---
title: 'The Crooked Economics of Esports'
source: 'https://youtube.com/watch?v=Ti5eciur59M'
video_id: 'Ti5eciur59M'
date: 2026-06-14
duration_sec: 2440
---

# The Crooked Economics of Esports

> Source: [The Crooked Economics of Esports](https://youtube.com/watch?v=Ti5eciur59M)

## Summary

Esports experienced a meteoric rise in the 2010s, fueled by hype, venture capital, and the promise of becoming the next NFL or NBA. However, by 2024, the industry has collapsed under unsustainable economics, with teams shutting down, viewership declining, and publishers pulling support. This video analyzes the fraudulent business models of Esports, examining teams, publishers, and middlemen to reveal why the industry failed.

### Key Points

- **The Rise and Fall of Esports** [00:00] — Esports grew rapidly in the 2010s, with viewership increasing and brands investing heavily. However, the expected payday never materialized, and by 2024, many teams have shut down, viewership has declined, and the industry is in shambles.
- **Ecosystem and Mutual Dependence** [05:26] — Esports is an ecosystem of mutually dependent entities: publishers, teams, leagues, and advertisers. Success requires all to work together, but the collapse of one domino can bring down the rest.
- **Publisher Roles and Variances** [08:56] — Publishers like Riot control every aspect of Esports, while Nintendo refuses to cater to it. Others like EA and Valve have one foot in and one foot out, creating inconsistency across titles.
- **North American Teams and Failures** [10:36] — North American teams like FaZe, CLG, and Enthusiast Gaming were well-funded but unprofitable. FaZe's IPO tanked, CLG lost $6 million annually, and Enthusiast's stock plummeted to $0.10.
- **European Teams and Unsustainability** [22:24] — European teams like Heroic and Astralis also struggled. Heroic was acquired by a shell company, and Astralis only turned a profit by selling its LEC slot. Both saw stock prices collapse.
- **Activision's Role and OverWatch League** [28:56] — Activision aggressively pushed Esports, charging $20 million for OverWatch League spots. However, they later shuttered the league, paying teams $6 million to exit, highlighting the lack of sustainable revenue.
- **Venue Failures and Shell Companies** [34:00] — Esports venues like TGs and Allied Entertainment struggled to turn a profit. TGs was bought by a mysterious shell company with no revenue, and Allied diversified away from Esports.
- **The Core Flaw: Viewer Value** [38:59] — Esports was built on the assumption that viewership would reach critical mass and be as valuable as traditional sports. However, Gen Z viewers have low disposable income, and even Twitch can't monetize them effectively.

### Conclusion

Esports failed because it was built on flawed assumptions about viewer value and sustainability. The industry's collapse reveals that competitive gaming, while culturally significant, cannot support the inflated business models that venture capital and hype created.

## Transcript

there are few industries that have risen
and collapsed as quickly as Esports in
the 2010s Competitive Gaming had grown
Beyond South Korea RTS games Niche
forums and land cafes cable was on its
way out twitch was taking off and
viewership for traditional Sports
declined whereas the audience for
Esports rapidly increased Esports sold
itself as the sport of the future a
world where video game tournaments would
surpass the NBA and NFL where anyone
could Grind from amateur to Superstar
where gaming would be a viable
profession and stadiums would be packed
around the world with thousands of
screaming fans marketers had been
desperate to reach the younger
Generations who shunn traditional media
and advertising only Esports boasted
such a concentrated and engaged audience
of Millennials and Zoomers all this
value in theory would be captured by new
Esports teams and leagues who could
monetize these eyeballs through tickets
merchandise and media rights the same
way that the NBA NFL and Premier League
have eached used viewership to Rak in
billions over decades there was so much
hype that everyone expected the econom
omics to solve itself over Time Around
the World Venture capitalists invested
Millions into emerging teams game
Publishers hosted tournaments in world
class venues and broadcasted matches
with immense production value colleges
rolled out scholarships for promising
Pub Stompers prize pools ballooned into
millions and pro players were marketed
as budding celebrities with the best in
the world signing six to S figure
contracts as Esports progressed into the
2010s the audience and spectacle reached
even greater Heights it was no longer
Mountain Dew and Doritos mainstream
Fortune 500 Brands jumped into sponsor
teams tournaments and players alike even
the billionaire owners and millionaire
athletes of traditional Sports joined in
enticed by the prospect of owning the
next Dallas Cowboys or Manchester United
with the media and Wall Street
