Kingdoms of Amalur Developer 38 Studios In Trouble?

News broke today that Kingdoms of Amalur developer 38 Studios may be in some major financial trouble with the state of Rhode Island. Reports are sketchy at this point but it seems that 38 Studios borrowed approximately $75 million dollars from the state of Rhode Island that unfortunately is taxpayer backed loan. Reports are that the governor Lincoln Chafee of Rhode Island met with 38 Studio heads yesterday to talk about the financial situation of the company. Here is the kicker, according to Joystiq because loans have something called interest if 38 Studios collapses the taxpayers of Rhode Island will be on the hook for $112.6 million dollars. Like I said reports at this time are all over the place but according to the governor they are trying to find ways of "keeping 38 Studios solvent." Here is the official statement from Chafee:

€œWe€™re concerned and just doing everything possible to ensure that 38 Studios stays part of the Rhode Island community,€ €œWe€™re working on different issues with them.€ When asked whether he thinks 38 Studios can be stabilized, Chafee told WPRI €œWe€™re working on it.€

This sounds as bad as it gets, and the fact that Kingdoms of Amalur just released just a few months ago does not bode well for 38 Studios. The long term ramifications of this could be even worse than losing a good video game developer; with the looming threat that Rhode Island taxpayers might be on the hook from anywhere between $75 million to $112.6 million the industry will have a monumental task in getting tax breaks from other states. The video game industry may be in more trouble than we initially thought; the fact that a company is in financial trouble after releasing a well received RPG just three months ago does not bode well for the future of major AAA games. If companies are literally drowning themselves in debt just from making one game, something is going to give eventually and we could be headed for another video game crash.