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The Week The Music Died

It’s hard to overstate how difficult this week was for what remains of the MMO industry.

First off,  Bioware took an axe to the Old Republic team. No official numbers on how many were let go, but most people I’ve talked to put the total bloodletting at somewhere in the neighborhood 0f 200 people… 40% of the studio.  This after EA went through contortion after contortion trying to first boost then mask subscriber numbers (at one point giving most players a free month of time) finally coming out and saying that the most expensive game ever produced (my initial estimate of $150m  was at least $50m low) wasn’t really that important and why are you people so interested in it anyway? So, a retrenchment of the team, which never really underwent the usual post-launch pruning, was inevitable.

You’d think the loss of 40% of the team working on the highest profile MMO release of the year would be hard to top, but hand it to Curt Schilling, he stepped up to the plate without fanfare, knocked it out of the park, into the bleachers, and  straight into the record books with a company explosion so painfully drawn out and mismanaged that it may have poisoned the well for anyone ever considering investing in an MMO company. Lest you think I’m exaggerating, let me direct you to a press conference by the esteemed Governor of Rhode Island trying to explain the mystery of role playing game sell-through, team burn rate, and why those games are so sexy and violent, anyway. Or just check any media source in Rhode Island or Massachusetts, with people with no connection to gaming other than, you know, paying taxes, furious that they, through the state, apparently now are on the hook for $90 million dollars to pay, among other things, a cool $1.4 million to R. A. Salvatore to come up with synonyms for the word “drow”. (At least, until the company collapsed, at which point Salvatore, as a stakeholder along with Rhode Island taxpayers, lost any hope of being paid.) Coincidentally, that is also close to what 38 Studios paid the state of Rhode Island this month in lieu of paying the people who worked there.

While all this was happening, 38Studios employees were kept completely in the dark. Their first warning was when payroll checks stopped showing up in their bank accounts. The final warning was a dismissal letter showing all the compassion of Ayn Rand towards welfare recipients.

And that’s just what’s on the public record so far. The rumors that have been surrounding this total collapse/clusterbomb have made the above look like a case study in business management. Insurance plans unpaid for months (and literally uncovered by pregnant women informed by their doctor that their insurance expired) ensuring that the newly laid off employees are disqualified for COBRA and liable for pre-existing conditions with new plans, relocation/home sales packages so badly mismanaged that ‘beneficiaries’ turned out to be liable for two mortgages and back taxes due to lack of payment, the list goes on.

Through all this, the 38Studios employees have shown an unbelievable loyalty to Curt Schilling himself. From everything I’ve heard, publicly and privately, Curt Schilling is a great guy, generous to a fault, and a gamer way back before it was ever considered cool much less a path to wealth, and has sunk over $30m of his own cash into the company.

However, Schilling is also a very wealthy man (over $114m over the length of his career), and a political conservative who has consistently demanded that government not be involved in the private sphere, except where he is involved. There is a word for that and it isn’t “great” or “generous”, it is “ragingly hypocritical“. But even beyond that, Schilling failed the 400 people who depended on him.

I’m told that most of the people affected by the Old Republic layoffs had plenty of warning what was about to happen, specifically because during a company meeting Greg Zeschuk, one of Bioware’s founders and the studio head, was honest and forthright about the challenges facing the company and what his people could probably expect. When faced with the prospect of failure, he stepped up and said hard things that no doubt hurt him deeply and personally, because his people were owed that much.

Schilling did not. Instead he continued to squander what little operating capital the company had left to it trying to continue drawing public taxpayer money into what by that point could almost be considered a Ponzi scheme, while keeping the vast majority of his employees completely unaware of how final the situation was.

Loyalty matters, but character also matters. And in this case, Schilling’s failure of character has damaged an industry, to the point where it may be years before we see another investment in MMOs. I am loathe to link to anything said by the possibly sentient Michael Pachter, but even a stopped watch is right twice a day. The MMO industry in general is in deep trouble this year, and Schilling this month pile-drived it even further into the concrete.

I have nothing but sympathy for the now-unemployed former colleagues of Schilling at 38, and I know from my own time working in the trenches that many of them will violently object to much of what I have said here. But I think the direction that our industry is going – the incredible amount of money wasted by EA on what was essentially a roll of the dice that came up 2 and 3, and the even more incredible display of massive hubris and utter incompetence on the part of Schilling and his management team, is killing the very concept of massively multiplayer gaming.

Addendum: Steve “Moorgard” Danuser, creative director and the self-described “Czar of Amalur” has a different perspective: it’s all the Governor’s fault.

We just needed a little more help, and we thought the state would have our backs on that,” said Steve Danuser, one of the creative minds at Curt Schillings 38 Studios.  “We thought the governor was an ally. It didn’t turn out that way.”

“We’ve really loved it here…we bought homes, we’ve helped the businesses in the area,” said Danuser.

“The governor has turned his back on a lot of taxpaying Rhode Island citizens who work here and it’s unfortunate because we had a lot of great people who wanted to contribute to Rhode Island and now they can’t.”

The “Czar of Amalur” says he has a few questions for the governor.

“Why did you do it? Why didn’t you help us?” asked Danuser. “He (the governor) said a lot of things, he’s broken confidentiality. He’s done a lot of things to materially hurt us and I don’t understand it.”

My comment on the above: Um.

  • Ryan James OSullivan

    Well said… very well said. 

  • mox

    Holy fuck, I had no idea it was that bad, in regards to health insurance and ineligibility for COBRA.  Holy fucking fuck.  Schilling needs to be tarred, feathered, and drug through town by his nuts. (but seriously, there needs to be some investigations and some hearings and some goddamned jail time.)

  • Josh Winslow

    Lum, do you think the business model for developing AAA MMOs is fundamentally broken or are MMOs just hitting problems in the AAA game model sooner than say, Call of Duty, because they are more complex?