collectively proclaiming Esports as the
next big thing in media and
entertainment this gaming future seems
certain fast forward to 2024 and Esports
has fallen apart many teams have shut
down they've run out of money or have
been sold for parts viewership has
declined for once dominant titles and
questions have been raised on whether or
not this audience is even valuable for
advertisers when twitch itself still
can't turn a profit game Publishers have
cut their support and shuttered leagues
many Pros have left Esports channeling
their star power into more sustainable
streaming careers or leaving gaming
behind entirely the highest valued teams
like TSM and Cloud9 have gone into radio
silence Under The Continuous layoffs and
roster cuts the few teams that have
ipoed are all penny stocks with the
majority already delisted from their
stock exchanges marketers are moving
away and the only supporters of Esports
still left are Saudi Arabia online
casinos crypto exchanges and fast food
chains no team or league has ever
managed to turn a profit even at their
Peak outside of vague unverifiable PR
statements and people are turning back
to watch the NFL premier league and the
NBA the fall of Esports has never been
covered by mainstream media as a result
the industry remains Rife with con
artists shell companies and charlatans
who continue to run the scene out in the
open with little scrutiny the pump and
dump has continued and the grifters that
are running Esports these days make even
the most delusional Silicon Valley VCS
and Founders look like angels in this
episode we'll break down the fraudulent
business of Esports and analyze eight
teams four Publishers and two middlemen
across Na and
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MBA before we dive into specific teams
we need a baseline understanding of orts
as a landscape like in traditional
Sports Esports is not a winner take all
Market but instead an ecosystem of
mutually dependent entities that must
work together to achieve Commercial
Success the route is multiplayer games
the more popular the title the greater
the player base the more competitive the
game play the better fit for Esports
players assemble their own teams or join
existing ones these teams then compete
in tournaments and leagues where the
formats rules rankings and prize pools
are administered by Third parties or by
the game publishers the competitions are
then streamed on Twitch or YouTube to
fans developers and Publishers invest
their resources to support the
competitive scene in exchange for free
marketing stronger engagement and player
growth teams provide paychecks and
coaches so players can focus on winning
Brands and advertisers can insert
themselves at any stage they can sponsor
a team the league the streams or all of
the above teams make money through
sponsorships and merchandise and League
organizers make money off sponsorships
tickets concessions and sometimes even
team entry fees in the 2010s the goal
was maturity if the teams matches
tournaments and leagues could each
improve in quality and process then
Esports would become more attractive and
accessible and then viewership in theory
would grow in line once viewership
reached some critical mass it would be a
piece of cake to sell the streaming
rights and perpetuity for millions and
eventually billions just like how it is
for the NFL and the NBA this annual wat
of cash could be shared amongst the
teams who would each use their cut to
finance player salaries and transfers at
the beginning publishers team owners
League admins tournament organizers and
players were all United in pursuit of
this payday everyone had to keep doing
their part Publishers needed to support
the game for competitive play leagues
needed to keep upping production value
and teams should spare no expense
bringing in the best players in the
world games had to be easy to watch
matches needed to be thrilling and
tournaments needed to become spectacles
in order for viewership to grow yet
payday never materialized broadcast
deals in Esports have never been
meaningful enough to offset cost or be
comparable to that of traditional Sports
in this mutually dependent ecosystem all
it took was for one entity to quit to
bring everything else down for some
titles it was the publisher who threw in
the towel first and for others it was
the teams themselves ultimately as soon
as one Domino fell the others would
collapse shortly after the complication
is that Esports encompasses a vast
number of games and no title is the same
some games are popular for years and
then flame out a small handful endure
for decades and some just never get off
the ground there's no definitive way to
rank Esports titles as viewership
fluctuates and prize pools are not
reflective of popularity for instance
DOTA boasts the biggest prize pools but
pulls in less viewership than leading
titles in the past decade Esports has
been dominated by League of Legends and
Counter-Strike these titles are
generally regarded as Tier 1 Esports
