End Game

Curt Schilling set out to build the greatest video-game company the world had ever seen, and to get rich — Bill Gates rich — doing it. Instead, the whole thing exploded in his face. Drawing on exclusive interviews with the Red Sox legend and his former employees, Jason Schwartz takes us inside the chaos, arrogance, and mistakes that led to the destruction of 38 Studios and the loss of $75 million in taxpayer money.

On March 6, 2010, Schilling hosted a fundraising event at his Medfield home. Then-Rhode Island Governor Donald Carcieri attended, and the two men got to talking business. Schilling needed money. Carcieri was looking to beef up his state’s high-tech sector.

The talks continued for months, with the outline of a deal to move 38 Studios to Rhode Island gradually taking shape. At one point, Schilling approached Governor Deval Patrick and asked for tax incentives to keep the company here, but Patrick politely passed. 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.

There were a few catches, though. The loan deal stipulated that 38 Studios had to hit certain hiring benchmarks to access some of the funds. The company would unlock $17.2 million for creating 80 new jobs in the state by spring 2011, another $4.2 million for adding 45 more by fall, and $3.1 million on top of that for 125 additional jobs by winter.

So as the company moved south in April 2011, it embarked on a hiring binge. In its midst, Schilling seemed to be handing out important titles to anybody who asked nicely for one. “It became a joke,” one employee says. “Oh, you are a VP of lunch? Oh yeah, I’m a VP of doughnuts.” Infighting inevitably resulted, with execs often giving conflicting directives to staffers. “They didn’t work well together,” Schilling says of his bloated management team. “I was amazed at the turf-building and protecting that went on.”

The people working under Schilling had their own complaints about him. One says that he’d undermine managers by randomly dipping in to give direct orders to employees: “His requests added significant work, and were often contrary to the direction given by other people.” Former staff members also charge that Schilling was stubborn and ignored people when he didn’t like what they were saying. For instance, sources say Schilling froze out his vice president of business development by excluding her from meetings. “Once Curt turned on somebody,” a former employee says, “you went from being a superstar to he doesn’t want to talk to you, overnight.”

Schilling disputes much of this, but 38 Studios churned through a litany of executives during its existence. One former employee says Schilling appreciated that there was a lot he didn’t know about video-game development, and “tried to hire some of the best people in the industry to shore up those gaps. The problem is if you don’t listen to those people.”

  • Jan Dumas

    I am surprised that 38 Studios never contacted the large gaming and Science Fiction communities. There are conventions he could have attended with samples, with single player versions of his game. Gaming groups that would have given him real feedback on his game. And many many people who could have helped him build his company before building him game.

    He is a great base ball player, skilled in the fundamentals of the game, he should have learned the fundamentals of business.

    • Christine

      Only problem is, by Curt’s own ommission the game was all eyecandy and no substance. In this current MMO market, it would’ve flopped miserably if it’s core gameplay was so weak and the only thing on par was it’s visuals. There is no way they could’ve revamped the entire core of the game in time for 2013 launch; the game was just a moneysucking liability at this point and floating it with more money would have just delayed the inevitable.

      • John

        Arguable. Some MMOs with really bad mechanics, but are flashy or have wide open visual editting of their character do well. Some MMOs rely on their good gameplay. The key is though that you need the pros to outweight the cons. And without a living copy of the game, I’m not sure we can decide that.

        Both exist in the world and it’s impossible to say whether or not their dream project could have enough flash to make up for their lack of substance.