    •  The business model for developing AAA games of any kind is fundamentally broken.

      • Jmoose

        Not any kind, but many kinds. Ultimately there are more people in the game industry who think they know what they are doing than actually have a clue. Those of us on these failed projects are rarely surprised when they fail, indeed we often try to enlighten our execs… But they know best and don’t want to hear it. It’s a case of poor management pure and simple. You just expect minimally to be paid until they lay you off.

  • Snafzg

     Best damned post about the whole damned cluster****. I do wish you’d write more often!

  • JuJutsu

    I’m just stunned. Is there no end to MMO sleazy behavior.

  • Dave Rickey

    I’ve actually reached the point where I see charm, that ability to instantly take on the role of a trusted friend, as a flare-lit warning sign that I don’t want to work anywhere *near* somebody.

    Real geeks, people who get shit done, are rarely the type of people who are easy to like.  And I’ve yet to see a case in this business where someone who was always smooth and likable didn’t turn out to be a total bastard who was always assessing the backs he was slapping for where to plant the inevitable dagger.

    –Dave

  • Mechakisc has it right. SW:TOR gained more subscribers during it’s launch period than ANY MMO has ever done, including WoW, but since it didn’t meet the arbitrary goals set by EA, it was a “failure” and consequently, we all got laid off…

    • Rick954

      I’m sorry that happened to you guys.

    • Ajt312

      Sadly, that was sort of preordained. You could see this result from almost a year before release. if the game had cost as much as WoW to make, it would now be the most successful MMO ever. But they grossly overspent in producing it. As a result there simply was not enough market to recoup the costs that they would need within anything short of a decade. The game needs not simply wow like growth numbers to make back its costs. It needs ongoing wow peak numbers, for an extended amount of time. The developers didn’t fail SWTOR, the accountants did.

  • Harry Teasley

    Is there some verification for the assertion that 38 Studio employees are not qualifying for COBRA because 38 was already delinquent on paying premiums? I haven’t seen that anywhere, haven’t heard that yet from anyone I know. That would truly put this on a whole other level of terrible, which, given how terrible it is already, is saying a lot.

    • Scott Jennings

      There is no verification for this yet, it is rumor that I have heard from many sources.

    • X-38 Studios

       The Rhode Island’s Department of Labor is working with BRCS to see how they can ensure that the employees are getting the necessary coverage. It is still a little vague.

    • Buck2482

      Yes, we do not qualify for COBRA because he cut ALL employee’s insurances. Based on BCBS and Maryland’s Insurance Commission this was legal. All employees and their families were left with less than 48hours to find health insurance only because of the findings of a fellow employee. It was NOT informed by anyone from the 38Studios upper Management. Some were denied insurance due to pre-exsisting conditions but thanks to the state were able to get some coverage. I am a wife and mother to a hard working BHG former employee, so this is a nightmare we and the rest of the employees are living.

      • intehknow

        That is aweful! I suspect it was the COO’s decision.

  • bairdduvessa

    What Bloody Sock did was tell Massachusetts  that he’d leave if they didn’t pay him to stay; they called his bluff…so he went to Rhode Island and fucked things up like a true “right” wing business man.

  • Rich Weil

    There are still quite a few states that are aggressively courting game industry presences, but not quite as blatantly as Rhode Island did, just forking over cash like that.

    And from what I can tell, Chaffee  never liked this deal and criticized his predecessor for making it, so no surprise that he wasn’t going to  continue giving 38 money.

    At the end of the day, the financially monolithic model of MMO development has to change.  More discipline and less tolerance in early phase development is necessary.  As  well as quick trigger fingers to cut losses early.  My opinion, anyway.

    • X-38 Studios

       Well many people at 38 are pointing fingers at the Governor, but at the
      end of the day even with the tax credits it would have kept the company
      going..another 2 months? If that? I would agree with the failing of 38 was in regards to a lack of discipline and having the correct people in key positions.

      The number of management, sadly, who had no prior MMO experience should have been a sign for me, but I was hopeful to assist in creating a gaming hub in NE (an additional MMO company like Turbine, plus the other game companies (Harmonix, Rockstar NE, etc.) but didn’t work out.

      From a personal standpoint, most of the information we were getting were either from the news, which is a sad place to be in which was infuriating. Interestingly enough, there are more 38-ers who still hold the management in high regard than those that don’t. Personally, the handling of this borders criminal (not from a legal standpoint). There was even a point fellow employees were bringing in canned goods for those employees who couldn’t afford food because of the lack of checks.

      I can’t make this up, I wish I was….

      • intehknow

        Glad someone (else) over there is beginning to wake up and smell the coffee6 years with virtually no investment (aside from Curt’s) the company managed to secure 1 loan from RI and that was it. Somehow we are all supposed to believe that a bunch of investors (EA it seems) were just about to invest but didn’t because of the Governor pointing out they missed a payment. 6 years virtually no investors. I think coco crisp may have some money invested, and of course Doug M. Not to mention, did Curt basically comes out and say he was going to rip off EA and fund the MMO when EA was expecting to invest in a KoA sequel? . The 38 Studios enchantment is lifting…

  • The Goatman

    Just saw this break: http://www.theverge.com/gaming/2012/5/25/3043282/38-studios-downfall-leads-to-second-mortgages-for-some-employees

  • Scott Jennings

    http://www.joystiq.com/2012/05/25/editorial-38-studios-and-the-dunkin-delusions/

    A really good piece on what I’ve often called the view from the trenches.

