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September 26, 2010

Curt Schilling’s Rhode Island Hoodwink

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Written by: Diane M. Grassi
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By Diane M. Grassi

Curt Montague Schilling, has never been one to duck controversy nor a good game of old-fashioned hard ball.

In fact, in the latter part of his Major League Baseball (MLB) career as a starting pitcher, who many experts believe will be an easy entry into the Baseball Hall of Fame, Schilling became a lightning rod for controversy.

With his outspokenness, particularly critical of fellow MLB players, initially with Barry Bonds, in addition to his political rants in interviews and on his website concerning Capitol Hill politics, Schilling relishes confrontation.

Nonetheless, his bravado, or big mouth in some circles, was backed up by three World Series Championships. The first was one with the Arizona Diamondbacks, who unexpectedly defeated the New York Yankees in a necessary 7th   game in 2001.

And as a member of the 2004 Boston Red Sox, who won their first World Series since 1918, was almost as famous for Schilling’s performances in the American League Division Championship Series (ALDS), playing on a gimpy ankle, against the NY Yankees.

The Red Sox came back from a 3-0 deficit to take that series. It was followed by a taking of the American League Championship Series (ALCS) against the Anaheim Angels, only to ultimately to win their crown against the St. Louis Cardinals in 6 games in the World Series.

But controversy followed Schilling in those post-season series in 2004, most notably for his bloody sock, the second of which was used in the ALCS, and now sits in the Baseball Hall of Fame.

It is still argued today, amongst fans and pundits alike, as to whether or not at least one of those socks was a prop, and perhaps the “blood” was fakery. After all, the reason for the blood was the supposed result of sutures used to hold ligaments and tendons together in his ankle, in order to forestall his eventual post-season required surgery.

There were not only questions about the bloody sock but whether or not sutures would even be effective for such a structural injury in the first place, bringing up doubts about the veracity of the injury.

No such prop, however, followed Schilling to his 3rd World Series Championship in 2007, again as a starting pitcher with the Boston Red Sox. But it is perhaps his bloody sock that has paid off for him in spades and helped to script his post-MLB career.

And presently, the state of Rhode Island,  with the 4th highest unemployment rate currently in the United States at nearly 12%, is on the hook for a $75 million loan guarantee for Mr. Schilling and his 38 Studios, LLC. It was formed in 2006 under the original company name, Green Monster Games, which Schilling swears, the name of which has nothing to do with Fenway Park’s famous Green Monster wall. Schilling’s games are not, however, of the sports variety but modeled after the World of WarCraft variety.

38 Studios is a start up intellectual property (IP) gaming developer, offering massively multi-player (MMO) and role-playing game (RPG) product for both online and free standing consoles and PCs. Based in Maynard, Massachusetts, with its 70 present employees, it also includes the wholly owned subsidiary, Big Huge Games and its studios, located in Timonium, MD, that includes 80 employees.

 The Rhode Island Economic Development Corporation (EDC) was appropriated funding for a new program called the Job Creation Guarantee Program. It was approved earlier in 2010, by virtue of state lawmakers approving it to specifically increase jobs for “knowledge-based industry” jobs throughout the state, in the digital media and information technology sector.

The program was originally authorized in June 2010 for a total of $50 million in loan guarantees, which the state would arrange with commercial banks in the form of bonds, in order to distribute to multiple entrepreneurs in the $2 – $4 million range with a variety of companies within the field.

And at the same time that Rhode Island was looking to bring high-tech jobs to Rhode Island, Curt Schilling was knocking on the door of the Massachusetts state house asking for a guaranteed loan in order to expand his 38 Studios. And if Massachusetts made it worth his while, his company would not leave the state.

Word has it that Schilling got wind of Rhode Island’s new program and was using it as leverage against Mass., much like MLB players do when they become free agents and use one team’s bid against another in order to up the ante. When Mass. said they would work with him through a variety of tax incentives and not taxpayer based payouts, he bolted and approached Rhode Island in February 2010, for a loan guarantee.

