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38 Studios: A study of government incompetence May 16, 2012

Posted by truthspew in Uncategorized.
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So in recent news it’s been talked about ad nauseum about Curt Schilling’s 38 Studios. Schilling was a Boston Red Sox player but here I will explain why the state government in RI is incompetent when it comes to economic stimulus measures.

38 Studios was given $75 Million dollars in state guaranteed money. Now I have a fair amount of experience with finance and accounting and the systems needed to accomplish accepted practices. Here I will lay out why $75 Million was a money grab and that the state should have known better than to give it to a sports figure.

1) Schilling wouldn’t know what it takes to develop a game if it bit him in the ass.

2) Schilling’s core competency is as a ball player, not as a business leader.

3) Game development houses can crank out a new game in 90 to 180 days.

Therefore it appears that the state made a major screw up backing Schilling’s 38 Studios.

Let’s do a little pro forma here.

Some assumptions first:

A development team of 20 individuals comprised of software, graphic and story development members.

Average yearly salary of $100,000 when benefits are included per employee.

Each employee will require a one time equipment and I.T. gear expenditure of $5000.

Month to month I.T. infrastructure including broadband connectivity will be set at $500 per month.

2000 square feet of space, at $20 per square foot for a total of $40,000 a month rental expense for Class A office space. This is low end but there’s a glut of commercial office space in Providence that I believe it is a fair estimate. And in most cases, utilities are included in the cost per square foot.

So doing the math we get:

20 employees at $100,000 = $2,000,000 per year.
12 months rental at $40,000 per month = $480,000
20 employees at $5,000 flat for gear = $100,000
12 months of Broadband net connectivity at $500 per month = $6,000

Lets be generous and include breakfast and lunch for each employee at a cost of $20 per day. $208,000!

And lets say legal, patent and copyright is $1,000,000 a year.

The total comes out to $3,794,000 per year.

So tell me how the hell did the state back loans for this guy of $75,000,000? In essence, with what I’ve laid out above they could operate 20 employees for 20 years at that rate.

So the question remains – where did the remaining $71,206,000 go?

I’d like to ask the Governor, the Director of Economic Development and all those involved why they thought that backing a $75 million loan for a baseball player was a good idea.

Here is what I think happened to the money. Schilling transferred it out of the company to his own benefit. And since the money is gone, and the state is the guarantor guess who’s on the hook for the $75 million? Yes, we the taxpayers.

Comments»

1. Jonathan - May 16, 2012

we are talking over 400 employees, not 20. That’s where the money is going. And your typical MMO takes 4-6 years of development time.

This isn’t that reIevant but I have NO IDEA what kinda games you are talking about when you say they can be cranked out in 3-6 months. Not quality games, that’s for sure.

truthspew - May 16, 2012

Even at 400 employees it would cost $40,000,000 in the first year. And four to six years? That is ludicrous – you can get a development project up and running on 20 people and you can push a product out the door in six months. Hell, you can sub-contract the graphic design work too.

And considering the business has only been around for a little less than a year, you see my point. They’re wasting money.

2. truthspew - May 17, 2012

Ok, I got a firmer fix on the number of employees at 38 Studios. There are 150 – so multiply that times $100,000 and you come up to $15,000,000 a year.

No matter how we run the numbers there is still $30,000,000 to $50,000,000 that is mysteriously gone. And recent news says that 38 Studios cannot cover the check on their loan payment, and that they cannot make payroll.


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