

Schilling: RI broke financial promises, governor scared away investors - ilamont
http://news.providencejournal.com/breaking-news/2012/05/sa-editing-schi.html?utm_medium=twitter&utm_source=twitterfeed

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tibbon
Some things simply don't add up still for me.

How did 38 Studios not have a better idea of their runway? Did someone forget
that the loan payment was due?

Why did Schilling report on Twitter that sales of Kingdoms of Amalur:
Reckoning beat expectations, but it sounded like it needed to sell 2x as many
units to break even? Was it expected to take a loss? Why was there talk of a
sequel (which he was apparently trying to raise money for) immediately upon
release? Its a good idea to run multiple projects concurrently and diversify,
but it still strikes me as strange.

It also sounds like they were building an incredibly ambitious "WoW-killer",
and that the funding wasn't enough to do that, no matter how you ran the math.

In my mind, you don't start a company to create jobs. Its a nice economic
goal, but it should be a side effect of need internally, not the stated goal
of the company. In doing that you're going to hire too many too early. Maybe
the concept of 'lean' doesn't apply to game companies?

Why the last days were they still advertising new jobs on their site?
(currently 18 open jobs listed on the site)

Why was there not greater transparency with employees? It seems like they were
using brinksmanship as a managerial strategy and it bit them.

I'm also not sure why Schilling wasn't doing more to help employees find jobs.
Yet, Jen MacLean (even after stepping down as CEO) is all over twitter
(@JenMacl) helping place employees.

I can't really blame investors for not wanting to jump onboard. MMOs can be
incredibly hit and miss, and Schilling being at the helm didn't really inspire
confidence for many.

~~~
SkyMarshal
_> In my mind, you don't start a company to create jobs. Its a nice economic
goal, but it should be a side effect of need internally, not the stated goal
of the company._

Indeed. The objective of all businesses is to create (or otherwise obtain)
wealth. Jobs are a side effect, fringe benefit of that.

This is common knowledge to people wired into the startup scene, but these
days you hear so much about "Creating jobs" all over the airwaves, from
Washington to local politics, to non-profits, to even frickin Starbucks (they
have these gift cards you can buy at checkout where the proceeds go to
'creating jobs').

For a while I've wondered if it is generally understood where jobs come from,
or is "Creating Jobs" a cargo-cult meme.

Eg do most people know that job creation comes from wealth creation? Is that
the general unstated assumption behind the "Create Jobs" meme in the US right
now?

Or, are lots of people who've never actually created jobs (politicians,
professional athletes, etc) reciting it but most not really understanding how
it fundamentally works?

What I wouldn't give to see a politician run on a platform of "Create Wealth,
and Jobs Will Follow!", and have that chanted from every rooftop and town hall
in the country.

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droithomme
Someone who has no history of running a successful tech/game business is
usually not the best person to give millions in investment money to.

It's the government's fault not because they didn't do the stuff the article
is claiming, but because they got involved in this at all to start with.

This is so simple it's impossible to argue against.

<http://en.wikipedia.org/wiki/Curt_Schilling>

Mr. Schilling went from being a Major League baseball star directly to being
the founder and chairman of a computer game company, with absolutely no
experience relevant to IT, games or even running a company in the middle. Does
there not seem to be anything wrong with this?

Private investors lose their shirts every day. But they are risking their own
money (or their clients). That means having some skin in the gambling game, so
they are motivated to proceed cautiously and sensibly, or accept the
consequences to themselves if they don't. When government gambles with the
taxpayer's money, they don't have skin in the game. They also don't have
experience investing or running companies and are not able to evaluate
fundamentals of what are good ideas, as this entire boneheaded venture makes
abundantly clear.

Blaming Schilling for his certain predictable failure is like blaming a dog
for not being able to drive your kids to school. The person to blame for the
crash is the parent that put the kids in the car with a dog as driver!

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brk
Like most of these stories, I'm sure there are tons of details not in the
press.

I find it difficult to believe that any statements made by the governor would
have really scared away investors though. Any rational investor would be doing
a fair amount of due diligence and looking at the companies financials before
investing. Statements by the governor (if accurate) should at that point be
redundant to any information gathered during the DD process.

Armchair-quarterbacking this, it seems that 38 Studios was spending money like
a 90's dot-com company and didn't realize that the gravy train had a real
chance of running out before they managed to get stabilized as a business.

