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Just to be clear – the downfall of 38 Studios, while bad news for that company, isn’t a lesson for the games industry at large (except in that it might scare superficially-minded investors who go “that game company failed therefore game companies are a bad business to invest in” without bothering to look at WHY that company failed… but to be honest, you’re better off without a business partner that clueless). It is a lesson in how not to run a business, but the lesson is a simple one – do the maths (or math, if you’re a colonial). This isn’t a lesson that is restricted to the games industry. It’s one I learned at an early age from reading the works of Robert Heinlein, who always showed contempt for anyone who indulged in fuzzy thinking without working through the numbers. Judging from watching a lot of the hapless would-be entrepreneurs on The Apprentice and Dragon’s Den it’s a lesson that a scary number of people out for investment in their wonderful business ideas haven’t learned, but it really is THE fundamental of business. If the numbers work out, you make a profit. If they don’t, you make a tit of yourself. As Lord Sugar has been known to say, “basic business principles went out the window on this task. I don’t know what you were thinking!”

Unsubject over at Vicarious Existence has done a better job of crunching the numbers than I could which goes to show that 38 Studios and the state of Rhode Island had made a deal that looks awfully like a financial suicide pact. As in, if you agree to hiring a bloated payroll that will burn through cash at an astonishing rate, then we’ll give/lend you a huge pile of money that nonetheless isn’t nearly enough to actually meet that payroll for the length of time needed to complete the project. After a point, throwing extra bodies on a project doesn’t actually bring it in that much faster – just because it takes one woman nine months to produce a baby doesn’t mean that you can do it in one month if you put nine women on the task 🙂 The deal that 38 Studios signed up to could almost have been designed expressly for the purpose of pissing taxpayers’ money up the wall before creating a bankruptcy and more unemployed people than if they’d not done the deal in the first place. It was manifestly a deal made by people on both sides who did not do the maths – although in defence of the governor’s staff they are politicians, and many people in politics seem to have gone into that career expressly to piss taxpayers’ money up the wall, so we couldn’t really expect anything else.

It’s got nothing to do with whether Copernicus was going to be a sandbox or a theme park MMO, or if it would be solo-friendly or force grouping. Nothing the developers actually working on the game could have done would have saved it – well, apart from offering their labour for free for a couple of years, anyway. The game never got to the point of failing on its design or its merits, because it died before it got to the point of being seen by the outside world. 38 Studios could have been making a new brand of washing machine rather than an MMO for all the difference it would have made. It doesn’t matter what their product was going to be, because the company ran out of money long before they actually had a product. Because people who damned well should have known better Did Not Do The Bloody Maths.

One Comment

  1. Thanks for the link!

    I agree completely that the issue behind 38 Studios was one of business management, not the games they were making. However, for a lot of gamers, all they consider is the quality / desirability of the games of that company and then assign blame accordingly. So in 38 Studios’ case, if they liked Project Copernicus / KoA:R, they assign the blame to the government for obviously doing something wrong.

    Other examples of this kind of thinking include:

    – APB, which crashed shortly after launch because they spent too much on development and would only have recouped that investment if the title had achieved incredible initial sales. However, its market failure was seen as validation of any gameplay complaints.
    – Star Wars: Old Republic, which gamers are claiming is failing because it isn’t holding onto its players. That’s an issue, but the bigger problem is that it cost US$200m and had to achieve an incredible result for any chance of pulling off its business goals.
    – LA Noire, which DID achieve incredible sales, but the development took too long and the studio (Bondi) was mismanaged so that they didn’t have any other projects to keep them going once LA Noire shipped.

    There’s an industry problem here – that putting all your eggs into one multi-multi-million dollar basket that then takes 5 – 6 years to hatch is a highly risky thing to do.

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