Unbelievable. I feel bad for the workers most, and Curt Schilling’s conscience comes in a close second.
I find it amazing (regardless if you’re anti-big government) that you would go to a municipality for such a loan, versus VC or typical modes of aiding an entrepreneurial business plan. To put your idea to work with taxpayers on the hook?? Am I missing something here, or misunderstanding something? I can’t believe the state even floated the bonds (good work, Carcieri). Crazy!
Forbes – Former pitcher, Curt Schilling, will be enshrined in the memories of Red Sox fans for his bloody-sock-related wins in 2004. But Rhode Island residents will remember the vocal Republican for costing the state $112.6 million in moral obligation bond payments in the wake of his collapsed video game company.
In 2004, Schilling pitched two key games during the post-season. That November 9th, he had surgery to repair a ruptured tendon sheath on his right ankle, according to NBC Sports. To keep Schilling in play, team doctors “made a wall of stitches in Schilling’s ankle to keep the tendon in place.”
But the wall of stitches didn’t hold and Schilling’s sock got bloody. That did not stop him from pitching winning outings against the Yankees in Game 6 in the AL championship series and Game 2 of the World Series against the St. Louis Cardinals.
Although he was a member of a Boston team, Schilling does not fit the mold of a Massachusetts liberal. Five years after those wins, Schilling expressed far greater pride in his religious accomplishments than his athletic ones. As hewrote on his blog: “I am proud of what we did that night, but I am far more excited about what I was able to experience in my relationship with Christ that night.”
And soon after the Red Sox won the 2004 World Series, Schilling stumped in New Hampshire for the reelection of President George W. Bush. He also campaigned for John McCain in 2008, and Scott Brown in 2010, according to the Valley Advocate, that dubbed Schilling a “bloody hypocrite.”
Schilling started a video game company – currently named 38 Studios for his Red Sox jersey number. 38 Studios’ offices were originally in Maynard, Mass. — home of the former Digital Equipment Corporation, now absorbed into Hewlett Packard.
In 2010, Schilling sought money from Massachusetts to stay afloat. But the state turned him down. Massachusetts Housing & Economic Development Secretary, Gregory Bialecki, told the Boston Globe through a spokesperson, “We are not willing to get into a bidding war.”
But then-Rhode Island Governor, Donald Carcieri — who was dazzled by Schilling at a May 2010 Republican fund raiser held at his Medfield, Mass. mansion — agreed to give 38 Studios $75 million in state loan guarantees — meaning that the state would pay off the loan if 38 Studios couldn’t.
In 2010, Rhode Island sold $75 million worth of moral obligation bonds that – including interest and other payments — would put the state on the hook for a total of $121.6 million, according to WPRI.com.
To make that decision, Carcieri skipped the cost/benefit analysis. As Republican state Representative Robert Watson and former Rhode Island House minority leader told the Boston Globe, “I think the governor had stars in his eyes, the whole idea of playing ball with a baseball player intrigued him and others. And I think they got blinded by that celebrity.’’
Schilling has been clear about his rage against big government and the value he places on individual responsibility. One example of this came in February 2011 — just before he moved 38 Studios from Maynard to Providence.
It was during an interview with WEEI sports radio that he said, “There can be no question our country is in the worst economic crisis of our lifetimes. …[I]t falls on us, the individuals, to find a way out of our own personal crisis,” according to the Valley Advocate.
So Schilling moved 38 Studios to Providence in 2011. Unfortunately for Schilling, Carcieri was replaced as governor by Lincoln Chafee who was not as wowed by Schilling. So after 38 Studios was two weeks late on a $1.1 million payment this month, Chafee was looking for Schilling to explain his turnaround plan.
But Schilling’s pitching and political advocacy skills evidently did not extend to competing in business. Otherwise, he would have acted in a way consistent with his anti big government, pro-free-market stance and raised venture capital instead of taking a taxpayer loan guarantee.
But he tried to raise private funding and got turned down. And there’s no reason that venture firms should have given him money. After all, he had no experience running a company and video games companies are notoriously bad start-up investments.
They require enormous amounts of up-front capital to develop a game — World of Warcraft took $100 million to create and operate. Moreover, the odds of hit that’s big enough to pay back that investment are extremely low.
And there are other reasons 38 Studios could not make the big leagues when it came to raising private capital. Schilling asked for way more money — $48 million – than other gaming companies in exchange for too small an equity stake. Flybridge Capital Partners was one of ”several Boston area firms [that] passed on 38 Studios,” according to the Boston Globe.
Something is fishy here. After all, 38 Studios’ first game – early 2012′sKingdoms of Amalur: Reckoning — sold about a million copies at $60 a piece according to market researcher, VGChartz. If 38 Studios got $60 million in revenue this year, why couldn’t it make a $1.1 million interest payment?
Before launching the venture, Schilling was hardly poor. During his 18 year baseball career, he earned $114 million. Schilling told Chafee that he had invested $30 million of his own money in 38 Studios and was “tapped out” according to the Boston Globe.
In addition to his failure to offer a compelling case for more Rhode Island taxpayer money, Schilling did not mention to Chafee that he would be firing 38 Studios’ 413 employees via a mass email.
Now Schilling must be delighted to realize that he is getting the same “free market” treatment that Wall Street received in 2008 when its leveraged bets went bad.
Rhode Island will likely end up making the $112.6 million in payments due on the moral obligation bonds that it sold to finance 38 Studios
— Update: Boston Herald gets second place for it’s headline of, “It’s Curt-tains for 38 Studios”