where the viewership is strongest and
the leagues are the most mature then in
tier two are titles with lesser but
respectable followings like Rainbow Six
Siege pubg valerin and DOTA then at the
bottom are titles with low viewership
and Niche competitive scenes like FIFA
Madden Call of Duty rocket League Street
Fighter and Super Smash BRS while
everyone has their role to play teams
players and organizers generally all
look first towards the Publishers to
determine their own Investments
Publishers have the deepest pockets and
the most to gain from Esports but since
they make money off the underlying video
game their business is not fundamentally
dependent on the competitive scene
whereas every other entity in the
ecosystem is on one end of the spectrum
are Publishers like Riot who
meticulously control every aspect of the
Esports scene for league and valerant
they're the developer publisher
broadcaster organizer and League
commissioner allinone and they get
involved in everything from player
salaries and team allowance to owner
conduct and sanctions on the other end
of the spectrum is Nintendo who has
consistently refused to cater to Esports
as the biggest tournaments for Smash and
Splatoon are generally Grassroots
community-run passion projects yet
Nintendo has no concerns about investing
ing in competitive Pokémon then in the
middle of the spectrum is EA Ubisoft and
valve who have had one foot in and one
foot out over the years the variance in
Investments attitude and agendas across
titles and Publishers made the goal of
turning Esports into a business even
more complicated even at the peak of
Esports the economic pressures never
disappeared instead of a classic pyramid
system where teams got relegated and
promoted based on Merit tournament
organizers began collectively
transitioning towards Clos leagues like
the NFL ml be an NBA with or without the
publisher support that way viewership
would not be fragmented across hundreds
of teams and multiple levels of
competition all the eyeballs could be
concentrated on an exclusive few teams
would pay millions to secure a permanent
spot in these closed leagues and get a
guaranteed share of League revenues
which on paper would ensure longevity
for all the direct emulation of the NFL
MLB and NBA the three most lucrative
sports leagues in the world into
Counterstrike Call of Duty OverWatch and
League of Legend Legends renewed hope in
the mid-20s that Esports could truly be
sustainable Esports is divided by region
North American teams were the least
competitive but the most well-funded
given the concentration of venture
capital in the continent their revenue
opportunities were also the greatest As
Americans are the wealthiest in the
world by measure of disposable income
and significantly more valuable to
advertisers than Asians and Europeans if
there was any org that could be
profitable it would in theory be an org
from na after Cloud Knight and TSM the
most famous org in North America was
FaZe who ipoed in 2022 since 2011 FaZe
has won 32 championships across
Counterstrike Cod fortnite pubg valerant
and Rocket League their legacy in gaming
culture and success in Esports was so
strong that they had even earned
recognition from traditional media they
sold themselves as a generational
company where their fans were loyal to
faas the brand rather than just FaZe the
team they not only showed up to matches
and bought merchandise but also watched
content and attended meetups Esports
Drew people in and phases network of
streamers rappers and influencers is
what got them hooked the centralization
of all these young eyeballs all year
round enabled the company to secure
brand deals with a Fortune 500 and to
launch genre Crossing collabs with
Disney Naruto and Porsche yet FaZe was
not the high margin media business or
the high growth Sports Empire it had
portrayed itself to be Esports
contributed less than 15% in Reven
Revenue while sponsorships made up the
majority of the Top Line despite
primarily dealing in digital goods and
services cost of Revenue actually
increased in line with Revenue brand
deals and tournament winnings were
awarded to phase the company but most of
the money passed through to the
underlying players and streamers while
the players were generally salaried the
content creators were all independent
contractors despite exclusively
representing faas the only way FaZe
could convince these content creators to
band together under one exclusive brand
was to compensate them with a generous
cut of every sponsorship deal with cost
of Revenue sitting well over 70% every
year FaZe was giving away at least 70%
of the money to content creators and
players and even as the company went
underwater the talent began to take even
more of the pie for themselves phze the
company was capturing the least amount
of value and still spending Beyond its
means with massive losses with poor
fundamentals across media and Esports
fa's shares tanked from $20 to 18 in
less than 2 years as the losses
