Updated March 25 at 6:25am

Industry analyst says 38 Studios game assets only worth $20M


PROVIDENCE – Michael Pachter, managing director of equity research at Los Angeles-based Wedbuch Securities told gaming-publication Joystiq that 38 Studios' intellectual property is worth only $20 million, $10 million less than he previously estimated.

The gaming company, which was lured to Providence with a state $75 million loan guarantee, laid off an undisclosed number of employees after it missed payroll last week. 38 Studios managed to make an overdue $1.125 million payment to the state on Friday.

The $1.125 million guarantee fee, which is 1.5 percent of the outstanding loan amount, was due May 1.

Global sales of 38 Studios’ first game - Kingdoms of Amalur: Reckoning - have reached 1.15 million at $60 each since its release in February, according to market-research company VGChartz.

The $75 million in funds from the state did not go toward the development of Amalur, but toward the larger MMO – massively multiplayer online game – Project Copernicus, which is slated to be released in June 2013.

"Nobody is buying MMOs after Star Wars fizzled. I think value is low, probably $20 million or so," Pachter told Joystiq. Not clear of the connection here. "There is just no demand for game assets right now.”

Furthermore, Electronic Arts, the publisher for Kingdoms of Amalur, has yet to confirm that it would publish the teetering company’s MMO.

Last week, Pachter told Providence Business News that even if 38 Studios doesn’t ultimately dominate the massive multiplayer online-game market, there is no reason the company should be running out of cash so early in its development.

“I find it unfathomable that they don’t have any cash,” Pachter said. “For Kingdoms of Amalur alone they should have $30 million in revenue coming in. … I can’t believe they can’t raise enough money for a $1 million loan payment.”

The relatively small size of the missed guarantee fee payment compared with the size of the loan and anticipated revenue have raised the question of why 38 Studios could not get private investment to cover any cash-flow issues and whether their $1.125 million default was tactical.


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$20 million is probably high. It is not clear how the KOA revenues end up in 38 Studios, LLC. It appears likely to me that Mercury Project LLC interfaced with Electronic Arts not 38 Studios. Throw in a couple of other LLCs and you have LLC hash. All these LLCs revealed by EDC earlier this week create a nightmare when dealing with tax credits. None of them qualify for tax credits in Rhode Island

Here's what the bloggers are saying about the value of the single user game in the gaming blogs:

15/05/2012 at 15:50 Vagrant says:

One you add in the publisher’s cut, the console maker’s cut, and distribution costs, you get a much smaller slice of the pie. If this random google result is to be believed, ( http://unrealitymag.com/index.php/2011/04/29/how-your-60-video-game-is-chopped-up/ ) then the developer only got about $3m out of the game. I’d expect at most $5m.

I do think there’s something wrong with expectations among developers, though. It’s not hard to do the math and figure out how much your game is likely to sell based off industry statistics. If they honestly expected 1 million units sold, there’s the original problem.

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15/05/2012 at 15:56 Shuck says:

The problem was that they needed more like 4 million sales. (Which is extremely unlikely for a non-sequel made by a new studio.)

One million sales is pretty much the minimum required to just break even on a AAA-level game (about 30 people working for 3 years, plus some minimal marketing). You want to do an expansive open-world game with modern graphics? Double, at least, the required sales needed to cover costs.

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