Rhode Island, unlike its neighbor, Mass., apparently bought it hook line and sinker, because the program’s original authorization was increased from $50 million to $125 million, with 60% of it specifically earmarked for Curt Schilling. Quite a feat for a non-resident with no prior allegiance to the state of Rhode Island, nor a commitment to personally move his home there to date, just his company.

While some Rhode Island lawmakers have questioned how an additional $75 million would be allocated, after they approved it, it also has played a part in the Rhode Island gubernatorial and state treasurer 2010 campaigns, as the whole matter has upset candidates and lawmakers on both sides of the aisle, on whether this was a wise use of state funding. After all, Schilling has yet to ever sell a video game.

 Although Schilling claims that he tried to raise venture capital for six months, not a one bit, as he had no product or track record to provide. In addition, the gaming industry is considered high risk, and in such a recessive economy, given that many game makers are also laying off employees regularly, did not further endear Schilling to investors for his endeavor.

Perhaps Schilling’s best selling point was that he said he had invested his life’s savings or $20-30 million into the company since 2006, and was dedicated to making it work out. Well, hardly, as his MLB contracts totaled $114 million over the course of his career, and he earned over $21 million alone during his last two years with the Red Sox in 2007 and 2008. He retired from MLB in 2009.

And with intellectual property start-ups, unlike traditional manufacturing, where hard assets are used as collateral, there is little to liquidate with an IP venture. Its soft assets would include intellectual property, licenses, publishing contracts and software, but could be worth very little in the end.

Schilling has two pending game releases the first titled, Kingdom of Amalur: Reckoning, a single player RPG for the Xbox 360, PS3, and PCs, due in September 2011 and to be published by Electronic Arts (EA). His other game, in development since 2006, has the working title, Copernicus, with no release date. It is a massively multiplayer online game (MMO).

And even with the prospect of a game product, and only the promise of creating 450 well-paying high-tech jobs to be located in the state of Rhode Island by the fall of 2013, three years from now, in a volatile economy where discretionary income is in free fall, Rhode Island took the bait anyway.

But EA and 38 Studios would need 1.75 million copies of Reckoning to sell, just to break even. Best estimates presently are slated for 1 million copies to sell. And even though EA has decreased its number of annual releases each of the past two years from 50 to 35 games, due to the soft economy, in addition to laying off 1,500 employees, it has already made its commitment.

Barely a month after the EDC’s newest program was approved in June 2010, Curt Schilling signed his agreement with the EDC on July 26, 2010. And regardless of all the executed contracts and promises, it will still take a great video game that will be the basis for well-paying jobs, expected to be in the range of $80,000.00 annually. It will take a great game in order to make good on this guaranteed loan by Schilling.

But if 38 Studios does not earn a dime, it will but pick the pockets of the good taxpayers of the state of Rhode Island based upon how the deal was structured. Genius perhaps on Schilling’s part?

 While the deal requires 450 jobs be established, not all of them will be in the $80,000.00 range. For some of the most lucrative jobs at Big Huge Games, based in Maryland, may never end up moving up to Rhode Island at all. Schilling just needs to present full-time jobs.

Of the $75 million guaranteed, just in the past two weeks it was decided that $20 million will be held in reserve, for the time being. But within 15 months, the entire $51 – $55 million, depending upon who you believe, becomes payable based upon certain demands being met, such as the number of employees added and a scheduled release date for Copernicus, for example.

But the initial payment in the amount of $13 million will be payable at the expected October 2010 closing date with the full balance paid prior to the requirement of adding the full 450 jobs and only 300 jobs.

 Oversight of the contract by a third party has yet to be chosen by the EDC, nor have all of the final pieces been finalized as to  how the Job Creation Guarantee Program will operate other than the outlining of Schilling’s finalized deal.

