38 Studios and Kingdoms of Amalur: Reckoning Bankrupt

On May 24th came to the shocking news (to some) that 38 Studios the makers of Kingdoms of Amalur: Reckoning had gone bankrupt, that the CEO and VP left, and all the staff was laid off. Not only this, but 38 Studios' subsidiary Big Huge Games is being sold off as well. Though it is unclear what exactly lead to such a break down, there are a lot of things to look at to get a better picture of what will happen next.

This action role playing game was released by the studio in February 2012 after being under development by both 38 Studios and Big Huge Games. BHG had already been working on a role playing game before they were bought, so they just altered the game to go to Kingdoms of Amalur. There were a lot of criticisms about this game - graphically it looked nice but it was restrictive and the gameplay was not exactly new. The game was given anywhere from a 6 to an 8.5 by the more generous.

2006: Start! 38 Studios building.

2009: 38 Studios bought Big Huge Games, who mostly made the Rise of Nations series.

2010: The announcement was made that the Rhode Island board of Economic Development allowed a loan for $75m to 38 Studios because they promised to bring 450 jobs to the state by the end of 2012. They then move to Rhode Island.

2012: Kingdoms of Amalur: Reckoning Released. Announced an upcoming game to be an MMO set in the same universe - Project Copernicus.

Around May 12th, Rhode Island did not get a scheduled payment. On the 17th it was widely reported that the studio tried to hand deliver a $1.12m check, but then said that they didn't have the funds to cover the check so it was returned.

Perhaps related, RI's Economic Development Corporation's executive director resigned.

May 23 and 24th: CEO and VP left, and all of the employees were laid off.

It is hard to say what exactly happened, and we wont know until there is an official release. What we do know is a considerable amount of money went into this game, both from RI and private investors. This totals somewhere over 150 million.

The RI governor states that Kingdoms of Amalur just wasn't popular enough and did not sell much at all. However there is a conflicting report that over 1.2 million copies were sold in the first 90 days. That comes out to 72 million dollars in 90 days if it is sold at 60 each. This just ends up with more questions why they were unable to pay back the loan properly - its not as if it were all due this year, they had until 2020.

Here is a copy of an internal memo that went around to inform people of the lay offs.

"The Company is experiencing an economic downturn. To avoid further losses and possibility of retrenchment, the Company has decided that a companywide lay off is absolutely necessary. These layoffs are non-voluntary and non-disciplinary. This is your official notice of lay off, effective today, Thursday, May 24th, 2012."

Well, technically the people of Rhode Island own 38 Studios. So what can they do with this? Well, instead of just being stuck with such a large bill, they own all the intellectual property that the company came up with. This could easily be sold at auction to someone who wants to do something more with any of the creations of the studios. However, that is not to say it was not a horrible decision for RI. It could end up costing taxpayers there about 112 million.

This is the first time this has happened, so it will be interesting to see what happens. It is clear that the future for the heads of the company probably will not be as bright as they would be due to whatever bad decisions leading to this.

Big Huge Games - no stranger to being randomly sold by a parent company - will most likely be sold to whatever company is willing to buy it as 38 needs to get as much money as they can.

As an interesting note, the members of the board who agreed to this loan have been dropping like flies. Two resignations and two asking not to be reelected so far.

For everyone else: it will probably mean that companies will have a harder time even getting tax breaks in other states. 38 Studios failed to both pay them back and to create 450 jobs as they ended at around 370 jobs with these layoffs.