38 Studio shut-down likely, what’s next

Officially, “38 Studios” isn't gone yet, but it's likely the shutdown will happen unless there's a drastic change.    

If “38 Studios” closes its doors for good, and Schilling walks away, the state and taxpayers are on the hook for more than 100-million dollars, which experts said the already broke state can't afford and will probably have to default on the loan.

Governor Chafee didn't really tell us Tuesday whether he's giving up on “38 Studios” just yet. 

“I just take it day by day and listen to the experts,” said Governor Chafee, “I'm not an expert in this industry, but I certainly listen to them carefully.”

We followed his advice and talked to our own experts. Investment Advisor George Killborn said the state probably won't pay it.

“I think a precedent is being set here if Rhode Island is re-doing contractual pensions, they certainly set a precedent for doing the same thing for the so called guarantee,” said Killborn.

The truth is, Rhode Island is already running in a deficit, and Killborn said the state can't possibly raise taxes enough to pay the loan back when it's due in three years. All in all, he told us “38 Studios” was a bad investment.

“People would not put their own money to work in something like that,” said Killborn. Because video gaming is a risky business, where you only make a profit if you put out a hit game.     

That didn't happen with Schilling's company, and even though under the loan agreement the state gets control of games that haven't come out yet, Killborn said that won't help any.

“What that's worth is anybody's guess, but for a company that's only come out with one product, I wouldn't venture that intellectual property is going to be worth a heck of a lot of money,” said Killborn.

Killborn said only way “38 Studios” can survive is if Schilling brings in private investors, which isn't likely.