Mainstream media is fond of pointing out that the video game industry pulls in more money than the movie industry. This factoid is true, but most of that money goes to game publishers based on the West Coast. There are some major game publishers and developers on the East Coast too, including Rockstar in New York and Bethesda in Maryland, and it’s easy to see how other state governments would be eager to get a piece of this lucrative pie.
That’s why Rhode Island was so keen to offer a 75 million-dollar loan to a new game developer called 38 Studios for their very first game, Kingdoms of Amalur: Reckoning. Today, only three months after thelaunch ofthat title, the studio has folded, leaving Rhode Island inan embarrassing predicament.
It certainly looked like a great idea. 38 Studios is owned by Curt Schilling, a former Red Sox pitcher with an easily recognized name and a personal fortune to partially finance his own game company.
Kingdoms of Amalur: Reckoning uses art designed by Todd McFarlane who also has legions of fans from his work in the comic book industry. Plus the story was written by famed author R. A. Salvatore who has a string of best-selling fantasy novels. 38 Studios also brought in the lead designer from The Elder Scrolls III and IV which just about guaranteed a great game.
It was picked up and published by Electronic Arts, and released earlier this year with two DLC packs adding to the sales figures in the months since then. Yet, despite all of this talent and potential, Kingdoms of Amalur failed to bring in enough money to let 38 Studios make the scheduled payments of their debt to Rhode Island or even pay all of their employees.
After weeks of ominous signs, 38 Studios finally shut down, laying off their entire 400 person staff (Including their subsidiary Big Huge Games).
The tragedy is that Kingdoms of Amalur is actually a good game. It wasn’t a blockbuster that sold millions of copies overnight like Diablo III did last week, but Amalur certainly wasn’t a bad game. Reviews were generally positive, and the game sold over 300,000 copies in the first month it was on the market.
With games like Call of Duty selling millions of games in the same time span, it’s easy to be unimpressed with the sort of moderate success that Amalur had. Unfortunately, it is likely to be better remembered as “The game that killed its developer” instead of being a cool new intellectual property.
What are state and local governments to think of the game industry now?
This episode will no doubt dispel the notion that the video game industry is a cash cow waiting to be milked. States and cities hoping to lure in some game developers with tax breaks (Or outright multi-million dollar loans) are learning that even a reasonably good game might be more trouble than it’s worth.
Game publishers understand that they can’t put all their eggs in one basket, and that’s why companies like Amalur’s publisher EA try to develop their intellectual properties into franchises with multiple games. The first game in any series is at great risk for being a commercial failure.
Sequels and spin offs have a much easier time as players know what to expect, and word of mouth about the earlier games in the series has had time to spread. Compare the sales of the first Call of Duty game in its first week on the market to sales of the most recent game in the franchise, Modern Warfare 3 (It’s about 9 million copies more).
Kingdoms of Amalur: Reckoning was intended to be the first game in a series, and when they closed their doors, 38 Studios was already at work on making another game using the same setting.
Enlisting R. A. Salvatore for the project was more than just creating a backstory for this game. Rather, Amalur was given an elaborate 10,000 year backstory that could have been explored in future sequels that would have eventually paid off the huge starting loan from the state of Rhode Island.
Perhaps it was short-sighted of the government to cut off this developer, but unlike a game company, politicians have to think in the short term. The hundreds of millions that could come in return of that initial investment in 38 Studios aren’t going to help a Governor who needs to get re-elected in two years.
True to this view, Rhode Island governor Lincoln Chafee, who was opposed to the 75 million dollar loan before he took office, has ruled out further aid with tax dollars, but still pledges to assist 38 Studios who had to lay off hundreds of Rhode Island residents today.
“Wherever there is any kind of hope you can bet I’ll be putting all my energies in that area, whether it’s a 1 percent chance or a 2 percent chance I’ll still be working,” said the governor “Lot of money at stake here.”
Chafee is nonetheless under attack by political rivals for allowing the company to go under while he was in office “A company does not run out of money overnight,” says the state’s Treasurer Gina Raimondo, a possible opponent in the 2014 election. “A company is not a year behind product development overnight. So the question is: how has the state been monitoring this investment?”
The sad case of 38 Studios and Amalur raises quite a few disturbing issues for the video game industry. How can a game that got such good reviews end up being considered a flop from a commercial perspective? Should the game industry stay put in Silicon Valley, or are state and local governments in the rest of the country justified in taking a risk on enticing the industry to try out new frontiers?
Even though there are mountains of money to be made in video games, it’s still a risky industry. Making a good game should be the goal of every developer, but as Kingdoms of Amalur: Reckoning demonstrates, that isn’t necessarily enough.