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Curt Schilling’s game studio teeters on brink of disaster

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Curt Schilling (Getty Images)

Former Boston Red Sox pitcher Curt Schilling shocked a lot of people when he launched a video game studio following his retirement from baseball. Today, he might be wishing that he hadn't followed that dream.

38 Studios, who partnered with EA earlier this year to release its debut title, Kingdoms of Amalur: Reckoning, is in the midst of a severe financial crisis. The developer was unable to pay its 379 employees this week, and is behind in making repayments to the state of Rhode Island, which loaned the company $75 million in 2010.

The financial troubles at 38 Studios are having a ripple effect, too. If the developer defaults on the loans, Rhode Island taxpayers will be left with the bill. The state could also end up owning all of the studio's intellectual property — including Amular and an in-development online multiplayer game codenamed "Project Copernicus."

The public furor over the issue has had political ramifications as well. Keith Stokes, the head of Rhode Island's economic development committee (RIEDC) resigned Thursday. Stokes played a major role in providing 38 Studios with state funding two years ago.

Schilling's studio missed a $1.1 million payment to the state on May 1. The two parties met earlier this week, but Schilling surprised officials by asking for more money. As employees went unpaid, a company representative showed up at the RIEDC with a check to cover the late payment, but then admitted it was rubber, since the company did not have adequate funds to cover it.  (Update: The studio and Rhode Island, in a press conference held Friday afternoon said 38 Studios has now made its first payment to the state. The studio is currently seeking private funding to continue operations.)

What makes the issue more maddening for Rhode Island taxpayers is the fact that state officials lobbied hard to lure Schilling and 38 Studios away from its original home in Massachusetts. Despite the mutter of some skeptics at the time, then-Governor Donald Carcieri said when announcing the deal, "This is a risk worth taking."

The financial crisis at 38 Studios comes, in large part, because of weakness in retail software sales. Kingdoms of Amalur: Reckoning performed fairly well for a first title, selling 330,000 copies its first month, but it wasn't a blockbuster. In an industry that's increasingly hit-driven, that can be catastrophic to a developer — and possibly an entire state.

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