continued the company found itself out
of hype and money in 2023 FaZe was sold
to games Square another Esports Oregan
na who funded the purchase with Equity
ironically games Square's own shares
have plummeted to be just as worthless
as phases still both companies took the
effort to spin a tail in the press that
FaZe was the victim of mismanagement and
that the founders have been rightfully
restored to turn things around they
blame fa's former CEO Lee trink a man
who allegedly bought diamonds split L on
dinners and rented mansions on company
dime while wrongly pivoting the brand
away from gaming the scrutiny on Lee is
fair as he can barely keep his own
career straight on some websites he
claims to have been the one who turned
Katy Perry and Jared Leto into musical
Superstars despite only working at
Capital Records for 2 years on other
websites he downplays his involvement
with these artists as routine
collaborations Lee also claims that he
ran his own Hollywood talent agency by
the name of Dar Mighty entertainment
where he allegedly managed Kid Rock the
back street boys and ice cubes for 8
years without any websites or social
media the business address that Lee
registered for Dar Mighty entertainment
is the same exact address that he would
later register fazeclan with both point
to a random house in Los Angeles as
unqualified as Lee was it doesn't
absolve the cronyism and the conflicts
of interests that still run rampant in
Esports today the CEO at games Square
who rescued FaZe from bankruptcy was
fa's former Chief Financial Officer the
same CFO who approved improve the
spending set the budgets and Endor the
same business model that brought FaZe to
both IPO and Penny Stock FaZe continues
to compete and to push content the only
difference this time being that they're
bleeding someone else's Pockets while
poor leadership exacerbated phases
failures their struggles to make a
business out of Esports are not
unique by the mid 201010 the Esports
rocket ship had taken off and Outsiders
were eager for a finger in the pie one
of these was Madison Square Garden the
multi-billion dollar venue operator and
owner of the New York Knicks and New
York Rangers they had hosted the soldout
LCS finals in the garden the year before
and that event single-handedly convinced
leadership of the future if MSG could
own the next big Esports team that would
easily add another billion to their
valuation in 2017 they bought a 65%
stake in counter logic gaming of all the
Esports teams that they could have
acquired CLG was the safest CLG was one
of the oldest orgs in Competitive Gaming
having competed in League of Legends
since the very beginning and the team
there had just won their second
consecutive Championship founded by Pro
players rather than trickshotters CLG
had always focused on winning Madison
Square Garden's plan after acquisition
was to help CLG mature its marketing
media and merchandise businesses income
streams that the org could not properly
develop on its own before with smaller
Pockets but despite having more than
enough cash flow as the owner of an NBA
and an NHL team Madison Square Garden
gave up on CLG in less than 6 years
shuttering the org laying off staff and
killing the brand the only worthwhile
assets were CG's League team and LCS
slot both of which were sold to NRG who
like games Square could only pay with
Equity while Madison Square Garden
intentionally buried clg's financials
alongside the Knicks and Rangers during
its ownership to avoid scrutiny over its
Esports Money Pit we can actually infer
clg's bottom line if we extrapolate the
net losses for clg's minority share
holders which was the 35% that Madison
Square Garden didn't buy we can
calculate that CLG lost $6 million every
year for 6 years straight the absence of
bottom line Improvement can be explained
with the context that every CLG team
dropped off in performance in the Years
following its acquisition yet these
numbers also reveal that Revenue share
from LCS was not actually growing over
time as Riot had once promised the
entire purpose of having a closed league
for League of Legends was so that
underperforming teams would still
receive enough proceeds from the league
to sustain operations but as CLG showed
that clearly wasn't the
case even newer better funded na teams
did not Faire any better Faze CLG and
countless other first movers had all
demonstrated in their own ways how
fragile it was to do Esports first and
then content second competitive success
was not guaranteed and player salaries
were only increasing Enthusiast gaming
out in Canada attempted sustainability
from the opposite end by doing content
first and then Esports it made sense as
media was a proven business and Esports
was not their idea was to use the
established income from mature websites
to subsidize their Ventures into
Competitive Gaming enthusiasts bought
addicting games Escapist wise crack and
assortment of gaming channels and
websites over the years they expanded
