Are pro-athletes doomed to fail in business? MMO maker 38 Studios may be proof.
“There are no second acts in American lives,” F. Scott Fitzgerald wrote. The sentiments seems to be painfully true with athletes migrating from the locker room to the board room.
Last week, Curt Schilling’s 38 Studios had to choose between paying its employees for the week or going into default on a loan made to the company by Rhode Island. After an emergency meeting, governor Lincoln Chafee announced the company had made the scheduled $1.25 million payment on the $75 million loan. The sum had originally been approved in 2010 to lure the studio from Massachusetts in the hope that it would launch a tech industry jobs boom.
The company’s first game, Kingdoms of Amalur: Reckoning, was released in February. It debuted as the fourth best-selling game in North America, and an estimated 410,000 copies sold in the U.S. during its first two months.
There is no shortage of athletes who have struggled with failing finances after leaving the sports world, with celebrities like Lenny Dykstra, Mike Tyson, and John Daly famously grappling with cash problems. In 2009, a Sports Illustrated story estimated that 78% of NFL players will be either bankrupt or in serious financial jeopardy two years after retirement. Meanwhile, 60% of NBA players will end up broke five years after ending their careers.
Reaching the pros is a dream come true for most, yet there’s little cross-over in the skills needed to be a world class athlete and those of managing a profitable business. For an average person with an idea for a business, they’d have to travel a long and rigorous process of evaluating markets, creating a business plan, convincing investors to provide start-up money, securing bank loans for expansion, and managing a competent execution of the business on a daily basis.
The process is reversed for many athletes. They have money but aren’t sure what to do with it. So they fall prey to financial advisors with ideas for a steakhouse franchise or a local car dealership. In Schilling’s case, videogames were a long-held passion that he eagerly invested in as his career was winding down. He started the studio to create an MMO to rival his beloved World of Warcraft, and hired R. A. Salvatore, Todd McFarlane, and Elder Scrolls designer Ken Rolston to help him create his own fantasy realm.
But a team of all-stars cobbled together from famous free agents does not make a successful venture, however. Amalur received good reviews from many critics (not me, though–I called it “a lavish catastrophe“), but the company had so much invested in that one game that when it underperformed it seems to have found itself on the verge of collapse.
38 Studios released footage of “Project Copernicus,” an MMO set in the same world as Amalur, as news of the possible default was spreading. Chafee told reporters the game, which has been in development since 2006 is expected out in June 2013. Meanwhile, the next loan payment to Rhode Island will be due on November 1st, worth $2.6 million.