~~~
runevault
Yeah, last figure I heard was $4 million a month, with only one somewhat
successful game under their belt (and they bought the company that made it).

This is why any company that doesn't already have a serious track record and
money coming in from previous projects shouldn't jump straight to an MMO.

~~~
tibbon
Right on. It was 13 years and 26 games before Blizzard released WoW.
Experience does count for something, as does having an established world of
characters and lore to draw from.

------
Bud
Typical right-wing businessman:

If he succeeds (with the benefit of tons of public financial support), all the
credit is due to his brilliance.

If he fails (despite all that public money), it's the government's fault for
not supporting him even more and bailing him out.

Oh, and btw, let's keep repeating the mantra: Big government is baaaaaad! Rich
people must be coddled as job creators!

Schilling is a douchebag.

~~~
protomyth
Both sides of the political spectrum pull this stunt (e.g. Solyndra, Evergreen
Solar). Crud like this is why I don't vote party lines.

Actual businesses run by competent people create jobs. Big loans from
governments or VCs distort who is actually good.

~~~
Bud
Actually, despite Fox News' obsession with bashing the Solyndra events,
Solyndra does not prove your point at all, nor is it at all related to my
point or to what Schilling did.

Solyndra received extensive private equity funding, in addition to federal
investment that looked like a good deal at the time. It was also not run by
left-wingers. So I'm not really sure what your point is. All investments can
fail, and not all the failures tell us anything about politics.

I of course agree that "actual" businesses which are "competent" create jobs,
but it's not always easy to tell in advance what is actual and who is
competent. Certainly, solar energy in general is an "actual" business.

It should also be noted, since you took unsubstantiated potshots at the Obama
Administration, that the vast majority of stimulus-related bets made by them
have paid off handsomely.

~~~
protomyth
Your post could prove my point. I am not a fan of Fox News or CNN, but it
seems to be thrown out their anytime someone criticizes how our tax money is
spent. Sadly, this type of stuff isn't really new to American politics (go
look at the election of 1800).

The government itself said on Jan 9, 2009 (days before inauguration) that
Solyndra wasn't loan worthy. It was rushed and costly. Even the NY Times (not
known as a bastion of Fox News lovers) said[1] that "Government Accountability
Office, which found that Energy Department preliminary loan approvals —
including the one for Solyndra — were granted at times before officials had
completed mandatory evaluations of the financial and engineering viability of
the projects."

Stimulus-related bets made by them have NOT paid off handsomely.

[1] [http://www.nytimes.com/2011/09/23/us/politics/in-rush-to-
ass...](http://www.nytimes.com/2011/09/23/us/politics/in-rush-to-assist-
solyndra-united-states-missed-warning-signs.html?_r=2&ref=politics)

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ubercore
I'm not sure how Schilling expected the state to do anything else. That's kind
of the price you pay accepting _state funds_. As an RI taxpayer, I'm happy
with the way Chafee has handled this so far.

~~~
gee_totes
Is there any movement in RI to do something with all of 38 Studios' IP? After
all, once the studio defaults, the citizens of Rhode Island will own it.

~~~
tibbon
That's a good question. I'm unsure if they citizens/state will really own it,
or if the state will be forced to sell it at firesale to help cover their
losses. Also, with the loan being through a semi-private intermediary (I
think) I'm unsure who the direct owner would be afterward.

~~~
ubercore
I believe the loan is only guaranteed by the state, but the terms say that the
state will own all IP given a default. I'm willing to bet we'd be legally
obligated to sell it to help cover the bonds. I know very little about
finance, though, so take this with a grain of salt.

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tmuir
Either the governor libeled the company, or he spoke truthfully. I don't see
Schilling claiming libel, so essentially he wanted the governor to
misrepresent the financial health of the company, right? Who, besides the
people standing to take a loss, would be in favor of that?