  • Robert

    Schilling and his defenders like to say he’s out more than other people (like those who moved to Rhode Island and had to drain their personal savings to pay unreimbursed moving costs, health insurance, etc) because he lost $50 million. If you have $90 million over however much Mr. Schilling had, and you lose $50 million, your life is not substantially different. You can pay bills, keep your mansion, send your kids to college, AND PAY YOUR HEALTH INSURANCE. Mr. Schilling left hundreds of families bankrupt and many homeless. They don’t have millions to fall back on. And let’s just suppose for the sake of argument that Mr. Schilling lost all his cash. So what. As a rich person with a financial adviser, the second things started to go bad, he had options. I’m sure his financial adviser had him do money hiding things (which are all legal and any competent adviser would do them) like gifting money to family members or buying real estate in a state like Florida. You see, in states like Florida, if you declare bankruptcy or even get a personal judgement against you personally, you still get to keep your “home”. So Mr. Schilling probably has a $10 million home somewhere that no one can touch even when (not if) he is found liable for damages. Also, even if he ended up completely penniless, he’s still Kurt Schilling. He could walk into the Home Shopping Network tomorrow and cut a multi-million deal for memorabilia and autographs. He’s not going to be homeless, he’s not going hungry, he’s not even going to have to cut down on the premium channels on his satellite tv bill. So don’t dare say “He gave $50 million, so he’s hurting more than anyone.” because hurt is relative. The “little people” in his game company may have lost “only” tens of thousands of dollars, but that was all they had. Most will be able to recover, but they’ll (unlike Mr. Schilling) will have to work long and hard to get back to where they were before this whole fiasco. Their security and quality of life is going to suffer for the next few years. Their kids are going to have to go to public schools and take government handouts. Those are the ones who gave the most to Mr. Schilling’s folly.

    • Tim

      What an insightful assessment of the situation! I was thinking the same. He can’t afford to fork over a few more million to make things right, yet he was soooooo very concerned about his employees? Bullcrap. He has the money, and if he doesn’t, he can get it. “What are we going to do in case of failure?” needs to be a question, however bitter, all businesses have an answer to, as well as “At what specific point will we consider the venture unsuccessful?”. But the biggest mistake was in exorbitant spending/hiring. Seeing as this was going to be a drawn-out development process, the fact that they were spending 4 million a month should have allowed them to forecast failure long before it occurred.

      • KevinNYC

        It said he earned 90 million over his career. It didn’t say he HAD 90 million after his career.

        Taxes, expenses, spending, etc. The guy is not going to be a pauper, he probably still had a nice house and nice cars, but he definitely took a hit too.

        • http://madhaberdashers.wordpress.com Dan Z

          You assume that he had 90 million left after his career. Let’s assume that he took that money home and that none of it went to taxes, agent’s fees, his accountant, all the stuff that it does go to. He owns a house, he had 5 mill in gold coins (that are now gone) he probably took some pretty luxurious vacations, owns some pretty expensive cars, how much do you think he had left? There’s hundreds of sports stars who go bankrupt every year, this is going to be another one, he might have a ton of assets, but not enough cash to fill the tank in his car. Before asking him to front more money why not ask what might keep him from doing it.

      • Sarge

        The article itself says he doesn’t have the money to pay the wages. If he did, given how much he spent on the project and employees during the lifetime of the project, I have no doubt he’d cover it.

        • Kirk Bilder

          You have no doubt? I guess you didn’t work for Schilling. Alot of the money he spent was for unnecessary stuff. Buying things he thought were cool or made him fee like a big shot. Not necessarily what was needed or even wanted.

  • Pingback: Look Inside 38 Studios Disaster Shows Overconfident, Clueless Curt Schilling | Libertarios of America

  • Jac

    Schilling should be in prison, and his personal assets should be liquidated to cover the wages and expenses he owes his former employees. Trying to run a company and failing is one thing. But deceiving employees into continuing to work even when disaster is on the horizon…continuing to throw money away even when you know ordinary, non-millionaire people are depending on their paycheck to pay rent and medical bills…that’s evil. It’s borderline sociopathic, in its utter disregard for the hardship and suffering of others.

    I can’t believe it’s even in question as to whether he’ll be held responsible for his obligations to the people that worked for him. As always, it’s the regular, run-of-the-mill worker who gets screwed the hardest in the end.

    • John

      He did state though that it was their option to come in and work or stay home. Most of them came into work out of belief that either their best chance of making money was there or out of loyalty.

      They made their choice to work for nothing and were subsequently burned. But they chose to stick.

