Published on November 9th, 2012 | by Joshua Hinke0
Lessons from Curt Schilling and 38 Studios
We should have seen it from the start. Some baseball icon gets it into his head that he’s going to spend millions of dollars to start up a game company with no experience in development or publishing. He develops a team on the East Coast and pours in excessive funds demanding a hit franchise. The only question is: why didn’t anyone stop him before all of this came to a head?
It’s perfectly natural to go through a midlife crisis or even a quarter-life crisis. Some people buy corvettes, others join the peace corps. Maybe you go back to school for that English degree, or maybe you start writing for an independent video game website. Curt Schilling retired from baseball and decided that he was going to the start the next big game company to make “Bill Gates money.” Curt was a giant nerd and gamer, no different from (probably) you or me, who had an ambition to make the video game that he had always wanted to play. Curt was used to things working out for him. He was a multi-millionaire professional athlete who wasn’t acclimated to losing. When his favorite war board game, Advanced Squad Leader, held its championships in October, Schilling started his own convention in January so that he would not feel left out. He was asked to write reviews for Everquest II and appeared on a World of Warcraft forum. The man never had to scrap at the bottom, begging for someone to pay attention to what he was doing in the gaming industry. He was welcomed with open arms. But he was like us in the sense that he hadn’t the slightest idea how to run a video game enterprise.
I like to juxtapose it with the story of my grandfather, Art Hinke, who retired from being a commercial airline pilot with the idea to start his own dairy farm. While flying high in the sky, at the helm of a 747, my grandfather would look down at the farms below and think, “That’s the life, someday I want to do that.” So he sent my father to farm school, recruited some of his other children as workers, and started his own dairy farm. However, Art did not know the first thing about farming. He didn’t know how much equipment should cost, how changing weather would affect the harvest, or how to negotiate a deal for the land required. Within a few years, floating interest rates on a bad loan was too much and the farm went under. All the passion in the world could not make up for the fact that my grandfather simply did not know how to run a farm.
When Schilling started 38 Studios, there was the promise that the studio would release an MMO that would compete with Blizzard’s defining product, World of Warcraft. In the following years, big names were attached to the projects like Ken Rolston (lead designer of Elder Scrolls: Morrowind and Oblivion), Todd McFarlane (concept artist for Spawn), and RA Salvatore (Forgotten Realms scribe). This team was assembled, given a blank check, and told to make a hit franchise.
There were certain shortcomings to the plan. One could not have foreseen that the MMO market would become flooded so quickly with the addition of titles like Guild Wars, Lord of the Rings Online, The Secret World, or The Old Republic (to name a few). No one could have predicted that the game would get stuck in development hell for so long. But, more than anything, no one could have predicted the state of Rhode Island would have so much to say about the company’s future.
For those who don’t know, one of the most interesting aspects to 38 Studios’ short, yet enthralling, history is that in November of 2010, the studio took out a $75 million loan from the State of Rhode Island under the conditions that they would move their company to said state. Rhode Island was looking to improve its job market by attracting companies to move within its borders. Now, keep mind that at this time, no real game had been shown for 38 Studios. Concepts were being tossed around, there was the talk of some future MMORPG in a fantasy setting, but no release dates had been announced, no trailers had been shown, and no demos were playable. All of this was on the promise was that someday, Schilling’s dream would come to fruition.
Any company that takes on a $75 million loan before having even produced a product would seem doomed to fail, but that is only first of the questionable decisions. In this same period, 38 Studios purchased Big Huge Games, spending even more money that it had yet to receive. The company obviously was unaware how suspect a return can be in the video game industry and how difficult it is to start a new franchise. They also clearly failed to take note that they were releasing a generic fantasy-RPG into a flooded market at the end of a console cycle. For a company that was “founded” in 2006, how did it take over five years for the company to start generating any whisper of revenue? It’s clear when you look at its founder.