The state also has yet to publicly offer the program for the remaining $50 million, to be divided amongst other start-ups with each receiving between $2-4 million. Rhode Island will unveil the program with local Chambers of Commerce in October, supposedly after the Schilling deal is done.

Putting Shilling’s corporate welfare deal at the head of the line is apparently a priority. If it were not so ironic it perhaps would not be such a wheel barrel of crazy. After all, “What government-run funded program in this country’s history has ever been run with an ounce of financial responsibility, prudence or with peoples’ best interest at the forefront? None. That’s which one.” The aforementioned was said by Curt Schilling himself, on January 14, 2010.

How the winds have changed in just a short 6 months. For now going to one of the most cash-strapped states, not to mention the smallest state, with hand outstretched in search of government subsidized corporate welfare is apparently just fine.

The upshot is, Curt Schilling may like to play video games and may know how to pitch a winning World Series game, but he knows little about managing a multi-million dollar operation and in building the empire in which he predicts will become a billion dollar business.

And while Schilling is not blameless, as the state of Rhode Island, its governor and lawmakers gave the keys to the EDC to arrange this high stakes gamble, it could not have come at a worse time. With the public trust in government waning by the day, not to mention taxpayers’ wallets, many may be left with egg on their faces as well as out in the cold after all is said and done.

But do not expect one of them to be one Curt Schilling. He will just go on to the next controversy and likely into the Baseball Hall of Fame.

Copyright © 2010 Diane M. Grassi

Contact dgrassi@cox.net



About the Author

Diane M. Grassi
Diane M. Grassi attempts to shine new light on issues centered on professional and amateur sports through her writing, by going beyond the headlines and sound-bites and to present sports fans with the back-story. In that effort, she seeks out those issues that rarely become headlines and elicits discussion as to why that is case. Grassi’s goal is to not only provide content, but to offer an outlet for sports fans of all types, of various backgrounds and life experiences, to engage in topical issues with candor, good humor and provocative thought. Yet, to Grassi, it is the issues that are paramount, as opposed to the messenger, while maintaining intellectually honest and original fact-based reporting and research without an agenda.




5 Comments


  1. Diana you sound so bitter and hateful towards Curt. Probably the most hateful thing I have read in some time. You say you shine new light on issues yet nothing I have read is new except your interpretation and attack of Mr. Schilling.

    Perhaps if you spent as much time researching the validity of what you write it might actually have some credibility. As it is, it’s nothing more than attack on Curt Schilling based on fantasy.

    First you question the validity of the bloody sock. Last time I checked they don’t put fake bloody socks in the Hall of Fame. I also question your assumption that the Bloody Sock has anything to do with Curt Schilling getting the 75 million dollar loan guarantee from the state. I think it had to do with what 38 Studios had to offer as a company and nothing more.

    You then state the company currently has 70 employees in Maynard and a simple check of their website shows 95 employee’s and I know for a fact they have new people that have not even been added. If you’re out this far on something so easy to check, how can anyone trust what you’re saying?

    Next you state the original 50 million from the Job Creation Guarantee Program was set up to be dispersed in 2 to 4 million range? Care to point out were you got that information from?

    I also question your time line. You state the Job Creation Guarantee Program was authorized in June 2010 yet say he went to Massachusetts state house asking for a guaranteed loan but when they refused he approached Rhode Island in February 2010? How could he do that in February if the program was not authorized until June? You also make it sound like any business looking for the best deal it can get is somehow a horrible thing; it’s not, it’s just doing business.

    “Rhode Island, unlike its neighbor, Mass., apparently bought it hook line and sinker, because the program’s original authorization was increased from $50 million to $125 million, with 60% of it specifically earmarked for Curt Schilling. Quite a feat for a non-resident with no prior allegiance to the state of Rhode Island, nor a commitment to personally move his home there to date, just his company.”