  • According to the records released,  the near $30 million that Curt claimed to have invested in 38 was more like $4 million, and it was repaid directly out of the loan from the state. So he doesn’t actually have any financial skin in the game here.

    http://blogs.wpri.com/2012/05/14/38-studios-finances-under-scrutiny-ri-taxpayers-75m-at-risk/

    • Ripper McGee

      That’s only one source of money from Curt. According to Curt himself, on March 17, 20o12 ”
      I am betting, roughly 40mm of my own money, and crap ton of others, that we will change the MMO space forever. ”

      Source: http://www.fohguild.org/forums/mmorpg-general-discussion/40053-38-studios-copernicus-mercury-other-stuff-823.html#post2322511

    • intehknow

      That article was misinformed. I don’t know how much he has invested, but I bet it was well over 30 mil

  • Rick

    Not sure when Lum the Mad turned into a frothing Neo Liberal…What a shame. 

    It’s also riddled with inaccuracies, but hey it’s all about bashing ‘the man’, who in this case is Curt and down.

    • lostintheD

       um… are you even reading the comments being posted by the 38 employees?

    • Scott Jennings

      As a libertarian conservative, I believe that the government has no business whatsoever investing in the gaming industry for dozens of hopefully blazingly obvious reasons.

    • InsiderG

       If you want to attempt to absolve Schilling from all of this I think that you are being incredibly naive. Clearly he is not the only one who is culpable in all of this, but he is 38 Studios for good or ill. He established the company 6 years ago when it was Green Monster Games. At that point, he Salvatore and MacFarlane were probing industry vets for their take one what they were attempting and most looked at what they were going to try to do and backed away.

      Look at the roster of people that they still have up on their website. You have a bunch of people that had worked as community relations or game masters for the majority of their time in the industry, only moving into development roles during expansion packs of well established games.

      This is not to belittle anything that this team accomplished, because I am certain that what they managed to create is beautiful. Works of passion tend to be wondrous to behold – sadly, they also tend to lack perspective.

      Starting a game requires a great breadth of talent. Starting and MMO requires an even larger breadth of talent, the willingness to make difficult decisions that might sometimes undermine the desires that are driven by passion. It takes the ability to maintain perspective above all else. Without maintaining that perspective you will fall into traps from which you cannot escape.

      Putting the cart before the horse for example.

      Do we build our own engine? A deep investment that can take several years to bring about, requires engineers with a variety of talents, foresight to anticipate the needs of future teams, keeping up with industry trends an advances.

      Do we lease an engine? This comes with its own variety of issues while attempting to alleviate the need to solve all the problems on your own. This was 38 Studios decision. Going with Big Worlds as their engine locked them into a difficult situation. (Rumor has it that, despite bringing in a CTO over 4 years ago, they have yet to solve the matter of a persistent world.)

      Hiring too many too quickly.

      You simply do not need a huge workforce to get your game built. Indie developers are proving this at an ever increasing rate. They are creating quality games without the need for big budgets and large workforces.

      You need to prove your tech is viable. You need to establish th core game mechanics and systems…oh say, COMBAT. Then you can start building around these core pieces, refine tools and start hiring. If you start hiring people on too soon, without a source of income, you run out of capital and have a very pretty set of screenshots to show for all of your employees. That is simply business 101. You need to maintain capital and the number one burn on capital is your staff.

      Curt may not have been the one that drove the company into the ground. I firmly believe that the executive team, which ceased communicating with their employees for over 5 days toward the end of 38 Studios existence and who were ultimately beholden to Schilling as the Chairman of the Board of Directors, are the most culpable in all of this. Still, Schilling is not without blame no matter how you attempt to paint him as a hero or victim.

      At the very least, he had an obligation as the CoB to remain aware of how the monies in that company were being utilized so that he could maintain the overall solvency of the company and inform the other members of the Board. As someone who claimed that this was his passion, he is culpable because it was his dream. His desire and ultimately his charisma that still has a good number of the 288 people in the RI office blinded to his fault in this collapse.

      Ultimately, his company failed. The news media is spinning it that he was looking for a handout, I do not believe that he was. He certainly does seem to have stonewalled the EDC in RI. As though he was attempting to play a game of Chicken – RI did not blink, they did not swerve; like any responsible investor they were requesting to see what their investment was doing before they put more money into the pot.

      As it stands, they are making the right choice. Some of the former 38 Studios workers are blaming Governor Chaffee and the EDC for their companies failure because they would not help them along for another couple of months.

      If that is all that was needed, sincerely, why would Schilling not put more of his own wealth to keep his dream alive? If he was strapped for capital he must have other sources to drawn upon? Hell, downsize your staff a few months before – keep the talent needed to hit the launch date, etc…

      The fact is 38 was not near release. If they were, the fly through of Copernicus would have shown a living world. The screenshots that were leaked would have included some inkling of action rather than manufactured moments.

      The fly through looked more like a tech demo for an engine (an engine that was not 38’s to begin with) or an art demo. It looked very nice. I have no doubt that the team that was at 38 was impassioned and believed completely that they were close to the finish line.

      When things start clicking…perspective is easy to lose. We can only assume at this point that the team at 38 still rallying around Schilling are doing so because they shared his dream, his passion, vision and desire to see this world come into being. In 6 years, however, a team that grew to nearly 300 in MA/RI was incapable of generating anything other than fly through movies of beautiful landscape and three actionless screenshots to share with the Public. That is not an MMO – it’s not even an MMO teaser.

      The internal work might be amazing. It might be so good that it would have revolutionized the MMO industry completely – we’ll never know because the ingenuity, passion, and desire of the 38 Studios team was not matched by the ability and competency of its leadership. Instead they were betrayed, ultimately, by that leadership.

      Curt’s charisma and his practices of rewarding his employees (rumors of 1 year anniversary gifts of Alienware laptops abound) for their service and the fact that his vision was grand and something that could easily be bought into seems to have blinded some of these workers to reality. Reality is that game design is hard. Having to make choices that undermine or alter your desires and passion is hard. Reality is that modifying existing technology with established toolsets and systems is different than creating them from scratch. Reality is that hiring members of your guild to make an MMO because they played MMOs and maybe even worked on them…might not be the best choice.

