Curt Schilling’s 38 Studios Bankruptcy: 5 Fast Facts You Need To Know

Curt Schilling Speaks Out on 38 StudiosSchilling joined the John DePetro show two days after writing a strongly worded op-ed in the Providence Journal.2016-10-18T16:39:20.000Z

Curt Schilling, the 49-year-old former Major League Baseball star hurler who pitched in four World Series and won 216 games in his 20-year career, said in a radio interview Monday that he plans to run for United States Senate in his adopted home state of Massachusetts, opposing popular Democrat Elizabeth Warren when she comes up for re-election in 2018. The only thing possibly standing in his way, Schilling said, is his wife.

The ex-pitcher — who last took the mound in 2007 — finished his career with the Boston Red Sox, helping the team to its first World Series title in 86 years in 2004 and a second championship three seasons later. A native of Alaska who grew up mainly in Arizona, Schilling settled in Massachusetts after his baseball career, where he has since become a frequent and outspoken figure in the local media known as much for his conservative politics as his thoughts on baseball. Schilling has been a vocal supporter of Republican presidential candidate Donald Trump.

If Schilling follows through on his planned run against Warren, he faces a steep uphill climb. A University of Massachusetts-Amherst poll taken in September showed Warren crushing Schilling in a head-to-head race, 47 percent to 19, creating what one local political analyst called “an easy re-election in 2018” if her Republican opponent turns out to be Schilling.

But Schilling will likely face another obstacle in his projected run against Warren — the shadow of his failed video game company, 38 Studios, that collapsed in Chapter Seven bankruptcy in 2012. Here’s what you need to know about Schilling’s 38 Studios, which could become a major issue if he runs for public office.

1. 38 Studios Received a Taxpayer Loan of $75 Million

While it isn’t unusual for businesses to fail, especially in highly competitive industries such as video game production, the bankruptcy of Schilling’s 38 Studios created a scandal because in going under, the company took $75 million in Rhode Island state taxpayer dollars with it.

Schilling started his company — originally named Green Monster Games, after the legendary left-field wall in Boston’s Fenway Park — in Massachusetts, but relocated to Rhode Island after Massachusetts refused to give Schilling the tax breaks he was looking for, and neighboring Rhode Island offered the $75 million loan.

Including interest, according to a Boston Magazine report, the bankruptcy left Rhode Island out as much as $110 million.

2. Schilling Took the Blame for the Bankruptcy — Sort of

Curt Schilling politics, Curt Schilling Elizabeth Warren, 38 Studios bankruptcy, Curt Schilling scandal, Rhode Island

Former Rhode Island Governor Lincoln Chafee. (Getty)

Schilling in 2012 told Boston Magazine that the problems leading to his company’s failure were his own fault, saying, “As the chairman and founder, who’s above me?”

He repeated his claim of responsibility in an op-ed article in the Providence Journal newspaper just this month.

“The company went bankrupt, and that will always be on me, as the founder and chairman,” he wrote. “My failure to raise the final tranche of money to complete (the video game) Copernicus was, in the end, our death blow, and I will take that to the grave.”

At the same time, however, Schilling shifted blame to the then-governor of Rhode Island, Lincoln Chafee, who according to Schilling engaged in “a concerted effort to make this not succeed.” Chafee had opposed the 38 Studios loan during his campaign for governor in 2011. Schilling has often referred to Chafee in public as “Mrs. Chafee,” and has said he believes that Chafee — who served as U.S. Senator from Rhode Island between 1999 and 2007 — suffers from a “learning disability.”

In the Boston Magazine article, Schilling also dumped a share of blame onto his erstwhile employees, saying his staff suffered from “significant dysfunction” and that the video game developers he hired didn’t work fast enough.

3. 38 Studios Was Developing a MMO Game, Known to be a Risky Venture

38 Studios MMO "Project Copernicus" Trailerse7enpoints.org2012-05-20T06:58:50.000Z

Schilling’s signature game, and the one that he says ultimately drove 38 Studios into the ground was Project Copernicus, a “Massively Multiplayer Online Role Playing Game,” or MMORPG — often shortened even further to MMO. The company’s trailer for the never-completed game can be viewed above.

But MMO games have proven extremely difficult propositions when it comes to turning a profit, even in 2012 — especially those basing their revenues on a paid-subscriber model as Schilling planned for Copernicus. Even MMO games based on such marketable properties as Star Wars and the DC Comics superhero universe have seen difficulties. The DC Universe Online MMO was released in 2011 as a free-to-play game, and in the first five months of its release in 2012, Star Wars: The Old Republic lost 400,000 users, 25 percent of its player base.

Even the industry-leading World of Warcraft game dropped about 2 million subscribers from 2011 to 2012.

The difficulty in creating financially successful MMO games was likely a factor in Schilling’s frustration with Massachusetts and its tax credit program, driving 38 Studios into the waiting arms of Rhode Island.

4. Many 38 Studios Employees Blamed Schilling for the Company’s Failure

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Former 38 Studios Vice-President Bill Mrochek blamed Schilling’s “arrogance” for the company’s failure. (LinkedIn/Bill Mrochek)

Schilling says that he lost $50 million of his own cash by sinking in into 38 Studios, not only paying off the company’s debt, but providing extravagant benefits for his employees including top-of-the line health care plans, free laptop computers and free gym memberships, leased homes for out-of-state hires and other luxury expenditures.

But in the end, especially after Schilling publicly excoriated Chafee for his company’s failure, his out-of-work employees spoke out.

“Are you going to admit that your stupid hubris, pride, and arrogance would not allow you to accept that we failed — and help shut it down with dignity?” said former company vice-president Bill Mrochek in one Facebook post.

Other employees told the media that the same stubborn self-confidence that made Schilling a successful pitcher led to his downfall as a video game impresario, because Schilling was simply unable to believe that 38 Studios was in trouble.

“Curt sincerely believed that Copernicus was the best thing since sliced bread,” one former employee was quoted as saying. “[He] could not imagine a scenario where other people would not see the same potential he did. His attitude is always, ‘This is gonna happen, the deal is going to close.’”

“He really needed Company 101,” Brett Close, the company’s first president who later became CEO, said. “For example, the whole concept of vacation was foreign to Curt. He actually said, ‘People get weekends off, right?’”

5. Schilling Refuses to Apologize for the Failure of 38 Studios

In his Tuesday radio interview on Rhode Island station WKPO — the same interview in which he announced his plan to run against Warren — Schilling showed no remorse for costing the taxpayers of the state millions, and flatly refused to apologize for the bankruptcy of 38 Studios.

“What do you want me to apologize for?” he said in the interview. “If somebody thinks I need to apologize, what is that thing I need to apologize for? I didn’t commit any crimes.”

Indeed, after a multi-year-long investigation ending in July of 2016, Rhode Island Attorney General Peter Kilmartin said that there was not evidence to bring criminal charges against Schilling or anyone involved in the downfall of 38 Studios.

“Bad politics, bad public policy, bad business decisions simply do not always rise to the level of criminal conduct,” Kilmartin said.

Schilling responded by slamming the state’s investigation as “a witch hunt.”

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