    • josh

      i was head of security at 38 studios and what i saw of how much money was being spent was totally insane…there were days where big rig trucks would show up at 1 empire plaza on providence and 50 – 100 cases of beer were off loaded into the studio for various parties and events that went on often, every week. in the studio everything was free….high end coffee machines with exotic coffee…free drinks…free beer….catered meals everyday. it was ridiculous. i used to think to myself…wow so this is the life of millionaires. one thing in curts defense is what i saw is he did take care of his people,but splurged on everything…it was like a pro baseball clubhouse. .i did not know much about the video game process, but from what i saw i figured everything was peachy….guess not…i was laid off in march 2012..that is when builing security ceased at 38 studios…..but i did get a bunch of awesome baseball memorabilia signed by his greatness curt schilling.

  • John

    It’s really just a tragic story… I think every avid gamer has dreams of striking it rich/winning the lottery and using that money to build the game of their dreams (I know I do). This guy actually had that shot and went for it, which makes this something of a cautionary tale.

    It’s really not hard to see where it went wrong though. Because the cash flow model for the video game industry is so lopsided (it basically all comes after development is over, less relatively small financing cash flows during the course of development), typical game developers have only a very small team working on a game during most of its production. Only during the final push, once all the design work is finished, are teams ramped up to fill out the game content. Ramping up too early, or miscalculating how long it will take to complete a project, has been the death knell for a great many developers over the years. In that sense, the case of 38 Studios is neither unique nor precedent setting. Only the celebrity status of the founder and political ties to Rhode Island have made this news versus the many other studios that have died to exactly the same sort of financial mismanagement before 38S.

    It may not be unique in the history of video game development, but it’s always sad to see a dream die and cause so many collateral tragedies among the former employees.

  • Dan

    This is actually a pretty common story in the gaming industry. Not at this scale generally, but common enough. Many industry vets can tell stories of their last paycheck being the computer at their desk and anything else they can grab.

  • jon

    This is the guy who turned the moment of New England’s greatest triumph into a political event by endorsing W during post-game revelry. Endorsing him against the senator of the state he played for. It was the ultimate in p***ing on the parade, it tainted the experience for me and many others, and I’ll never forgive him for it. I’m sorry that so many worthy people have had to suffer for his foolishness, but for a Republican to whine about the taxpayers of Rhode Island not giving him enough money to throw away is the ultimate in hypocrisy. Get thee behind us, Curt.

    • Theresa

      You mean you changed your opinion of Schilling after the first Red Sox WS victory in 86 years because of his POLITICS? How sad. How much has the democratic party really done for you? You must be getting some kind of government money yourself. Pathetic.

      • Kirk Bilder

        You mean YOU think a baseball championship is more important than politics? Now THAT’s PATHETIC.

        I can’t speak for Jon, but it matters to me what progressives (very few of them in the Republican Party) have done for this country to try to ensure social and economic justice for all.

        But no matter what side of what political issues you’re on, you’d be an idiot or a fool to believe a baseball title matters more.

        To follow your lead, You must be getting some kind of baseball money yourself.

    • profile

      jon wrote:
      “This is the guy who turned the moment of New England’s greatest triumph into a political event by endorsing W during post-game revelry. Endorsing him against the senator of the state he played for. It was the ultimate in p***ing on the parade, it tainted the experience for me”

      ———–
      made it that much more jovial for me

  • God’s Advisor

    I don’t understand any of the people who thought because a guy could throw a ball he could run a company as it’s founder, visionary and over-ruler of industry pros. This is a guy who went to Junior College, probably blew off classes to pitch, was treated as a Diva during his career and practiced nepotism at his first chance.

  • John

    I’m an avid World of Warcraft player (well…used to be anyway), and independent businessman, and fascinated by this story. I really wanted 38 studios to come up with something great. I feel really bad for everyone involved, Schilling’s family too though I think he made aweful mistakes and did some unethical things towards the end.

    I think this is a bigger part of American capitalism where people blow other people’s money away and then walk away with millions but the little guy has no recourse and no health insurance. It’s 2008/2009 re-enacted in a way.

