Exposé blames Schilling for 38 Studios mismanagement, costs
July 23rd, 2012 at 6:57 pm by Ted Nesi under Nesi's Notes, On the Main Site
What was Governor Carcieri thinking?
That and a lot of head-shaking will likely be most Rhode Islanders’ reactions to “End Game,” Boston magazine’s 5,000-word autopsy of what went wrong at 38 Studios, out this afternoon. Jason Schwartz uses a two-hour interview with Schilling, private Facebook messages and other sources to paint a vivid picture of a company that was never ready for prime time.
Schilling’s overconfidence and lavish spending, combined with dysfunctional management and – crucially – a high-risk business plan, created a situation that’s almost impossible to imagine ending well. The problems were already evident to one venture capitalist who vetted the firm before Carcieri and Schilling started talks in March 2010 and told Schwartz 38 Studios didn’t have “the ‘A’ team that I thought you’d want to see.”
Schilling estimated the game’s development would cost $50 million at most; the company had spent more than $100 million by the time it collapsed, partly because the EDC deal forced it to go on a “hiring binge.” The comments from one of 38 Studios’ potential partners are lukewarm, and Schilling himself declares that the game itself “wasn’t fun” – a worrying review considering the EDC wants to sell it to recoup some of taxpayers’ losses.
These paragraphs sum up the magazine’s findings well:
Given the warning signs flashing around 38 Studios, it remains difficult to understand why Rhode Island so freely handed over $75 million. But for Schilling, despite being a longtime proponent of small government, the guaranteed loan was a godsend. He’d get the cash without having to give up even the tiniest slice of ownership. And if everything went bust, it would be Rhode Island that was responsible for the money. …
Schilling, meanwhile, kept up his free-spending ways. This past Christmas, he personally bought every staffer a computer tote bag with the 38 Studios logo. Add in the company’s high staffing levels, frequent gratis lunches and dinners, and big travel budget, and it was easy to forget the whole thing was a startup. “We never had that sense of urgency or panic,” Schilling tells me. “I think there was a sense of invulnerability — I don’t want to say invulnerability, but I think we were comfortable.”
Tags: 38 studios, boston magazine, curt schilling
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
one time vendor needs to pay for his own failure for that company..right carcieri? (no fun intended)
I recall when the deal was announced, that EDC boasted that 38 Studios would bring 400 jobs to Rhode Island. It looks like Schilling was under the gun to hire excess employees to meet an EDC mandated metric. Have you ever heard of such nonsense in a venture backed startup? In my experience with many startups, the goal was to get the product designed and shipped with a MINIMUM of new hires. With Schilling’s hubris and lack of business management background, and EDC’s incompetence, this company was bound to fail.
Ted,
This is small change compared to what is about to happen in RI concerning the “Renewable Energy” taxpayer funded initiatives at the EDC.
There is a line item on everyone’s electric bill (the renewable energy charge) that goes directly to an EDC slush fund, and the GA has plans to increase that line item to create a bigger EDC slush fund.
There is a consortium called the East Bay Energy Consortium who was provided one grant in 2010 for the purpose of doing a Phase III study on wind energy in RI.
In 2011, the EBEC Board voted to allow just two sitting Board members full authority to approve the spending from that grant. Instead of doing the Phase III study, they started to pay ex 38 Studio lawyers and lobbyists. The Phase III study has not been completed.
The GA has it in mind to keep increasing this Renewable Energy Charge on your electric bill in order to pass the money to the EDC and it’s cronies.
38 Studio’s was a one time hit. This renewable scam will go on forever.
Twenty years ago I was Treasurer and VP of the American subsidiary of a major British company, which was in fact a competitor to Cookson America where Mr. Carcieri was in charge (we and they were both headquartered here in RI). If I had ever walked into my boss’s office (the President of US operations who also was based here in Providence) and laid the 38Studios proposal on his desk, I would have been fired so fast that the revolving door in the lobby would have spun off its hinges…
Sad…and eminiently avoidable.
Albert,
You may also have been told that if you did the project, your job would be on the line. To protect that job, you would have done a basic project management timeline and watched every due date knowing your job was on the line.
Having some knowledge of how the EDC is currently managing the renewable energy projects (see my post above), I can tell you that nobody at the EDC believes their job is on the line.
The 2010 EBEC Phase III study that was funded by the EDC and never completed, you can bet nobody will be held accountable for that mess.
To GaryM: Is there anyone now pulling together data and material on the status of the EBEC project, other than you? I am retired and would be very interested participating in such a citizen based effort, including as appropriate contacting our representatives, obtaining a hearing at the EDC etc. If anyone has ideas on this please contact me at aglee@aol.com
Albert
PS: not only was my job on the line, the “stink” of this project never allowed it to make the first cut, for a host of reasons such as lack of collateral assets, alternative best/worst case and headcount budget projections, hazy market forecasts, etc. And Don Carcieri’s VP-Treasurer would have had the same objections, to save HIS job.
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