      Curt and 38 aimed high. They failed. The state of Rhode Island gambled big. (Chaffee had nothing to do with this investment, was against it from the start because it was too many eggs in one basket.) Now the taxpayers will deal with fallout. It’s a shame. It’s a real shame.

      In all of this, something really painful has happened too, because BHG made a good game. They got saddled with Amalur, delivered a solid game that sold 1.2 million worldwide (410k f that was domestic) an they suffer the most. They suffer the most and get lumped in with the failures of the parent company. They might have a silver lining somewhere though, who knows. The second part of the real pain is that once the shock of this wears off people will start to realize how badly they were treated, how fleeting those transient benefits and start to realize that the choices made by a handful of selfish individuals (the 38 studios exec team) stole their time, their energy, their passion and maybe event their shot in the industry.

      I feel for all of them. I really do. This industry needs passionate people who are willing to push the envelope and drive the future, but it also needs people who understand that you need to make hard choices to get a game out the door. You do not need everything included in your game at launch. You need a fun game, first and foremost. 

      TL;DR

      Schilling is not blameless. A bunch of passionate and potentially spectacular designers were wronged by a few. RI is not at fault at all, they did what any investor would do. BHG made a good game and Copernicus was nowhere near ready.

      When you are making a game you need to keep PERSPECTIVE first and foremost.

      /end rant

      • intehknow

        InsiderG OMG YES! this is by far the best well researched post. Though, the laptops were not Alienware they were Voodoo Laptops, and not rumored it was fact. There was about 50 of them at 4,500 bucks each (I saw the invoice.) Please keep telling your story as it. I have pics of the Voodoo laptopt I could not get it to link.

        • intehknow

          Oooo it did link! Shiney 🙂

    • Care to break it down for us, Rick?

    •  Care to break it down for us, Rick?

  • kildy

    This has nothing to do with liberal or conservative. The management completely failed in their responsibilities. When times are tough, the management team needs to step up and tell the work force that things are tough. You need to tell them the second you stop paying them, or paying their benefits. Like, before the email is even sent to actually stop payments, the staff needs to be informed no matter how much it sucks to tell them. You do not becoming a raging liberal to say “as a manager, you chose to be responsible for these people, and have a duty to tell them what the shit is going on”

    Curt may be down, but he can take a bit of a bashing: he’s still got a place to live and shit to eat. The people he completely failed however are suddenly in a terrible spot that they might have been able to avoid if anyone in the C level band had decided that they maybe should inform everyone that their bank balance was zero.

    In a real company, with real managers, they’d have known this was coming months ago when they looked at their burn rate versus bank balance. And started planning on how to continue operating before hitting zero, bouncing a bunch of checks, and demanding the government give them more money to their checks would stop bouncing.

    • intehknow

      exactly!

  • Rich1138

    Quote from Scott: However, Schilling is also a very wealthy man (over $114m over the
    length of his career), and a political conservative who has consistently
    demanded that government not be involved in the private sphere, except
    where he is involved. There is a word for that and it isn’t “great” or
    “generous”, it is “ragingly hypocritical“. But even beyond that, Schilling failed the 400 people who depended on him.

    First, Curt wasn’t running the company. He was an investor and board member.

    Second, Salvatore has already said he didn’t get almoast any money as his deal was on the backend.

    Third, most of the people still support Curt. He showed up and did the walk of shame too. I’d guess he’s lost millions. It’d be nice if people got the whole story, but hearsay will run amok in times like this.

    Finally, there was no need to make it a political hit job which comes across as petty and sad. Curt is not exactly a neocon.  It’d be good if Scott had a clue about Republicans and Federalism or the fact most of 38S were registered Dems, but let’s not let facts get in the way of a rant.

    Don’t take my words, take it from a site I’m sure Jennings has bookmarked

    http://www.dailykos.com/comments/1094587/46200390#c75

    • intehknow

      Curt wasn’t running the company? Who was? his Uncle? The people he personally picked to run it? Maybe he should of if he invested 30+ million.

  • Ripper McGee

    Let’s discuss KoA sales.  According to NPD, the figures are barely over 400k through march (
    http://blogs.wpri.com/2012/04/18/38-studios-debut-reckoning-sells-80k-in-march-out-of-top-10/), but according to Curt Schilling, via Twitter, “Reckoning, 38 Studios first game, has outperformed EA’s projections by selling 1.2mm copies in its first 90 days”

    Shenanigans. Why? Because the same Curt Schilling posted to Fires of Heaven just last month, in response to questions about KoA sales:

    “Trust me, if I could talk about it, I would. This isn’t a joke, or a place to riff in, this is law, federal law. Commenting on ANYTHING relating to sales is in violation of about, well I don’t know but it’s alot of laws that would be broken.” (http://www.fohguild.org/forums/other-games/43042-kingdoms-amalur-reckoning-242.html#post2356067)

    and

    “EA is a publicly held company, as such sales figures cannot be disclosed from anyone except them, at a time of their choosing, or I assume quarterly shareholder events.” (http://www.fohguild.org/forums/other-games/43042-kingdoms-amalur-reckoning-241.html#post2352543)

    A month ago, he’s afraid of breaking “federal law” and stating only EA can release those  numbers, but now he’s casually tweeting them during the spectacular collapse of his studio?

    • intehknow

      Good links! It illustrates the con in con-man! Seems like his grasping at straws. Which story is it?

  • Kbrury12

    Those NPD figures are North America only and don’t include digital sales. Reckoning sold at least 1 milltion but it depends on the how things were divided up with EA.

  • According to a two year old piece about a Harvard case study done with Schilling, he had already put $20 million into the company by the end of 2008.

    http://www.boston.com/business/technology/innoeco/2010/02/a_business_school_grilling_for.html
     

  • Dave Weinstein

    In addition to being bad for the Rhode Island taxpayers, and (I think) bad as a matter of public policy, the loans put 38 Studios in a position that required they either ship successfully before the loan payments were due, or, well, end up going out of existence (assuming the loan guarantors had in fact learned not to follow the ante).