    I also think it’s part of the illness that plagues the game industry, especially the MMO industry. Honestly, for all the money that’s sunk into MMO’s the game makers give us very little in return. Instead they studios heads blow money like Schilling and the programmers get free tote bags and laptops they don’t need while they play other games when they should be figuring out how to make the MMO they are working on better.

    So on one hand I feel bad for all of them, but on the other, I think they all get what they deserve… Schilling AND his design team.

    Hopefully, there will be better companies and better game designers to come up with better games and disrupt the complacent MMO gamespace that is at this point held back by the supremacy of WoW.

  • John

    Harvard University should throw out the Edsel marketing study and use the “38 Studies” for their students. 379 employees for a one item company which was never marketed. Bill Gates did it in the beginning with two people. It only took 9 people to win a game.

  • Ken

    Over and over again, we hear the charge that Schilling was a hypocrite for spreading Republican agitprop; i.e., big government bad, small government good. But it wasn’t just that; he’s implicitly a promoter and defender of true Republicanism and its attendant battle cry : “get the government off our backs.” He loathes government as burden, but embraces government largesse. Curt-types hate the New Deal, unless there’s a good ‘deal’ in it for them. He and his Free Marketeer brethren demand that the government “get out of the way,” but apparently only after they’ve fattened up at the gummint trough. But Curt, like everyone else who ventures into “the market,” learned the brutal truth of the market jungle : Pigs get fed, but hogs get slaughtered.

  • Jack from RI

    It is truly amazing that Schilling still is trying to blame others for his failing. He’s clearly upset that the Governor of RI refused to engage in a cover-up of the dire financial condition of the company in an effort to trick future investors – not to mention an effort to dupe RI taxpayers into giving even MORE taxpayer dollars.

    Can you imagine the scandal if Governor Chafee actually did what Schilling WANTED him to do? And he still insists that Chafee WANTED the company to fail.

    Schilling clearly isn’t thinking rationally. Why would a sitting Governor actively work to undermine a company for which it had $100 million invested? That makes no sense.

    Yet, given how poorly run the company was (who’s idea was it to release their first game two months AFTER Christmas?) Chafee could not ethically or rationally give up tens of millions MORE taxpayer money knowing how quickly and carelessly Schilling was spending it.

    The true blame lies with Schilling himself, and the politically connected friends of RI House Speaker Gordon Fox who are the ones who made this deal happen – and made millions on the sale of tax credits for Schilling’s company

  • Sarah

    Very well written piece, however, a little too easy on Schilling.

    A few things I think deserved mention or more attention:

    1. The fact that, as Robert noted here, unlike many of the fired-by-email former 38 Studios employees, the Schillings will be just fine. They will have plenty of opportunities–simply due to their fame and connections–to make piles of money doing things that others are far more qualified for. Affirmative action for the elites.

    For instance, the same Shonda Schilling whose writing can’t be quoted without loads of “sics”, was recruited to “write” a book about autism. Yes, the Schillings have a son with the condition, but so do many far more literate and insightful people who will never get the opportunity to write a book about the subject.

    2. Schilling’s hypocrisy regarding “big government,” also noted by Robert and other commenters here and throughout the web.

    3. The prepostorous nature of the fact that, despite her husband’s history of boisterous, nasty, denouncement others’ actions, Shonda now stamps her feet and demands in her garbled English (gee, if we make it the official language of the US, will she have to leave?) that her family not be subject to similar criticism.

    And, keep in mind, the actions Curt made it his business to criticize so vehemently and publicly seldom had any affect on him or his family, unlike his own actions, which have destroyed the well-being of many other families.

    4. The nepotism. OK, the Uncle Billy blunders did get good coverage, but there’s more that could have been revealed and more discovered by deeper digging.

    I also would say that:

    5. Those who still think Schilling is a swell guy were over-represented in the article.

    6. The potential illegality of Schilling and company’s actions should have to been expanded upon.

    • Theresa

      Some good comments are overshadowed by your over-the-top grammar-schoolish criticism of Curt’s wife.

