (as taxes in the Commonwealth are generally high) and buying himself time and money to focus on short and long term projects. This line of credit affords him ample opportunity to use it wisely to generate profits, jobs for RI, and a quality gaming company. He would be nuts to pass it up.

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Posted: Jul 28th 2010 11:47PM (Unverified) said

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Because Schilling is just another Hypocrite Republican who trashes Obama and the Democrats on his blog about Government Spending and smaller Government yet he runs at the sight of tax payers money rolling his way to create a Video Game so he doesn't have to spend it himself, talk garbage then roll in it.
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Posted: Jul 29th 2010 3:11AM (Unverified) said

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Jonathan nailed it.

It's only "big government" or irresponsible "tax and spend" policies if you don't have your own snout in the trough.

As soon as you get to start wallowing in the handouts yourself, it becomes "sensible economic policy stimulating investment and growth".
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Posted: Jul 28th 2010 5:57AM Jade Effect said

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I hope their game will be a success, or it'll be rather ugly when it's time to pay up those 75 million dollars.

Posted: Jul 28th 2010 8:29AM Amblin said

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Well this is the end of the original dev process. From here on in the game design is all about gettign that cash. I'm not surprised this has happened, as I see it the company was going nowhere fast other than down the plughole.

I got flamed elsewhere for stating this, well looks like I was right all along. 38 Studios has just got a +1 life. How long it lasts remains to be seen.

I still doubt they'll publish anything. They aren't too big to fail. Only now they'll have angry taxpayers as creditors and rhode island will be rethinking it's stimulus packages if they cannot produce the goods.

Posted: Jul 28th 2010 10:34AM Aleforge said

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Those are called "gamers" go ride a bike or something.

Posted: Jul 28th 2010 10:38AM (Unverified) said

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Xiphos, that doesn't make it any more valid to offer loans like this from the government. I live in a city where two businesses were offered such loans on a much smaller scale. One was able to pay it back plus interest, but the other one more or less became property of the city and now the city is trying to get rid of it (and failing at it). I'm sorry, but the reality is that governments should not and do not need to offer such loans. If Schilling can't find a way to setup an equity fund that would fuel further investment into his project, then the guy is a big failure in my book.

Posted: Jul 28th 2010 11:19AM MrDiamondJ said

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Is it any different than states subsidizing game development by offering game companies tax breaks? I don't think so. The state government is forfeiting money either way.

Posted: Jul 28th 2010 1:51PM (Unverified) said

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I don't deny this, but I do think it's a flawed argument to say just because it's done in one manner that it should be acceptable or even encouraged. Governments can't economically calculate, so how do they know 38 Studios will amount to anything? A trailer which some found annoying to watch, and some screen shots? I'm sorry, but that doesn't sound like a business plan to me (it sounds like hype).
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Posted: Jul 28th 2010 12:22PM Salaryn said

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Interesting news.

If Rhode Island is interested in drawing in tech companies, a game company is great place to start. States offer tax incentives to get businesses in all the time.

Best of luck to these guys.

Posted: Jul 30th 2010 4:13PM (Unverified) said

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First off,
As people have said, there is plenty of talent in RI. Many people who work in Mass, live in RI. RI does have high taxes, but not as bad as Taxachusetts. Also, yes Schilling believes in small government. A Small Federal Government that empowers the individual states. Last time I checked, he's not getting a loan from the U.S. treasury department. Also, he's putting up his entire company as collateral, the taxpayer makes out on the loan interest and if he defaults, they get the assets. It's win/win for the taxpayer.

If Rhode Island is smart, they'll raise the money for this loan with a bond offering. They can sell the bonds at a very low interest rate, because they are tax free for anyone who lives in RI.

So, for example, they sell loans with a, let's say 2% yield to raise the money for the loan. Now, they loan that money to Schilling at 5%. The state and the taxpayers make 3% on the principle of the loan and it doesn't cost the taxpayers a dime. Oh and the state gets a whole bunch of tech jobs it desperately needs.

How is this a bad deal for Rhode Island?

Posted: Jul 30th 2010 4:32PM (Unverified) said

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Some right, some wrong:

This is a loan guarantee. Specifically, RI sells bonds to investors led by Wells Fargo. WF administers the funds, dispersing the funds to 38 per the main post. 38 repays and everybody's happy.

Or not. I guess we'll see.

Armozel, can you give us the credit of not throwing $75MM at a guy 'cuz he played at sports game, huh? The deal's been vetted, although I was not privy. I know some who were but haven't had the chance to debrief. That said, I'm curious where you're getting your info. Clearly, this operation needs cash to burn. But that's the nature of the beast. Why do you doubt the ability to produce? Do tell...

Also, this is pretty far outside typical A or B round (VC) numbers. Well-regarded web startup Swipely got $7.5MM in their recent A round, so it's an order of magnitude bigger.

This is usually referred to as the mezzanine round. Investors generally don't take an equity position, so it's more like a regular loan. Only no bank in the world would make this loan, given their risk management protocols. Private lenders tend to take it out of your hide, so, well, I just loaned this guy $525 because I'm a household of 7.

Mezzanine is often a make-or-break point for organizations. You're too big for VC, but not yet eligible for the banks. Tough spot.

What makes this deal extra-weird is that the company is still pre-revenue, and, like, way-pre-revenue. They might make their first sale in a little over a year. Generally, companies need to show revenue, if not income, by the time they start looking for a B round of VC$, not mezzanine funding.

The driver, of course, is the outrageous cost of developing a top-quality game. It's movie studio numbers. Wacky crazy numbers. In this case, they don't have any little titles bringing in some cash to support further development.

Granted, it's an "I wish" comparison, but Ubisoft turned $200MM in sales last quarter on several smash-hit title. The possibility is there to make substantial returns. If this company gets to the point where it can publish its MMO, it will already have shown success with the console game. That's the between-the-lines view of number of jobs and $ dispersal.

The flame-out scenario you describe would only cost $25MM because that third round would not go out. WF would be exposed to us if they dispersed with clear inability to repay. And if Reckoning flops, it will be...what's that expression...something about I can't play anymore... (NB: ...only $25MM...)

As to the talent issue, you should know that RI sends lots and lots of people on a daily basis up to Harmonix or whatever the hell it's called now. RISD president John Maeda is a digital artist, and I don't mean he does Photoshop. Get his iGoogle theme that changes with weather and time. S'cool.

Creativity. We haz it.

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