The gaming industry is a modern Eldorado. At least, this is the impression created by the quarterly reports of companies with their beautiful graphs of revenue growth and huge investments. But behind each resounding success there are many failures, closings, cancellations, “burned out” investments and broken lives. One such story is the bankruptcy of the star 38 Studios , created by the famous baseball player Kurt Schilling. We've picked the essentials from a dedicated Bloomberg publication .
Baseball to MMORPG
38 Studios is the dream company for any teenager who wants to devote himself to game development. The company that creates an extremely ambitious game - a competitor to the legendary World of Warcraft - and, as it was thought, with unlimited financial possibilities. Employees were entitled to a gorgeous social package, gym membership, and top-of-the-line laptops for several thousand dollars. Plus free lunches, lavish travel allowances and Timbuk2 bags featuring a world map from the game, tentatively titled Copernicus , that the studio was working on. Kurt Schilling
was behind it all. Is a famous baseball player from the Boston Red Sox. Schilling is a true legend. Playing in the 2004 playoffs, he played two games with an ankle injury and a sock that sloshed with blood. The team won the World Series for the first time, and Schilling's bloody sock made baseball history ...
Kurt Schilling on the pitch
“Kurt Schilling was a sports star and believed that those working on Copernicus should also be stars,” says artist Tom Eng. has contributed to The Lion King and Toy Story cartoons, as well as game projects for Sony, Electronic Arts and THQ. “He said he wanted this kind of team, so he would invite the best people there and treat them like the best. And so he did. "
When Ang was invited to 38 Studios in 2008, Ang was initially skeptical. However, the game's project looked interesting, and the company offered it a gorgeous relocation package. He eventually agreed to move from Southern California and became art director for Copernicus. Of course, the studio hasn't made much progress in its two years of operation, and the fall 2011 release date didn't seem very realistic. But on the other hand, Eng realized that early game development could indeed be slow. And he knew not to worry about funding the studio: after all, Schilling had earned over $ 114 million in twenty years of his baseball career.
In 2017, the not-for-profit International Game Developers Association surveyed nearly 1,000 people in the gaming industry to find out how often they have to change jobs. It turned out that those who work full-time had an average of 2.2 employers over 5 years, while freelancers had 3.6. Journalist James Batchelor estimated that from October 2017 to September 2018, over 1,000 professionals lost their jobs due to the closure of studios, and this is during the heyday of the industry ...
Yes, jobs from big publishers like Take-Two or EA draw excellent career prospects. But in reality the situation is far from stable. Developers who create creative projects must accept the fact that things can collapse at any moment. “After all the layoffs I've been through, I get a kind of post-traumatic stress disorder whenever I get an email notification of the general meeting,” says Sean McLaughlin, who has worked in the industry since 2006. “So I try to keep on my desk as many things as fit in one bag. ”
Eng and his colleagues were confident that things would be different in their company. And in a sense, they were right: game studios close regularly, but extremely rarely with such a scale and political scandals, as happened with 38 Studios.
Kurt Schilling (center) and Tom Eng (left next to him)
Schilling became interested in video games when he was an athlete: he loved online multiplayer games, with their endless virtual worlds and ample opportunities for user interaction. After retiring, Schilling realized that he wanted to create his own game, and founded a company named after the number under which he entered the field. $ 5 million in start-up investment went to the creation of a “utopian” office - a place where video game production was supposed to become not a tedious routine work, but a platform for the major leagues.
The fact that Schilling had no business experience became clear from his decisions and ideas. For example, he offered employees a weird schedule, to which he was used to in baseball - to work 14 days seven days a week, and then take 5 days off (managers rejected this offer).
By early 2010, $ 30 million had already been invested in the studio - mostly Schilling's own funds plus a small investment from friends - and it was clear that additional funding was needed to implement Copernicus.
Finance and credit
Schilling was not only interested in games: he was a collector of items related to World War II, about which he was preparing a documentary. These interests brought him closer to Donald Carcieri, Governor of Rhode Island. Carcieri became interested in Schilling's game studio and made an offer that later became the Job Creation Guarantee Program: 38 Studios moves from Massachusetts to Rhode Island and pledges to create 450 new jobs in three years, and for this the state government gives her a loan of $ 75 million.
To make it easier for employees to move to another state, Schilling went to extensive support measures. For those who sold their home, the company reimbursed the tax paid, and if the employee could not sell, it took on mortgage payments until a buyer was found. This was an excellent option for the same Eng, who, after the 2008 crisis, mortgage payments became a big problem.
After the move, 38 Studios' staff grew rapidly due to the terms of the loan agreement, in the first year of which the company pledged to accept 125 people. Animator Pete Puckett, who joined the studio in 2011, recalls: “These were the best and most talented people in the industry. I was ready to work there for the rest of my life. ” The game also looked very cool: impressive medieval castles, huge waterfalls, statues, rocks, mysterious dungeons in neon green colors ...