    What did they sign up for, and what did they sign away? From the publically disclosed terms, the milestones were all about ramping up your staff, not about shipping a title. Being encouraged to increase your burn rate to get funding does not generate efficiencies, it just generates more staff. What you reward you encourage, the disclosed milestones don’t look to me like they encourage good development practices.

    What did they sign away? Well, everything. Any breach of the terms, and all their IP is owned by Rhode Island (as it is now).

    With that arrangement in place, the notion of an incoming White Knight to save 38 Studios requires delusion (either on the part of the aforementioned White Knight, or the person thinking there will be one). Why on earth would you buy a company which had a debt that was not only higher than the estimated value of it’s intellectual property, but had mortgaged that property to get into debt in the first place? If you seriously thought the IP was worth money, why wouldn’t you let 38 Studios fail, and then pick up staff and the IP on the cheap, rather than taking on the existing debt burden?

    I’m not really surprised that there are 38 Studios employees who insist that success was just around the corner, or that a savior was coming in, or that two months of their burn rate in tax credits (that they don’t actually appear to be eligible for) would have made all the difference in the world. One of the things that continually astonished me during my time in the game industry was the number of professionals (often of long standing) who were completely ignorant of how the business end of things worked, how their work turned into (or didn’t turn into) cash flow, and liked it that way.

    • intehknow

      very well thought out post. Rhode Island — the next mega MMO company!!! ( well untill they sell it…)

  • Dave Rickey

    This can’t be seen as much besides a management failure.  They worked a deal that *required* them to balloon up to 450 employees within three years (in exchange for the loan guarantee).  That meant they had a burn rate so high they simply couldn’t make an MMO before the money ran out (too many things you can’t throw bodies at until late in the cycle).

    They tried to finesse that with KoA and it didn’t work, and then they blew sunshine and roses up everyone’s butt as it fell apart, trying to fake it till they made it while burning millions per month, dot-com style.

    But this ain’t the 90’s, and you can’t “fake” paying your employees or your loans.  Curt put himself up front and took the big chair, and if he didn’t make the decisions that caused the problems, that’s his responsibility too.  Not trying to bag on the guy, and if he lost a big chunk of his own I feel for him.  There are few things that feel worse than taking your best shot at launching a business and failing.  But “mistakes were made” doesn’t help the people that just hit the street, and shouldn’t pass the sniff test.

    –Dave

    EDIT: I was once told that saying out loud that I didn’t see a way to *effectively* spend 9 figures on an MMO project was a bad career move. Investors don’t like hearing that you don’t know how to spend their money if they give you too much, and with WoW out the focus was all on “WoW Killer” 9-figure projects.

    Well, here we are on the other side.

  • dartwick

    This looks like the state made a made a deal that was doomed to fail by the stipulations of the deal itself.

    And its looks like Schilling and company were too clueless to understand this.

    I will be curious how the health insurance part tuen out – if employees were not informed that they had lost isuance and suffered from that the person or persons responsible may be seeing jail time.

  • Stan Gahpa

    New MMOs are doing badly because the entire industry is almost completely stagnant since WOW.

    WAR? Public quests were a good development but hardly revolutionary.

    RIFT? Cool thing about the classes, but the rest was just another MMO.

    SWTOR? Pretty video dialog on the quests, but hardly revolutionary. A cool one-player game marketed as a MMO and completely lacking an endgame at launch.

    GW2? With any luck it will be DAOC 2.0. Fun, but not revolutionary (certainly not nearly as revolutionary as the original DAOC).

    The next great MMO absolutely must function as a sandbox world —  run by the players in conjunction with the development team in conjunction with  — where you can be or do just about anything, and your actions have a perceivable, lasting impact on the environment .

    Imagine a MMO that’s part turn-based strategy game, part RTS, part RPG (part PVP, part PVE) that allows players to live a virtual life within its environs. It might not be good for the players’ physical or social lives. It almost certainly would not be good for society. But it would be awesome fun and make a helluva lot of money.

    • Completely agree without on the need for a sandbox, although I’m not sold on the form it (they) will take.  Devs and players have become averse to Eve due to its frankly psychotic gameplay, but I think it’s a mistake to overlook its niche success with a small customer base, and the underpinnings of its boxed sandiness.

  • Sinij

    Please, not another lost decade of WoW, we should have never stopped sacrificing virgins to the dark gods of gaming, they are punishing us now.

    Does this at least means that we are going to get more/better single player games?

  • InsiderG

    I do not necessarily agree with your opening statement; I don’t think the problem is that the industry is stagnant because of WoW.

    It’s more an issue of :

    1. Publishers have extreme expectations. (Because of WoW’s success.)
    2. Development house executives will take as much money as they can get. (As Dave Rickey pointed out, Investors or publishers seem to think that it is a money problem. It’s not.)
    2a. Designers are then encouraged to follow the tried and true method (Directive: Follow WoW’s model)
    2b. Designers are encouraged to provide as much content, depth, breadth and systems as WoW has so that the “game can compete” with the market leader.
    3. Innovation is discouraged because so much is on the line.
    3a. Attention to end game is cast aside in order to meet the demands of #2; this results in and incomplete game. (Executives and investors do not remember that there was little end game in WoW at launch)

    It is a Catch-22. One that has been challenged by powerhouse developers with little success. Smaller dev houses have had some success by being just that little bit different, but the expectations keep getting in the way. The failure of both Bioware and 38; Bioware to generate the revenue and subscriber base to maintain their staff and 38 to manage their capital effectively enough to ship a product will continue to drive big money away from large-scale MMOs.

    Smaller MMO companies will continue to shift to the F2P models and innovate where they can. The more of these big MMOs that attempt to chase that dragon, the more failures. The more failures the less investment, until the investors and publisher backed games will simply dry up.