    Perhaps that’s because the money was not being loaned to 38 Studios based on where people have lived or plan to live? Last time I checked the program was set up to draw in new companies to employ people. The people working at the company will pay income tax as will 38 Studios. I think that was kind of the plan and reason to loan the company the money.

    “While some Rhode Island lawmakers have questioned how an additional $75 million would be allocated, after they approved it, it also has played a part in the Rhode Island gubernatorial and state treasurer 2010 campaigns, as the whole matter has upset candidates and lawmakers on both sides of the aisle, on whether this was a wise use of state funding. After all, Schilling has yet to ever sell a video game.”

    Actually 38 Studios has sold something more than a game he has sold EA on publishing their first Game Kingdoms of Amalur: Reckoning. In the video game world the publisher is the one who pay the bills so in effect they have hired 38 Studios to make the game for them.

    http://en.wikipedia.org/wiki/Video_game_publisher

    “Although Schilling claims that he tried to raise venture capital for six months, not a one bit, as he had no product or track record to provide. In addition, the gaming industry is considered high risk, and in such a recessive economy, given that many game makers are also laying off employees regularly, did not further endear Schilling to investors for his endeavor.”

    You know this how? Last time I looked Curt said the following “Because anyone can write a check, but after you have written that check, how do you make us a better company?”

    http://www.38gamers.com/curt-schillings-leadership-abilities/

    “Perhaps Schilling’s best selling point was that he said he had invested his life’s savings or $20-30 million into the company since 2006”

    Really Curt Said that? Can you produce a credible quote? Curt Schilling has invested 30 million of his own money and that fact just came out. Regardless of if this is part or all of his life saving when was the last time you saw someone start up a video game company and invests that much of their own money? I would guess never :P

    “But EA and 38 Studios would need 1.75 million copies of Reckoning to sell, just to break even. Best estimates presently are slated for 1million copies to sell. And even though EA has decreased its number of annual releases each of the past two years from 50 to 35 games, due to the soft economy, in addition to laying off 1,500 employees, it has already made its commitment.”

    LOL where do you get that kind of numbers from? How does anyone have any kind of credible idea of how many copies a game will sell a year before release? I will tell you, none. So EA has reduced the number of games it’s going to back and release but still picked 38 Studios? Wow interesting that a company that is so much a part of the gaming industry even in tough times still went with 38 Studios. Hmm perhaps it’s because they feel the company and its employees really do know what they are doing and they feel the company will deliver? I think they are probably one of the best to evaluate and make that kind of judgment. Definitely far more then yourself or others who think they understand the industry and clearly do not.

    “But if 38 Studios does not earn a dime, it will but pick the pockets of the good taxpayers of the state of Rhode Island based upon how the deal was structured. Genius perhaps on Schilling’s part?”

    Funny how you left out the part where Curt would lose his 30 million investment if 38 Studios defaulted on the loan. The state takes everything the company has and Curt walks away with nothing. If he was genius he would have done it so he kept his 30 million but I guess instead it just makes him an honest business man trying to make his company be a big success and not only keep his 30 million but turn it into far more and help his employee’s and the state with jobs and even up to 15 million on bonus money to the state if the company exceeds projected income.

    “The upshot is, Curt Schilling may like to play video games and may know how to pitch a winning World Series game, but he knows little about managing a multi-million dollar operation and in building the empire in which he predicts will become a billion dollar business.”

    in 4 years he has purchased another gaming studio, got EA to fund the development of their first game and managed to get a state guarantee loan from the state of Rhode Island for $75 million? You sure he does not know what he is doing? Any idea how much cash World of Warcraft generates? I very much see it possible but then again to someone not in the “know” like yourself I guess it would be a bit of a stretch


  2. Sorry, you do not agree with my article, but I stand by the facts, that I largely got from Rhode Island’s EDC and numerous editions of Rhode Island news sources.

    And I also am sad that you see the article as representative as my “hate” of Curt Schilling. Largely, as I stated, I put Rhode Island at fault given the state of their economy.