their portfolio to include Live Events
stat trackers forums and communities all
through m&a and all related to gaming
these online properties despite
generating steady advertising income
were not particularly valuable in the
first place their Acquisitions had been
mostly funded by equity and any cash
portions had been deferred into
multi-year payments indicating that
there weren't many other buyers for
these websites in the first place
putting these assets together enabled
enthusiasts to surpass $10 million in
less than 3 years that cash flow was
then spent on the purchase of luminosity
in 2019 an emerging Toronto Esports team
who competed in Siege fortnite Apex and
Madden despite their later expansion to
OverWatch Pokemon and Rocket League
Esports and Luminosity has remained the
company's weakest link in 5 years
Luminosity has shown the least growth
whether measured by percentage or
dollars the only way the company has
reduced burn for its Esports division
has been through eliminating rosters and
replacing American talent with lower
salaried Latin American players while
media has brought in cash flow it hasn't
stopped enthusiasts as a whole from
losing money there's no profit in
assembling a portfolio of Aging cash
cows especially when they've already
peaked and they were purchased at a
premium if anything Esports seems to be
an expensive unnecessary diversion as
any viewer that Luminosity could reach
in Esports is likely someone who the
company already hits with its media
properties enthusiast's stock has
plummeted from $8 to 10 cents a share in
3 years and was just delisted from the
NASDAQ like FaZe the original CEO has
been blamed for mismanagement yet the
new CEO that was brought in to clean up
the mess stayed just 10 months before
fleeing the sinking ship
the new narrative out of Na is that it
was the suits who screwed things up and
that putting these companies back in the
hands of content creators and players
who actually understand gamers are what
will turn things around we can see as
much when we revisit games square games
Square's pitch is that video games are
the bridge to reaching gen Z and that
the collective marketing power of their
influencers streamers and Esports teams
will bring success to your brand it's
the same and Bull business model
that FaZe luminosity and CLG had been
pedaling for years prior the only
difference being that game square is
bankrolled by Dallas Cowboys owner Jerry
Jones and Texas Lan Tycoon John Goff
like FaZe did at IPO games Square boasts
about its Blue Chip deals with Denny's
Chipotle and Miller Light and its
exclusive Talent like Tim the tatman and
Nick MKS games purchased complexity in
2021 for $23 million one of Na's longest
standing Esports orgs who had won 140
championships over its 20-year history
and yet another example of conflict of
Interest complexity was actually
co-owned by Jerry Jones and John Goff
yet after picking up phase in 2024 gam
Square immediately dumped complexity at
a loss selling the org for $10 million
with only 8% of the deal paid at signing
in cash if Esports was really the key
they would have kept both phase and
complexity given the legacy of both
teams Bank rolling two teams in
different races would only generate
higher probability of tournament success
but game square is clearly moving away
from Competitive Gaming and they can't
ad admit it the only money is in content
creation and there's no need to lose
millions of dollars every year Fielding
Esports teams when you can reach a
comparable audience and viewership
through streamers games square is closer
to a talent agency than an Esports org
and the inmates are now running the
Asylum just like FaZe the company pays
over 70% of brand deals and prize pools
to its content creators and players once
again the cost of Revenue is so
abnormally High and the gross margins
are so bizarrely low for a company that
deals a non-physical digital Services
the numbers are even stranger when
stacked up against traditional media
companies what's worth highlighting is
that all these streamers and content
creators are actually also gamees square
co-owners and shareholders they're the
only ones getting richer they land huge
deals that they never would have gotten
individually and they keep all the
profit for themselves as the company is
the one that's funding all the sales
marketing and BD that was needed to
secure those deals in the first place
with massive losses worthless stock and
R&D led by a ninja the fortnite streamer
games Square seems destined to run out
of cash just like FaZe and Enthusiast it
all raises the same questions do these
companies exist to profit off the talent
or is the talent there to milk money out
of the company and how can the
individual success of a content creator
or streamer whose followings are rooted
in parasocial interactions ever
translate into a faceless corporate
entity when we look at less capitalist
regions like the EU the same
unsustainability appears heroic is a
Norway org that Rose to Global
