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| Zap! Take that, Rhode Island taxpayers! |
By Will Collette
The media is all abuzz over the apparent crisis former Red
Sox pitcher and uber-conservative business dude Curt Schilling is having with
his video game company, 38 Studios. It looks like the company is just about
ready to crash and burn
One of the last acts of former Governor Donald Carcieri before
he left office was to finangle a deal (a con job, actually), where he folded a
deal for Rhode Island taxpayers to provide Schilling with a $75 million loan
guarantee into a larger bill to provide help to Rhode Island businesses.
The problems with Carcieri’s scheme were manifold: Schilling’s
company wasn’t actually a
Schilling’s company also didn’t have a product to sell. They
had been developing a multi-player internet based game for years, but were
nothing more than a black hole for money until they actually brought a product
to market.
That $75 million could have been used to help keep lots of
genuine Rhode Island
small businesses going through some very hard times, instead of this stupid
deal.
Almost one year ago, with two Progressive Charlestown
articles in June and July, 2012, I noted this was a bad deal for Rhode Island taxpayers.
In “Money Can’t Buy Me Love,”
I noted that it’s
generally a bad idea to get into a spending war with other states to win the
hearts of companies hunting for corporate welfare. These companies have no
loyalty to whoever bids the most for their temporary presence, and will leave
as soon as somebody makes them a better offer.
In my July article, I noted that Schilling was having a very
hard time raising additional financing to stay afloat.
When his company’s first (and only) game was about to come
out, I did the math, to the best of my admittedly limited abilities, and noted
that the arithmetic for success just wasn’t there.
So now, it seems the Day of Reckoning (what a great name for
a video game!) has come. It’s so bad for 38 Studios that, according to the Providence Journal, they even asked the City of Providence for help!
Ted Nesi at WPRI notes that if 38 Studios fails, not only are Rhode Island
taxpayers on the hook for the $75 million loan guarantee, but that the interest
and carrying costs on the “moral obligation bonds,” Rhode Island taxpayers
could end up shelling out $112.6 million. If this necessitates pension cuts –
and in any self-imposed financial crisis, isn’t that where we turn first – I think
the first and biggest cut should come from the pension of Governor Donald
Carcieri.
When Schilling released Kingdom of Amalur in a February ceremony – in Bellingham , MA , not Rhode
Island , BTW – it started off with strong sales. But
as is so often the case with video games, it had its one month of hot sales and
then dropped off. As I noted in my analysis of the business math behind this
deal, counting on video gamers to be steady customers sufficient to keep a
high-overhead business afloat was not very likely.
And indeed, as WRNI’s Ian Donnis reported, this kind of
slide was entirely predictable
State Economic Development Corporation Director Keith Stokes
was a big promoter of this deal, and it almost prevented then in-coming
Governor Lincoln Chafee (a strong opponent of the deal) from retaining Stokes
as EDC chief. If 38 Studios circles the drain, and takes RI taxpayers’ money
with it, Stokes may be filing for unemployment.
Other politicians who supported the Schilling deal, such as 2010
Republican gubernatorial candidate John Robitaille, are already running for
cover. Although Robitaille bitterly attacked Chafee (and Frank Caprio) for not
backing Carcieri’s deal with Schilling, Robitaille now tells WPRI’s Nesi that
he really and truly wasn’t all that hot for it, after all.
Right.
Let’s remember that one if Robitaille makes another run for
Governor in 2014.
The worst thing, in my opinion, the state can do at this
point is throw good money after bad. Governor Chafee was correct to oppose the
deal when he was a candidate. Giving Schilling more money would be even dumber
than the original deal, because I would think that now we should know better.
To paraphrase the Boss, “the highway’s jammed with broken video game heros….”