    There are innovators out there. Sadly, 38 may have been akin to this…but innovation needs leadership too. The next great MMO…you could say is here in Minecraft. Not everyone will look at it as an MMO but it fits your requirements of sandbx, lasting impact and player driven.

    Personally, I believe that the next great MMO is going to be something unpredictable. Much like the astronomical success of WoW. Blizzard being involved in WoW’s release certainly made me believe that it would succeed, but no 11 million at its peak and sustaining at somewhere near 7 million subs.

    We just need a company to take a small chance on a really good idea to help make that into a great idea. Not a huge risk, a small chance. Prove the concept, set expectations to something reasonable, deliver what is proposed, keep perspective and make those hard choices.

    • intehknow

      Another strong  post!

  • Stan Gahpa

    “I do not necessarily agree with your opening statement; I don’t think the problem is that the industry is stagnant because of WoW.”

    You say that, but then all your arguments point to the fact that publishers, development houses, executives and designers are all thinking about WoW.

    I don’t think WOW directly stagnated the business. But now everyone wants WOW-style success without WOW-style innovation. They want WOW 2 because they think it’s safe and they can copy WOW’s success.

    When I finished watching the Avengers, I couldn’t wait for Avengers 2. After LOTR, I can’t wait for the Hobbit. But this isn’t a movie franchise, and the playerbase doesn’t want WOW 2. I played WOW. I’m done with it. I have given Warhammer, RIFT, SWTOR and a few others a try, but it’s just the same thing over and over. It doesn’t feel like a new experience. It’s just the same old experience with new window dressing.

    SWTOR had a chance to make it as “WOW 2: WOW In Space,” but botched the opportunity by making it too quick to level and too antigroup (as opposed to merely solo-friendly), while failing to include an endgame. It was also a space game with extremely limited space travel/combat, and a game that promised “Wars,” yet offered extremely limited PVP. After that, I hope no one tries WOW 2 again.

    UO was a great game for its time. So was EQ. So was DAOC. So was WOW. But since WOW… I can’t really think of a truly great MMO that brings the kind of innovation that any of those games brought (visuals, a 3D world, quality PVP and a casual-friendly game experience with really great raiding opportunities).

    I don’t want anyone to describe the next game as “It’s like WOW, but…” (e.g., “It’s like WOW but with dual-classing” or “It’s like WOW, but with cooler quests” or even “It’s like WOW but with more and better PVP.”). When someone asks if the next great MMO is like WOW, the answer has to be “Not really…” or at least “Kind of… but only superficially.”

    As to what’s next, I tend to agree that Minecraft could help provide the model. I don’t play, but my kids love it. At least it’s something other than WOW 2.

    I also think NWN might have a chance. It depends on the toolset that they provide to players. I’m not terribly familiar with their business model, but it’s prime for a really profitable F2P plan (or an initial purchase then F2P).

  • Sinij

    F2P will takes us further away from “the answer”. Fundamentally because F2P due to lower $/customer has to appeal a little bit to everyone, instead of a lot to a set group of players. Plus, F2P is not what gamers want – sure, nobody likes to pay but everyone likes getting nickel-and-dimed even less.

  • red dot mist

    The failure of SWTOR seems like the much more interesting story here.  38 Studios sold 1.2 million copies of KoA: Reckoning in 90 days, which would otherwise be considered a success for any medium size studio’s first game, especially in a niche market.  I think what hurt them most was the game’s Mature Rating, which probably stifled console sales of what should have been a very kid-friendly crossover action-RPG.

    SWTOR on the other hand is a huge failure on the part of an established studuo.  How do you spend 200 million on a shallow, feature-devoid game built on top of a horrible, off-the-shelf game engine?  Voice actors do not cost that much.

    It’s okay.  GW2 is going to save the industry.  It’s the best game I’ve ever played, online or off.

  • Vetarnias

    I like to assign blame equally.  So, in no particular order:

    1) The industry.  Creatively bankrupt, and always attempting to replicate someone else’s success with minimum effort.  Hollywood does that, and it works (financially, at least); but Hollywood hasn’t been trying to topple the same film at the box office since 2004.  The games industry has become like Hollywood: the same hollow creative façade, and the same desire to impose its clout by saying how important it is as an industry.  The Team Bondi affair before this makes me wonder whether it isn’t now part for the course for a studio to die in childbirth, even with a runaway success; if this is the case, the entire model has now become deficient, and it is a matter of time before the entire house of cards collapses.

    2) Investors.  Who would want to invest in a film company when “Hollywood accounting” is the norm? Plenty of people, apparently.  Because of the glamour.  The games industry is the new Hollywood, even though it’s a sweatshop model for people working there.  It’s one thing to waste your private money on a game company; it’s quite another to beg governments to finance your venture, or worse, play one jurisdiction against another just to get a better deal (like RI versus MA in Schilling’s case).  I should know: we have a fair amount of video game companies in this town, and inevitably someone — always a politician — will mention how “glamorous” it is. No, it’s not; it’s white-collar slave labour.

    3) Gamers.  You’re responsible.  You take offense when John Romero promises to make you his bitch, but some of you have been Blizzard’s bitch since longer than I can remember, and what’s worse, you like it. You’re the ones driving up the demand for better graphics, better boob rendition, better bells and whistles. You’re the ones demanding the garbage that now passes as video games while urging for its recognition as art; you’re the ones always chasing the new shiny toy at the expense of the tried-and-tested games of yesteryear, who are only good to be remade/dumbed down.  Indeed, Gamers, you have some introspection to do; without your money, none of this could be taking place.

    • Ripper McGee

      Your comments are ludicrous.  No combination of “the industry”, investors or gamers caused the failure of 38 Studios. 

