38 Studios burned through $133 million before bankruptcy

Kingdoms of Amalur: Reckoning developer 38 Studios was "hemorrhaging cash" at a time when the studio was not bringing in any revenue, according to a former executive director of the Rhode Island Economic Development Corporation.

Kingdoms of Amalur: Reckoning developer 38 Studios was "hemorrhaging cash" at a time when the studio was not bringing in any revenue, according to a former executive director of the Rhode Island Economic Development Corporation.

In documents obtained by the WPRI, the studio spent $133 million before it went into bankruptcy last month. The former executive director of the R.I. Economic Development Corporation, Saul Kaplan, said 38 Studios was spending big with taxpayer money.

"The thing that is most amazing to me is their burn rate was about $5 million a month all through 2011, heading into 2012, and it didn't slow down even when they knew they were running out of cash," Kaplan said.

The studio reportedly spent $118 million from its founding in August 2006 to the end of 2011. The company was funded from Curt Schilling's personal fortune until November 2010 when Rhode Island's Economic Development Corporation taxpayer-funded loan of $75 million kicked in. During this period of spending, 38 Studios earned no revenue.

The documents show that revenue of $27.7 million came in the first three months of 2012, and the studio also received a $28.7 million advance from Electronic Arts in January after it finished Kingdoms of Amalur: Reckoning. At the same time, the company spent $15.4 million in the first three months of this year, including $5.4 million in March alone.

"This was just not a startup atmosphere in the company, where you really hunker down and have macaroni and cheese – that's what most companies do," said Rhode Island Governor Lincoln Chafee in an interview with WPRI. "This was very, very different. [It] might not have been caviar, but they were living high on taxpayer's dollars."

Among the spending was $705,000 on 'travel and entertainment' in a two year period, and employees did not have to contribute to their health insurance.

38 Studios executives told a bankruptcy trustee that they'd projected sales of Kingdoms of Amalur: Reckoning to be more than two million, which was the necessary amount for them to break even on their EA advance and begin earning royalties. Actual sales totalled 1.3 million.

The company filed for bankruptcy on June 7. A bankruptcy hearing for 38 Studios began earlier this month.

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