prominence on the heels of its
Counter-Strike team many consider their
undefeated performance in the 20121 ESL
pro league and the 1v4 clutch in the
grand finals to be some of the best
matches ever played in CS history like
traditional sports franchises heroic
believe that winning solves everything
as long as they continue to perform
internationally the brand and business
would naturally strengthen over time and
the singular competitive Focus did
appear to work from the outside even as
Counter-Strike transitioned into leagues
heroic was rewarded with permanent
membership in the pro league and blast
Premiere with Revenue share and
co-ownership in the two leading CS
leagues in the world hero was convinced
that it had the financial Foundation to
grow they expanded to Rocket league pubg
and Siege they landed Red Bull as a
jersey sponsor partnered with new
balance on merchandise and landed
features on Forbes and BBC despite the
continuous competitive success heroic
was never able to shake off business
realities Revenue had grown rapidly for
Heroic thanks to sponsorship and
tournament winnings but it never came
close to offsetting the top-of-the
market salaries demanded by the best CS
players in the world what was worse was
that proleague and blast had charged
hero $13 million as entrance fees which
hero had to pay if they wanted a
guaranteed spot on the biggest stage in
Counterstrike as a fixed asset heroic
could only write off a quarter of the
cost of membership as depreciation
membership fees and player salaries
combined sink the company to an
operating loss of $5 million in business
you can only rely on on Equity when your
Shares are worth something and you can
only ever rely on debt when you get cash
flow hero had only $180,000 in the bank
they had already borrowed $5 million and
half of that needed to be repaid by the
end of the year the company drained the
last drops of equity for investors in
exchange for emergency cash infusions
but the writing was on the wall the
closed CS leagues were not generating
any meaningful revenue and even if
heroic had somehow won every CS
tournament in 2023 that combined prize
pool would still not have been enough to
keep the lights on heroic was acquired
for 18 cents a share in cash by a
mysterious shell company that's
registered to a Norwegian Law Firm has
no website has a postal address in
Cyprus and is linked to a sanctioned
Russian gambling
company while heroic was hoping to
establish itself on a shoestring budget
astralis over in Denmark was Esports
royalty they had the best CS team in the
world with four major championships and
secured permanent slots in proleague
blast and LDC all of which were paid
with Venture Capital like heroic
astralis had pegged its commercial hopes
on the shift to close leagues despite
leading in tier one competitive success
Asis still posted loss after loss the
only year where astralis has ever posted
a profit was in 2023 when they sold
their LEC slot for $19 million to a VC
backed French team when segmented by
title every team in business division at
astralis including the physical gaming
Cafe has lost money in every year of its
existence in four years asus's stock has
plummeted to just 17 cents a share
despite racing to be the very first
Esports team in the world to IPO the
company proactively delisted itself from
the NASDAQ in 2023 to save the half a
million dollars that it was spending
every year on compliance the LEC sale is
likely the last big capital in Fusion
and the only play now is to stretch
every dollar to Outlast the current
interest rates and its cash starved
competition over in UK the Esports hype
had reached the ears of celebrity
athletes like David Beckham who loaned
his face and name to an English
organization by the name of Guild
Esports while Asis was the first to IPO
Guild was the first to IPO on the London
Stock Exchange but it's not clear why
any of this even matters when they're
all penny stocks while Beckham owns just
3% that hasn't stopped Guild from
milking every scent from its $20 million
deal with the football star Guild spun a
story about building the best Esports in
the world where they would Scout upand
cominging players acquire them for cheap
develop them on company dime and then
sell them at a premium to other teams
like in the premier PR League they
continued to pound this drum despite the
reality that Esports teams all around
the world were already underwater paying
the salaries of existing players the
notion that they would have the budget
to regularly blow Millions more on
transfers was Pure Fantasy still thanks
to David Beckham Guild spun up teams in
FIFA fortnite valerant and Rocket League
while also Landing $14 million worth of
sponsorships from Subway Coca-Cola and
sky in Just 2 years in spite of a
non-existent fan base and poor results
still the company forged onwards and
continued to Shield the academy as the
source of future profits Guild was
ecstatic on his launch day crowing about
having netted over 3,000 signups for its