    • whatevah2012

      Call the “waambulance”. Get in line. You think you are the first to be f**Ked? by the industry? I also blame you all. BWHAHAHAAHA! Don’t even think that you’ll ever have a secure job in gaming. You’ll be a fool. Get in, get out. You’re paychecks will bounce, your insurance will be cancelled and they will make you think the next project will land while you work for free. Don’t be an idiot. Walk out, and move on. Artists, programmers unite!

      • Vetarnias

        I don’t work in the industry. I agree, however, that unionization is the only way.

  • Ano

    Lum

    Do you think GW2 will be a success? It does try to steer away from the typical MMO themepark format.

  • I don’t work in the gaming industry and I’m really sad to see all these jobs lost. I simply have lots of respect for people building worlds, what a beautiful and hard task.

    I think the current model is dead but that MMOs in general have a bright future ahead. I’m sure of it because humans, at their core, are both explorers and social animals and that the last frontier, space exploration, won’t be accessible any time soon.

    To be frank I’m baffled by the way MMORPG have been developed. They still rely on a single “dirty fix”  which simply cost too much and is not compatible with the 2.0 and “social” era we are living in : the exponential health pool increase (http://goo.gl/Iy0Qi)

    If real friends, not “time-rich” equivalent, can’t have any meaningful activities together then your MMO is dead in the social era. Games were always social until the arrival of  PC/Consoles and single player games. MMO shouldn’t go against human nature in the long term.

    It means to stop stats stacking separating players (strong vertical progression) and go with horizontal progression (similar to BFBC2 in FPS) or GW2 sidekick system which is an horizontal progression with a vertical “feeling”.

    Social structure in MMO are still mainly anti-social and encourages people to play solo after burning out  of trying to keep-up with the most time-rich players of your guild. We also  want google+ circles like in RL. We also want a public/private awareness system like chat clients or RL (not all my RL friends receive a notification when I wake up in the real world). GW2 seems to go this way from what i’ve seen on the login screen.

    Web 2.0 and Social is also about User Generated (PvP for example in MMOs) and User Created content. The last one is mostly untapped currently (Archage seems to go there and Minecraft is showing the way as already mentioned).

    I can’t stress enough how the real world have changed this last few years (CEO should read Clay Shirky books). What worked in the past won’t work today. It’s like predicting the behavior of water molecule in liquid state with solid mechanics equations: yes water molecules are still water molecules, yes players are still players but group dynamics are completely different, it’s called a paradigm change. At every step of game design people in charge should ask the question: “what is the Social Cost of this decision?” “How can we design a Social Proof MMO?”.

    I’m just not sure if historic MMO developers will adapt quickly enough until the FPS and Social gaming developers take advantage. Whatever happens, MMOs have too much potential to stop at the “dirty fix”. I’m excited by the untapped potentials of MMO and the resulting future ahead.

  • Excellent reporting. I’m still trying to wrap my mind around all of this. Governments investing in gaming? They do that?!

    It sounds like there’s some underlying problems outside of the clusterfrack, however. Are sign-ups down all over the industry? Did people really all migrate to Facebook and Twitter? Or are they playing little games on their mobile phones? Where did everybody go?

  • He (the governor) said a lot of things, he’s broken confidentiality.
    He’s done a lot of things to materially hurt us and I don’t understand
    it.

    While I agree on the fact that the state shouldn’t have be involved, it’s also clear to me “the governor” had a reason to go against them.

    His statement about sex and violence, being COMPLETELY out of context with 38 Studios game, was very clearly a political statement.

    So the situation is rather evident: a new governor who’s culturally hostile to the game industry as a whole obviously didn’t like the deal with the game company, and so seized the first opportunity to sabotage it.

    It’s a political move. It may have not change much the outcome for 38 Studios, but the governor isn’t coming out as the savior.

    • Dave Weinstein

      Right, because their failure to ship their MMO was due to the Governor doing… what?

      Why would the Governor be the savior? More, why should he be?

  • dartwick

    People talking about where the industry is going – its going everywhere . And thats natural.

    For instance lok at how many pople are playing the beta of the indy game called  http://www.dayzmod.com/ a persistant world mod of “ARMA 2”

    Its a basically an MM) where you just try to find bullets and ammo to stay alive(Perm death with no levels).  All it keeps track of is kills and how long you live.
    This beyond the engine this is maybe the simplest MMO ever and people are loving it.

    There are many ways MMO  development can go that dont require expensive custom crafted worlds covering entire continents. We will see many more eventually.

    • Theo

      “For instance lok at how many pople are playing the beta of the indy game called  http://www.dayzmod.com/ a persistant world mod of “ARMA 2”

      As an early adopter of DayZ, I would hesitate to call it a persistent world. In my opinion, it is more of a “Roguelike Survival-Horror MMOFPS”. Its strength, shown by the recent spike in sales of ArmA II, is that this unlikely combination of established (ancient, even) genres leads to a broadly appealing social dynamic; the mod manages to package a permadeath pvp-enabled game in a manner that engages an extremely wide range of gamers, many of whom would normally balk at losing their hard-earned shiny loot.

  • dartwick

    So the CEO was on 3 months maternity leave during which time it all fell apart?

  • dartwick

    The CEO has not been at work for the last 2 months before the company totally crumbles – and for PC reasons no one is allowed to say it?

    bias much?

  • spacefiddle

    Glad to have you back!

    Soo… between the slow implosion of SWTOR and the quick implosion of 38, the gaming industry has blown over a quarter of a billion dollars this year..?

    The gaming industry needs a smack upside the head.  They want wow’s success, so they imitate wow.  Except wow players already have it, and wow haters don’t want it.  And they’re confused why they fail?

    38 Studios is a special case (and henceforth, gross financial mismanagement by a game company shall be known as a 38 Special).  Fail up and down the line.  And who the heck expects original story and innovative gameplay when the head writer is R. A. Salvatore?  What, the guy who got famous by ripping off Michael Moorcock’s Elric?  You have chosen… poorly.

