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

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.
Posted 5/23/12

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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