Academy the company was then shocked
when all the leads turned out to be
unqualified or spam it takes seconds to
type an email address into a form and
it's a Marvel to see multi-million doll
modern companies repeatedly celebrate
vanity metrics like signups page views
and YouTube subscribers as a sign of
business strength Guild Justified its
losses as for the course and even
pointed the finger at its poor
merchandise as the reason for falling
behind on Revenue as we've seen
merchandise is so minor relative to
every other operating expense that
selling even a thousand more hoodies
would never meaningfully reduce losses
Guild's next move was to insert itself
into the for-profit UK education system
where they would receive ,000 for every
student they enrolled in their Esports
diploma program what exactly was taught
in these classes remain a mystery to
this day by 2022 Guild was running out
of cash to save a pound the company
renegotiated its deal with Beckham who
gave up his cash payments for a greater
cut on merchandise sales and brand deals
after the usual cost cutting and roster
consolidation Guild squeaked its way to
2023 pedaling a new vision of content
creation over Esports ironically their
fan base has remained so small that
their main partner a crypto exchange
refused to renew its sponsorship deal
and Guild is once again on the verge of
bankruptcy but looking at just the teams
paints an incomplete picture regardless
of their intentions and Inc competence
Esports can only ever be sustainable
when everyone Rose in the same direction
and no team could ever be profitable
without support from the rest of the
ecosystem players could always be
replenished as gamers in the 9s had
competed out of passion without money or
fame on the line and if there were no
official leagues or tournaments players
would simply host their own thus there
would never be a shortage of Talent OR
viewers the only other entity in the
ecosystem that was as critical as the
teams were the Publishers and there was
no publisher in the world more
aggressive about monetizing Esports than
Activision Activision was the first to
pickup on the potential of Esports 5
years ahead of EA Ubisoft and take 2
Activision's merger with blizzard in
2008 gave Bobby cotic a front row seat
into the Korean Esports scene having
rescued Activision from bankruptcy in
the90s Bobby had longlook for ways to
inject longevity and monetization into
video games post launch trying to create
the next hit game was expensive and
risking everything on a single launch
every few years had killed off many
studios yet Gamers were fickle and they
demanded new shiny things to keep
attention and spend under Bobby
Activision's primary business was in
ruthlessly milking proven IPS like Tony
Hawk Call of Duty and Guitar Hero with
annual full price sequels yet when Bobby
saw the Grassroots popularity of a
10-year-old RTS out in Korea he couldn't
resist building that competitive
longevity into its sequel Bobby didn't
want just more users and engage
engagement he wanted to own the eyeballs
and the future monetization
opportunities that came with them the
only way to accomplish that would be to
control everything the Starcraft 2
Community could not be allowed to
self-organize like the Koreans had done
with brood War Activision embedded
itself into every aspect of SC2
operating tournaments forcing battl net
2.0 onto every player and pushing teams
to join the only official Blizzard
sanction Championship League the company
persisted with the same heavy-handed
approach with Heroes of the Storm
Hearthstone Call of Duty and OverWatch
watch under the belief that if they did
it for enough titles they could own
Esports in the west by the mid-20s
Activision was regularly Fanning the
Flames of Esports to shareholders and
orgs alike they drew comparisons to the
NFL they poached media Executives from
the NBA they boasted about blizzards
tournaments having already surpassed the
MLS and they implied that a 10x increase
in future viewership was not only
probable but would also solve
monetization to demonstrate how serious
they were Activision acquired Major
League Gaming with the ambition to turn
it into the ESPN of Esports and they
also started converting existing
tournaments into Clos leagues
Activision's leadership from the front
emboldened Esports orgs to jump in feet
first as their own valuations grew off
the same hype Activision was the piper
and the teams followed right behind
never once imagining that the publisher
would throw them under the bus
Activision channeled their figurative
buyin into literal buyin charging teams
$20 million each to join the OverWatch
league and $25 million to join the Call
of Duty League these fees were twice of
what Riot was charging teams for entry
into LCS or LEC OverWatch at this point
had only been out for five months and
was completely unproven as a spectator
sport whereas League had been around for
nearly a decade there was no
justification for these rates and the
