How the Star Citizen Loan Got Blown Out of Proportion

By Jeff Francis
How the Star Citizen loan got blown out of proportion

To paraphrase an old saying, there's no drama like internet drama. One of the biggest magnets for drama nowadays is the ongoing development for Star Citizen. The virtual worlds mmo of interstellar travel and exploration has had more than its fair share of detractors, speculation, and controversy. The latest installment of the ongoing soap opera is of a Star Citizen loan that led many to begin saying that Cloud Imperium Games, the game's developer, was in deep financial trouble and that the game was heading to utter disaster, despite raising more than $153 million in crowdfunding. Eventually, CIG came out and said that this was a normal business practice and that the game is not in any trouble at all. Perhaps we should stop freaking out and examine how the Star Citizen loan got blown out of proportion.

Discussion of the Star Citizen loan broke out last week and quickly spread. Some gamers thought that the sky was falling for the game, but others pondered various scenarios on why such a loan was taken out in the first place. Speculation was rampant, generating headlines that said that Cloud Imperium Games could be in financial trouble. Within a short time, CIG addressed the rumors surrounding the Star Citizen loan. They said, "We have noticed the speculations created by a posting on the website of UK’s Company House with respect to Coutt’s security for our UK Tax Rebate advance, and we would like to provide you with the following insight to help prevent some of the misinformation we have seen. Our UK companies are entitled to a Government Game tax credit rebate which we earn every month on the Squadron 42 development. These rebates are payable by the UK Government in the fall of the next following year when we file our tax returns. Foundry 42 and its parent company Cloud Imperium Games UK Ltd. have elected to partner with Coutts, a highly regarded, very selective, and specialized UK banking institution, to obtain a regular advance against this rebate, which will allow us to avoid converting unnecessarily other currencies into GBP. We obviously incur a significant part of our expenditures in GBP while our collections are mostly in USD and EUR. Given today's low interest rates versus the ongoing and uncertain currency fluctuations, this is simply a smart money management move, which we implemented upon recommendation of our financial advisors.

The collateral granted in connection with this discounting loan is absolutely standard and pertains to our UK operation only, which develops Squadron 42. As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes 'Star Citizen'. The UK Government rebate entitlement, which is audited and certified by our outside auditors on a quarterly basis, is the prime collateral. Per standard procedure in banking, our UK companies of course stand behind the loan and guarantee repayment which, however, given the reliability of the discounted asset (a UK Government payment) is a formality and nothing else. This security does not affect our UK companies’ ownership and control of their assets. Obviously, the UK Government will not default on its rebate obligations which will be used for repayment, and even then the UK companies have ample assets to repay the loan, even in such an eventuality which is of course unthinkable."

To be totally honest, the reasons given above for the Star Citizen loan are perfectly valid and make sound business sense. So why did talk about the Star Citizen loan get blown out of proportion? One reason is that we're talking about Star Citizen here. This virtual world mmo has been the target of a lot of ill will. Fans of the game have been extremely devout in publicly defending the game against those who have expressed concerns over its lengthy development. There are a good number of people who think the game is a scam as players can spend thousands of dollars on ships for a game that hasn't even reached beta yet. While a lot of people want this game to succeed, a lot of others would take great delight in seeing it fail. This game is definitely polarizing, so it makes sense that any potential surprises, such as news about the Star Citizen loan, will lead to both sides running to the field of battle (the internet) to begin flailing away.

Another reason why the Star Citizen loan got blown out of proportion is page views and clicks. Nothing can start filling up the comment section on a page faster than putting a possible negative spin upon the sci-fi mmo. This will lure the haters to cackle with glee over the expected demise of the game whilst the fans will show up to defend it, which then leads to a lot of arguing back and forth. As players rage against one another, editors sit back and smile as the page views climb and climb. I know that this is a cynical view, but it's a common practice in today's online environment.

In the end, discussion about the Star Citizen loan got blown way out of proportion because the game has attracted a ton of haters and lovers, and the battle lines are drawn and always ready for battle. Writers and editors know that they can stoke the flames of conflict by pondering the overall health of the game, and the recent Star Citizen loan gave them the opportunity to do so once again. One final reason for this brouhaha is that most gamers don't understand how business really works, so they get understandably concerned when they start hearing words like "loan" and "cash flow" being bandied about. The truth of the matter is that it made perfect sense for Cloud Imperium Games to get the Star Citizen loan, but the smartness of certain accounting practices doesn't make for interesting reading or headlines.

Jul042017

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