Curt Schilling has long been known as a confrontational individual. Politically, athletically, and socially, the man has always been known for his conflicts among friends and enemies alike. It was clear that when Schilling started the company, he wanted things done his way and did not care much for the outcomes. He took his favorite parts of video games and told the development team to stick them together. His Staff reported that he undermined his management teams and dismissed deadlines. But the most disturbing part of Schilling’s lack of vision is how, even now, he fails to see why 38 Studios didn’t work. He instead blames it all on Lincoln Chafee, the Rhode Island Governor, who hinted to 38 Studios’ financial problems before the company went under. Schilling has since called the Rhode Island Governor a “dunce”. Furthermore, he claims the studio would have been saved if a deal with publisher Take-Two would have fronted money for a Kingdoms of Amalur 2. Take-Two has more or less denied any involvement with 38 Studios. Lastly, Schilling turned on his employees, telling Boston Magazine that the MMO they were working on, “Wasn’t fun to play”.
But honestly, 38 Studios never should have been in such a situation in the first place. Curt Schilling has long been a conservative politically-minded individual who believes in small government. So much so, that the man was encouraged to run for political office for the Republican Party. Yet, he took $75 million dollars from a state government to keep his business afloat. There is a stark contradiction there.
But the worst part of all was the silence that came from the executives of 38 Studios; the refusal to admit that anything was wrong. First the company missed payments to the moving companies that helped their employees relocate to Rhode Island. Then they missed a payment on a loan in the amount of $1.1 million. Then they failed to pay the premiums for their employees’ health care. During all of this, employees of 38 Studios were unaware of the companies financial problems. That was until May 24th when, after not being paid for nearly a month, 400 employees were laid off. Shortly thereafter, 38 Studios filed for Chapter Seven bankruptcy.
What is sad is that 38 Studios, for all intents-and-purposes, was a wonderful place to work by the sound of things. Lunches and dinner were regularly provided, the travel budget was extravagant, employees could join an afternoon game of Ultimate Frisbee. When a colleague’s rottweiler died, Schilling presented him with a puppy at a staff meeting. One Christmas, all employees received brand new laptops. Another Christmas, they got custom-made tote bags. It is impressive for a company to treat their employees so well, and if you look on glassdoor.com, you will see that many developers are not as nice. Schilling was following the behaviors of such companies as Google or Valve, who lavish their employees with gifts and perks. But, we come once again to the problem that 38 Studios did all of this with only the promise of an MMO that was 3-4 years away from completion.
Schilling is not a villain. His intentions were good and pure. That is clear in the way that he treated his employees and participated in the studio’s vision. The man pounded the pavement and lit up phone lines trying to find funders for 38 Studios. He has even admitted certain failures in his capitalist venture. The discussion should never be whether Schilling was a good man. It should focus more around how volatile the gaming industry is when you don’t know what you’re doing. When Schilling and his counterparts realized they were sitting on a sinking ship, they did not let the public know. Instead, they let it all explode in a media frenzy over the last 6 months.
The final chapters of 38 Studios are still being written. Many of the employees of the company’s Big Huge Games have been absorbed into other studios. Hopefully, other families and smaller characters in the story are on the road to recovery. But, as the assets of 38 Studios were auctioned off last Sunday, a decent amount of it being Schilling’s personal belongings, it became clear that the ex-baseball star’s part in the tale may almost never be over. 38 Studios went bankrupt with almost $150 million being owed to over 1,000 lenders. About $50 million of that was Schilling’s personal investment. Those numbers speak for themselves.
In the end, you sort of feel bad. No one should ever wish this kind of failure upon anyone, and the person who has suffered the most (at least financially) in this effort has been the man at the top. Maybe Schilling will continue to be fine, with millions of dollars left in the bank. Maybe he will find himself suffering, like so many do in these times of economic turmoil. However, the message is pretty clear. If you’re going to have an inkling to follow your dream, have a midlife crisis, whatever you want to call it, buy a corvette or start-up a farm. Hopefully Schilling’s story will be a cautionary tale, evidence that smart ideas, hard work, and difficult decisions account for more than millions of dollars in the gaming industry.