      • Sarah

        If you knew Shonda Schilling as I do you’d realize I was letting her off easy.

        Especially considering how she treats others who “displease” her.

      • Markus T

        Looks more like Mrs. Schilling’s behavior, not the criticism of it, is what deserves the grammar school label.

  • trudy

    Rhode Island taxpayers, of which I am one, owe a big thanks to our Governor, Lincoln Chafee, for not throwing our good money after bad.

    Schilling’s pathetic and despicable attempt to blame Chafee for Schilling’s business stupidity would be laughable if I weren’t fuming about the idiotic, corrupt RI pols, like former Gov Carcieri and the General Assembly leaders like Fox and Paiva-Weed and the EDC people who brought about this mess and whacked us in the pocketbook.

    Not one single normal person I know in RI thought 38 Studios was anything but a financial disaster waiting to happen from day one.

  • Kazz

    I cannot decide which is more delicious. The demise of that consumate baffoon Ketchup Curt or the demise of the Red Sox. The summer of my dreams. lOL
    In any case, how fitting that “small govt.” Schilling is crying over the lack of bailout by the state. Hope he and his low class wife end up collecting bottles on the street.

  • http://best-waterfiltrationsystem.org/ water distiller reviews

    This is actually a pretty common story in the gaming industry. Not at this scale generally, but common enough. Many industry vets can tell stories of their last paycheck being the computer at their desk and anything else they can grab.

  • dhhyey

    Hey, he can still sell the bloody sock.

    • http://www.facebook.com/people/John-Smith/1414167703 John Smith

      heh. he just did.

  • Dennis

    Not until we have become humble and teachable, standing in awe of God’s holiness and sovereignty. acknowledging our own littleness, distrusting our own thoughts, and willing to have our minds turned upside down, can divine wisdom become ours.
    J. I. Packer

  • adam

    this is why government should not loan to businesses, there is lack of risk for the developer . and by doing so the success rate for government funded businisses are low.

    • blank reg

      And as this article shows, the companies that apply for government financing are the ones private equity and VC companies have already run away from

  • Jason

    What’s conspicuously missing is the fate of Todd McFarlane and R.A. Salvatore. Both made out like bandits, if you ask me.

    • briancarnell

      Really? Bandits? Salvatore apparently worked for 38 Studios on a contract basis and was to be paid once the Amalur MMO was published and successful. Based on published reports, he didn’t end up with much at all from the 38 Studios debacle. Rather it sounds like he was drinking Schilling’s Kool Aid.

  • slimsh8ee1@yahoo.com

    Great article. Well written, concise, factual and objective. So for the man that said he couldn’t think of anything better than to make 50k New Yorkers shut up (Yankee Stadium fans), all it took was a few New Englanders (his people) to assist in wiping away his entire fortune.

  • OMFS88

    That picture looks a little eery these days…

  • Atticus Finch

    Big Curt, the fiscally CONSERVATIVE REPUBLICAN. Pathetic, and oh, so predictible. Screwed everyone in his path over, ROYALLY. He should be in jail for his dealings. BTW……anyone want to buy his HUMMER GOLF CART? Figures he’d own something so utterly ostentacious.

  • Mursha Basrag

    “and that his video-game developers worked too slowly.” The typical attitude of people that know nothing about software development/software management.

  • DC

    Leading your baseball team to victory against the Yankees three times in nine days IS NOT A VALID MEASURE OF POTENTIAL SUCCESS IN VIDEO GAME DEVELOPMENT! Why do so many of the great athletes think this way.. it’s retardedly ignorant.

  • The Johnny show

    Curt, thank you for Koar, your team did real good. Sorry about what happened. Thanks for the great game you put out, I love it.

  • Kylie Marie Summerling

    This man was nothing but a moron. He didn’t do his research, and spent money like a whore on a stolen credit card. Idiots who catch balls for a living can’t handle the real world. Wonder if his mother in law is giving him charity now.

  • steelerstwin

    Another “hand out for corporate welfare” conservative. The hell with him.