Memo to EDC and 38 Studios: Economic Development Is More than Just Money

Mark Patinkin’s Sunday column has a jocular tone, describing his attempts to tour the offices of 38 Studios — the videogame venture of former Boston Red Sox pitcher Curt Schilling for which Rhode Island has guaranteed $75 million in loans.  But he does have a serious point to make:

By the way, 38 Studios unveiled its first game at a store in Bellingham, Mass., on Feb. 7. Curt Schilling himself was there. To be honest, as a Rhode Island taxpayer, it hurt my feelings. We’re giving him a $75-million guarantee, and he won’t even launch his product here? What are we, chopped liver?

But Schilling has indeed delivered on jobs. The Rhode Island Economic Development Corp. says 38 Studios now has 270 employees with an average wage of more than $80,000 a year. That’s good for the state.

Elsewhere in the column, Patinkin laments the lack of any signage or any indication at all that something $75-million-exciting might be going on at One Empire Plaza in downtown Providence.  Altogether, his objections come close to articulating the intangible justification for Rhode Islanders’ bemused snorts at the news that Schilling launched his new game in Massachusetts:  economic development is more than just jobs and more than just money.

Those are critical, to be sure, but the state needs to be not just a location on the map with some buildings in which stuff happens that generates money.  It needs to be the place… defined by something cooler than the random Mr. Potato Head statue.  38 Studios should expend some energy making its neighborhood and its state feel like a cool place to be.  Premiering games, here, would be a good start, but there are countless other small ways in which it could be accomplished.



228 Responses to “Memo to EDC and 38 Studios: Economic Development Is More than Just Money”

  1. Dan
    March 13, 2012 at 1:24 pm #

    Of course 38 Studios has no loyalty to Rhode Island – they came to the state only because the state bought them off.

    The real problem with these special deals is that it reinforces the view that Rhode Island is a corrupt, anti-business state in which only the connected can survive. Like all quick-fix progressive solutions, the benefits of these cases are immediately obvious (270 employees!) while the real costs are hidden. How many small companies will go out of business in Rhode Island because they can't compete with 38 Studios for local talent or opportunities?

    For anyone not tied into the gaming world, 38 Studio's much-hyped first game, Kingdoms of Amalur, was largely considered a flop and quickly forgotten. The MMORPG they are planning based on it is total insanity and guaranteed to bankrupt the company. There is no way they can hope to compete with World of Warcraft and $200-million Star Wars: The Old Republic. Expect the high salaries to continue right up until the company goes bust, just like all the government-backed "green" firms. Taxpayers will be left holding the bill, as always.

  2. Chris
    March 13, 2012 at 3:25 pm #

    Dan,
    Your comment staggered me on many levels. Exactly which companies locally are competing with 38 Studios for talent? The problem in RI is that the people who might be qualified to work at 38 Studios are leaving the state in droves. The existence of 38 Studios is keeping them here and creating what could be hoped to become a kernel of young, educated, technically-savvy workers that might grow and in turn attract more start-ups to the state. Without 38 Studios, they would leave because there are no local companies that otherwise might "compete with 38 Studios for local talent or opportunities" and employ them.

    I can tell you are predisposed to think poorly of their debut game, but by all accounts it is good and may prove to be a truly creative IP with a strong and lucrative future.

    I am personally wishing the best for them so they can continue to reverse the RI brain drain, make a lot of money and pay back their loan along with a healthy dose of taxes. I'm not sure why you aren't wishing for the same.

  3. Dan
    March 13, 2012 at 4:34 pm #

    Chris, I don't know "exactly which" companies are competing with 38 Studios for talent, but I suspect that there are a lot of small graphic design and software companies in RI. When a rapidly expanding software company with $75 million in public money to play with and hiring mandates moves in next door, I can't imagine that will make talent retention easier. Your statement that the game is good "by all accounts" is not accurate – the average rating on review sites is 8/10, i.e. B minus, and Wikipedia summarizes the reviews as "polarized." The word "generic" crops up a lot – not sure what you think is so creative about it.

    Another issue is that the average salary of over $80k sounds extremely high, especially for a new company. Assuming a typical 34% cost of benefits to salary ratio, that's around $30 million in annual personnel costs alone, and he's still hiring. Out-of-control headcount and salaries are two common mistakes for growing companies. They had better crank out some incredible games in the next 5 years or that $75 million in public loans is going to be burned through in no time flat.

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