    As to my personal opinion on the arrangement that was made with Mr. Schilling, well, that is just my opinion.

    And I am glad that you took the time to reply, whether you like what I wrote or not.


  3. ‘Sorry, you do not agree with my article, but I stand by the facts”

    So you stand by the fact they have not sold a game even though EA is paying them to create Kingdoms of Amalur: Reckoning? I am pretty sure that would be considered income to any other company, call me crazy.

    You stand by the fact that EA would have to sell 175 million copies of the game to break even. At $50 dollars a game that’s $87.5 million dollars. Do you really think that sounds even close to reasonable? Do you also think a year out someone can accurately estimate how many copies a game will sell? Who cares though right as long as it supports your agenda that this is a bad deal.

    “And I also am sad that you see the article as representative as my “hate” of Curt Schilling. Largely, as I stated, I put Rhode Island at fault given the state of their economy.”

    Really that’s why the article is titled Curt Schilling’s Rhode Island Hoodwink and is mostly about Curt Shillings and 38 Studios because clearly and article is about the states mistake and has really nothing to do with Curt?

    Many felt Chafee’s comment questioning Curt’s character and the bloody sock was in bad taste. You embellished on it but it’s not an attack on Curt.

    You also question Curt’s ability to lead 38 Studios yet I think anyone would be hard pressed to say what he could have done any better these past 4 years.

    As to your opinion I thought you did not have an agenda? Is this not in your bio?

    “while maintaining intellectually honest and original fact-based reporting and research without an agenda.”

    Original fact based reporting? Reading what the local newspaper said and then regurgitating what they said is hardly original fact based reporting. How about doing your own research and investigating and uncovering things on your own? That would be original. See I have done that myself and found out that EA being the publisher did not mean they were just distributing the game it actually meant they were paying the cost of development. See that was not reported in any of the papers. So I ask you if EA is reducing the number of games they are publishing to me that would mean they are being more conservative and investing in only in what they feel are the sure things. The fact they went with 38 Studios is a huge endorsement for what Curt Schilling’s and the people at 38 Studios brings to the table. A fact very quickly skipped over by you and others in condemning this as a bad deal. In fact you twist it around in your article to suggest if EA had a choice to do differently they would and you base that on what exactly?

    You say you got your info from the EDC. Ok so what was the though process behind the EDC decision to increase the money from $50 million to $125? What is the EDC trying to accomplish by increasing the funding? Did they have any studies done and what did they say? If successful what benefits will this bring to the state and what will it have cost the state and taxpayers?

    With 12% unemployment don’t you think the state should be trying to do something to encourage high income businesses setting up shop?


  4. That’s 1.75 million copies, as I wrote. The EA deal will be an advance against earnings. It too is taking a risk.

    I don’t know what your point is. I outlined the crux of the deal. If you want to start a fight, you’ve got the wrong person.

    There are dozens of other more damning articles online regarding this very topic. If you want to be fair, go after them as well.

    Diane Grassi.


  5. Your 1.75 million is a quote by Mike Hickey, an analyst at Janco Partners but I honestely think the guy does not have a clue, I think Ted Nasi had to quote him to provide balance to the article he wrote.

    http://www.wpri.com/dpp/news/long-odds-for-ri-backed-schilling-game

    Again you say you have no agenda…well the article I linked was at least fair in showing both sides but your blog did not bother with any of the positives from the article as you clearlty have an agenda somethign you state tyou do not have.

    “38 Studios is doing everything right to minimize the risk of failure,” Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said in an e-mail. “The key to a successful MMO is a great story, compelling art, and a well-crafted game.

    “Much like the movie industry, investment in quality personnel doesn’t always pay off, but it considerably improves the prospects for success,” Pachter added

    I made comments on that article and I have questioned what people have written about this deal your not the only one, just read some of the articles on my site.

    http://www.38gamers.com/long-odds-for-ri-backed-schilling-game/



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