But the release was still far away, while the first loan payment was already hanging over the studio. Every month during 2011, 38 Studios “burned” about $ 4 million - and, as it turned out, spent almost all the loan funds: 26 million out of the declared 75 banks actually kept for themselves. According to Schilling, this was one of the reasons for the collapse of the studio.
Copernicus concept art
When Andy Johnson joined the development of the game as a localization specialist in January 2012, he walked around 38 Studios headquarters in Providence and spoke with managers, designers and developers. The result was a disappointing conclusion: even according to the most conservative forecasts, it made no sense to wait for the release of Copernicus in 2012. A week later, he brought the schedule to one of the vice presidents. He closed the door and asked who else knew about this schedule. “And everything turned into some kind of madness,” Johnson recalls. The information reached other top managers who broke into Johnson's office and questioned him about this document. “Damn,” I thought. After all, I was just doing my job, assessing the volume and duration of the work, and in the end I realized that I had revealed some huge secret ”.
Shortly thereafter, the studio imposed a moratorium on hiring new hires. Johnson was unable to pursue his business, and his colleagues had to lock themselves in offices to work on spreadsheets or prepare resumes. As early as March, 38 Studios stopped paying contractors' bills. In May, the studio did not fulfill the loan payment, which resulted in a default. In the meantime, work on Copernicus was moving forward, and many of the developers' ideas for their time were innovative. For example, the game world changed depending on the actions of the players: if a group of players defeated an evil dragon, a holiday would come in the world. And the losing group saw the dragon flood their cities with flames.
World of pain
Until late spring, most of the staff had no idea what problems the studio was facing. On May 14, the new governor of Lincoln Chafee told reporters that his goal is to secure the studio's solvency. But the line, on the contrary, scared those investors with whom Schilling was negotiating, including such giants as Tencent Holdings Ltd. and Nexon Co. The head of the studio later recalled: “All discussions were immediately terminated. I understood: we are in a world of pain. "
For the rest of the employees, this situation became clear the next day - payday. Designer Heather Conover says that on the way to the office, one of the employees asked her about the money received. Arriving at the studio, Heather checked her account: there were no receipts. "Everyone got the feeling that we are going down."
The next few days, the studio was in chaos of spontaneous gatherings and frightened employees. The management urged people to continue to go to work, and journalists with cameras and microphones were on guard outside the office. Some of the developers decided to stay at home, while others took their working equipment. “People grabbed computers and monitors with the words 'Fuck it, take it, this is my salary,'” Johnson recalls.
Chafee revealed what was considered a trade secret at 38 Studios. For example, he said that the release of Copernicus is actually scheduled for June 2013. The governor was opposed to the loan deal with the studio and accused the company of unreasonable spending, for which Schilling later called him “a liar and a fake”.
Despite the lack of salaries, some of the employees continued to go to work. They managed to release a two-minute video on Youtube - a trailer for the game, the latest attempt to attract the attention of publishers and employers and evidence that the game really worked.
Game Trailer
Until recently, some employees continued to believe that the situation would improve and that Schilling would find a way to get the company out of the crisis, just as he saved the Red Sox from defeat in 2004. As Ang says, “I kept thinking that now they were going to get the rabbit out of the hat, and now they’ll come up with something.”
However, on May 24, all 38 Studios employees received an email stating that this is their last working day. The sender of the letter was not Schilling, but Bill Thomas, the company's chief operating officer (and also the uncle of Schilling's wife). There was nothing in the text about "family", which was customary to talk about in the studio - instead, it coldly reported on the "economic downturn" and "the urgent need for mass layoffs." "This is your legal notice of termination, which is effective today." No insurance, no severance pay - they never even received their salary for the last month.
The collapse of 38 Studios crippled Schilling himself. Later it turned out that at the time of closing the studio's debt to contractors, investors and insurance companies was $ 150 million, and Schilling himself invested $ 50 million of his own funds in the company. A few years later, the former athlete became a right-wing activist, criticizing liberal media and politicians a lot. In 2015, he was suspended from his job as an analyst at the sports media platform ESPN for a publication in which he compared Islamic extremists to Nazis, and then completely fired for provocative memes. In parallel, he testified in the 38 Studios bankruptcy case, watching the company's assets go under the hammer.
But the main blow fell on ordinary employees. Hundreds of specialists were out of work in Rhode Island, where there were simply no other game studios. Those who still linked their lives with game development had to change their registration again. In the weeks following the closure of 38 Studios, recruiters from across the country posted posts with the hashtag # 38jobs to help those affected. The state government collected applications for unemployment benefits right in the studio office, and employees shared canned goods with each other.
For Ang, the main blow came from MoveTrek Mobility, which, under an agreement with 38 Studios, was selling his house in Massachusetts. As it turned out, the house was never sold, and in the contract signed by Ang, there was a clause in small print stating that, in the event of financial problems at 38 Studios, the obligations to pay the mortgage again pass to him. In a panic, Ang called the office and asked what that meant. He was told: "This means that now you will have to pay the mortgage."
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