The 38 Studios debacle continues unabated as the embattled video game company laid off its entire staff of nearly 400 in both Rhode Island and Maryland.
38 Studios’ downfall has now led to a second resignation at the Rhode Island Economic Development Corporation (RIEDC), as vice chairwoman Helena Foulkes resigned and wished Gov. Lincoln Chafee “good luck in this very difficult time.”
The first official to resign was RIEDC executive director Keith Stokes, who resigned on May 18, 2012. Apart from these two, at least two other RIEDC board members have asked the Governor not to re-appoint them.
The details are explained in this earlier post, but the summary is that the state offered 38 Studios, founded by former Red Sox pitcher Curt Schilling, a $75 million loan guarantee as an incentive to relocate from Massachusetts to Providence, RI.
38 Studios has used up around $50 million of that money and now run into a rough patch where it has no more money to meet payroll or the loan payments. The company sought additional time for a $1.1 million payment that was due and faster approval for additional funding in the form of film tax credits.
Both requests were denied. As a result, 38 Studios ended up giving a check to the RIEDC without sufficient funds to cover it and then also didn’t pay its workers. The company has since paid the $1.1 million that was due, but ended up having to lay off its entire workforce. A memo sent to employees says that, “To avoid further losses and possibility of retrenchment, the company has decided that a companywide layoff is absolutely necessary.”
Last month, on April 11, the company’s employees celebrated their one-year presence in Providence, RI with ice cream. At that time, they had no idea they would all be out of a job in one month. Departing employees are now blaming the state for not offering enough support to keep the company afloat until the Project Copernicus MMORPG game they were working on could become a success.
38 Studios released a video trailer of their game on May 21, perhaps to show that the company has done a lot of work on the game and may yet be able to finish it if they get funding.
The company’s request for film tax credits could still be approved if the RIEDC wants to save their investment and prevent 38 Studios from folding altogether, which would mean the state would be on the hook for around $90 million, including the interest on the loan. The delay is apparently because 38 Studios is incorporated in Delaware, which makes it ineligible for film tax credits in Rhode Island.