  • When it comes to business:

    1. The guy/gal doing the back slapping and glad handing better be in marketing and not finance.

    2. The guy/gal worried about how much the coffee costs, the nerd who embarrasses too easily and the guy explaining how an extra 15 minutes in a meeting costs a fortune, should be handling everyone’s money.  

    3. The guy/gal who appears incapable of human communication but gets things done when it comes to logic, coding, data, quality…  Probably should be in charge of logic stuff and his closest fiends should translate for him in meetings…  Literally, “I talk to the God Damn Engineers so the customers don’t have to!” friend(s).

    4.   The people who usually end up in charge are naturally, psychopaths.  http://community.hrdaily.com.au/profiles/blogs/psychopaths-at-work

  • Guest

    To everyone hailing EVE as the model for future MMO development, what part of “went bankrupt after launch and was sold for a song leaving the original investors NOTHING to show for their money” do you think sounds attractive to potential MMO investors today? 

    Given the repetitive mismanagement boondoggles CCP have regularly exercised since, it’s a miracle that EVE is still alive.  But surely you must admit that starting over with a complete, published game with a couple hundred thousand paying subscribers and no debt vs. no code just an idea or tens or hundreds of millions of dollars of debt played a not insignificant part in allowing them the space to fumble their way to whatever level of success they currently enjoy?

  • John Smith

    This post should have been broken into two seperate posts lum. Ea has pretty much fuck itself and the rest of us over as mmo players. There is very little chance anyone is going to want to fund a AAA mmorpg outside of asia now.

    On the other hand, a corrupt corporate fat cat using the law to fuck over his own people is an unrelated matter and has been the status quo for quite some time.  Indeed, this has been the economic/corporate culture for almost every industry for at least 20 years now, although it’s become more and more obvious within the past 5.

  • The trouble you have in determining if the MMO space is worth it for investors is that of comparison to where else the money can be put to use and the relative returns from that investment. MMOs, in general, have continued to go up in capital requirements to bring a product to market where most other technology investments have gone down (way, way down).

    MMOs are an expensive endeavor to partake and, quite frankly, the track record of failures is much bigger than the successes. The pitch always come to biulding the next WoW, but no one ever has – unfortunately, far more have failed. Investors aren’t looking to barely break-even, nor have an MMO customer base that stays static overtime but turns a profit every month. They want growth and a fairly large return on their investment.

    I don’t think SWTOR or 38 Studios is really going to change views on this as MMO investment is already a tough sell to begin with. SWTOR suffers from bad lead designers (which unfortunately is a commonality in the industry) and 38 Studios suffered from poor executive management (if which Curt Schilling was not). This happens in other industries as well.

    So, can it still be done, yes – but the business approach and the talent in the industry sorely needs to be addressed before convincing investors you can reasonably produce a return on investment.

  • IMO I think a die off of large scale investment may be just what the MMO industry needs. Think about it, we’ve had every major player in the market throw tens and hundreds of millions of dollars down the drain again and again trying to make the lightning strike twice. Every time the best funded projects have devolved into hacked off clones of world of warcraft, a title who’s gameplay was stale when it was released most of a decade ago. Innovative titles are continuously marginalized by multi million dollar marketing campaigns, in favor of failures in waiting pushed on the gaming public by dim witted corporate dinosaurs.

    I say let it die, or at least let the AAA MMO investment die. Sometimes the old growth has to die off for new growth to reach it’s potential.

  • spacefiddle

    Hmm.  Your Washington Post link regarding the “Ponzi Scheme” comment is a dead link.  I understand this has something to do with the tax credit broker shell-game they may have been playing; is that really just a typo’d link, or did the Post take the story down?

  • Ajt312

    The core problem in all of this is not WoW. It is money. Or rather it is too much of it. Both of these studios failed because they put themselves into situations where they were blowing an order of magnitude more money than the product they were developing had any reasonable chance of recouping. It’s that simple.

    It doesn’t matter if SWTOR’s endgame was good or bad. Even it’s initial growth rate does not matter. You could tell that regardless of sales or subscribbers the game had almost no chance of success simply because its costs to make were so out of balance with any reasonable interpretation of success in the marketplace up to that point. The business model pretty much demanded that SWTOR grab ALL of WOW’s past and present subscribers and keep them paying for at least 2 years. This is an interesting daydream, not a solid or realistic madel on which to amortize the costs of a retail product. When your launch plan requires you to steal all of the competitors customers +1, right away, well lets just say chances are it isn’t going to happen. This was easily forseen almost a year prior to the games launch.

    As far as 38 studios? There are a few major problems there. Their deals with the state were based around providing jobs to the state. So they needed what 400-500 employees? With no revenue stream? Plus once again look at the numbers. Reports are Curt Shilling kicked in $30 million. Others, who knows how much. Plus $90 million from the state of Rhode Island? Wow! Exactly how many paying customers would the studio have needed in order to pay off those loans? for how long? The simple fact that those in chareg of the money stopped paying the health insurance without telling anyone, and that the employees were getting trapped in fraud regarding their moving expenses and mortgages seems a pretty clear indication that those in charge were just shoveling monies in and out without actually bothering to do any math. Or read and labor laws or criminal code. Best guess is they stopped paying the lawyer too. 

    And here is a brief lesson to the 38 employees. My heart goes out to you. But make sure you point your anger in the right direction. It’s not the Governor. he did his job. He was the gatekeeper of public money, not your employer. He cut the money off when he realized that your employers were shady and poor stewards of it. That was his responsibility to his employers, the taxpayers. Even the hint that this might lie on the backs of the Governor or the State evaporated when it became known that the management had not been paying the health insurance, the mortgage payments, payroll, etc. They committed fraud on the employees. They outright lied to the staff, the state and the government in their accounting and expectations. The Governor simply stopped believing the lies first.