38 Studios in Trouble?

38 Studios in Trouble?

Shockingly or not, depending on your position, 38 Studios is in a bit of a pickle -- cash flow is starting to become an issue for them. At the end of last week they contacted the State to look for assistance.

I thought this was a dumb move from the outset. It never made sense to me for governments to play the role of a venture capitalist. Because politicians don't know squat about the video game industry, they couldn't possibly make an accurate risk assessment. It seems Gov Carcieri was wooed by the sexiness of rubbing elbows with a local sports star, and it didn't matter to him whether he was making a good bet or not because it wasn't his money.

Now the State's in a very tenuous position. Does the State let 38 Studios go under, putting taxpayers on the hook for all of the $75M plus interest (38 isn't scheduled to make its first payment on the loan until May 2013), and lose the 200 high-paying jobs? Or does RI basically bail out 38 and offer them emergency funding to stay afloat?

My opinion? We should cut our losses. Having seen how long similar games have taken to produce, 38 Studios' next project, Copernicus, has at least 1.5 yrs more of development, and with a web site that makes it sound like every other game that tried to take on World of Warcraft and failed, the prospects for 38 are not bright. RI cannot afford to pour good money after bad.

But this exact situation is what we get when government tries to pick winners and losers. Rather than make RI more hospitable to businesses of all types, we make these sweetheart deals, only reinforcing the notion that businesses must kiss the rings of politicians. It's no wonder RI is first in to recessions and last out, and is ranked as the worst state in the US to do business.