Did 38 Studios have a distribution deal for Copernicus, or not?

May 29th, 2012 at 9:52 am by under Nesi's Notes, On the Main Site

There were no major headlines about 38 Studios and Rhode Island last August. Curt Schilling’s game company was quietly working on “Project Copernicus” on Empire Street, and the state was busy with other matters, like the looming special session on pensions.

Out of the spotlight, though, Aug. 16, 2011, marked a big day in the 38 Studios-Rhode Island relationship.

That day the EDC delivered 38 Studios $4.1 million in cash from the $75 million bond transaction the previous November. The EDC says the money was provided because 38 Studios had entered “into a satisfactory distribution agreement for its Project Copernicus.”

Strangely, however, no other evidence corroborates that 38 Studios nailed down a distribution deal for Copernicus, even though the EDC gave the company $4.1 million based on the existence of one.

In a March 15 bond disclosure notice obtained by WPRI.com, 38 Studios described itself as still being “in discussions with top publishers regarding a publishing and distribution agreement for the MMO Copernicus, under which the Company anticipates that it would receive advance-funding for development of the game.”

On top of that, The Providence Journal reports today that 38 Studios thinks “Chafee’s public comments derailed discussions that 38 Studios says it was having with another publisher for a $55-million deal on Project Copernicus, as well as a venture capitalist about additional financing. 38 Studios declined to identify the would be-investors.”

Add the Copernicus distribution deal to the list of unanswered questions about 38 Studios.

Also on Aug. 16, R.I. Economic Development Corporation executive director Keith Stokes signed a modification of his agency’s 10-month-old third-party monitoring agreement with 38 Studios, apparently without informing the agency’s board or Governor Chafee, according to the governor.

The revised agreement said IBM would no longer deliver paper documents to the EDC as part of its “ongoing project monitoring for Project Copernicus.” Instead, 38 Studios “agree[d] to hold quarterly review meetings” where the information required from IBM (the “IBM Work Product”) would be given to EDC officials.

38 Studios “agrees that EDC will be entitled to delivery of such written IBM Work Product as EDC determines it is necessary to receive,” the revised agreement adds. The EDC would still be able to request an opportunity to view IBM’s documentation on 38 Studios, but only after the agency gave “reasonable advance notice.”

Update: A reader writes in to suggest one explanation – there’s a significant difference between a publishing deal (which could provide money up front to fund the game’s development) and a distribution deal (which wouldn’t provide money until the game starts selling). It’s possible 38 Studios had a distribution deal in place but not a publishing one, which would help explain why an infusion of cash didn’t come in after last August.

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3 Responses to “Did 38 Studios have a distribution deal for Copernicus, or not?”

  1. Richard Langseth says:

    The bond disclosure document also noted that 38 Studios was in the process of converting to a Rhode Island domiciled C Corporation. That never happened and 38 Studios remained ineligible for Motion Picture Tax Credits. Now Curt Schilling is telling the press that his company is eligible for these tax credits when that is clearly not the case.

    Since the state does not always make provisions to fund tax credits through budgeting this becomes a real issue. The FY 2013 Capital Budget includes $152 million of borrowing to pay for past historic tax credits. Who would actually pay for motion picture tax credits if they are given to Schilling. I have not heard this discussion in any news story.

  2. This whole debacle becomes more and more incredulous as it goes along. How could the EDC possible have approved this disastrous deal at the time when Carcieri was out the door? What would have led the EDC to go to such lengths with taxpayer money when its Chairman Carcieri was obviously leaving?

    Knowing RI there is much more to this story and we count on the press to unveil whatever it is and take us where it leads.

  3. Where does Savage get the authority to say Rhode Island would give up first standing?????

    Why in the world would the state do that???

    My word, there is no shame when it comes to taxpayer dollars!!!!!!!!!!