millions of dollars that Activision had
invested into Esports was just a drop in
the ocean compared to what it was making
off microtransactions alone still
Activision pocketed these entry fees for
itself and they embarked on a global
Road Show selling League spots to glal
billionaire and VC back teams under the
promise of eyeballs and revenue that
simply never existed by 2021 Bobby had
completely forgotten about Esports
free-to-play live Services had taken off
and they offered comparable monetization
engagement and viewership without the
overhead of Esports war zone was the
hottest game in town it was bigger than
Diablo OverWatch World of Warcraft and
Starcraft combined in 2024 Activision
shuttered the OverWatch league and paid
out $6 million to each team to kick them
out the door as fast as possible
meanwhile EA in the 2010s was happy to
keep Esports as groundup Grassroots
community events for FIFA and Madden
their focus was mass Market monetization
as long as Competitive Gaming was
driving players to buy more Ultimate
Team packs the publisher was happy to
invest in a bit of marketing or
contribute to a prize pool every now and
then but as sales improved and the
relationship between Esports viewers
players and microtransactions proved
worthwhile EA ramped up its Investments
accordingly organizing leagues acquiring
sponsors and building their own
broadcast Studios for FIFA Madden
Battlefield and Apex tournaments but
similar to Activision live Services took
priority after 2022 and EA has since
remained half committed to Competitive
Gaming with one foot in and one foot out
across all its titles Ubisoft also took
a measured approach the competitive
scene helped prolong longevity for Siege
and the company has been cautious not to
rock the boat too much especially as
every other major title in recent
history has been a dud for the French
publisher Ubisoft doesn't charge teams
entry fees they have a revenue share
program with microtransactions that
helps support teams from a distance and
they've organized tournaments to
maintain the existing player base rather
than growing Spectators the only major
publisher that's consistently poured
cold water on Esports has been take2
they've stuck to the same talking point
since 2015 that Esports is at most worth
only a billion dollars most of the money
goes to League of Legends and the
competitive scene for NBA 2K will only
go as far as basketball itself
beyond the orgs and Publishers even
companies who built venues for Esports
have struggled to turn a profit there
was TGs who ipoed on the story that they
had constructed a one-of-a-kind Esports
stadium in Vancouver that would host all
Gamers and tournaments up north they
sold concessions ran boot camps hosted
contests and rented space despite being
a venue operator TGs made more money off
sponsorships than it did hosting events
unsurprisingly there's not enough
Esports in Canada to ever sustain such
such a specialized venue and when
there's not enough events you just have
to manufacture your own the company
spent twice its revenue on Advertising
just to get gamers in the door and was
running out of cash despite being months
away from bankruptcy with a share price
of 5 Canadian cents a mysterious
Illinois company by the name of midnight
gaming bought the failing TGs for three
times its Market valuation at $18
million midnight gaming claims to be a
conglomerate run by two employees with
no revenue and no assets its website is
a stock WordPress template with
lingering typos and formatting issues
the CEO claims to have raised millions
of dollars but the S1 shows that they
have just $11,000 in their bank account
against $400,000 of debt the other
employee is the chief gaming officer and
appears to be a family member he ran an
amateur team for a year before branching
out into a supposedly quote high demand
Esports consulting firm their contact
form leads to an anonymous catchall
address and the staff page is filled
with people who report zero Association
to the company on their own LinkedIn
profiles where these two employees found
$18 million to buy TGs how they deem TGs
to be worth that amount and what
midnight gaming is really a front for
are questions that no one has been able
to answer then there's Allied
entertainment who spent $9 million in
2018 building an Esports Arena at the
luxer hotel in Las Vegas and has hosted
events like ninja versus Mr Beast the
MLB awards show and the world poker
tournament like TGs the vision was
simple as Esports grew the facility
would naturally just be in Greater
demand to leagues and Publishers Allied
monetized the space as much as they
could when they weren't hosting events
they collected admission and they
produced content but as Esports began to
collapse with Publishers and teams
pulling back the board saw the writing
on the wall and they pushed for a fast
sale rather than a slow death in 3 years
the company has turned through three
different CEOs each brought on
specifically to drw up interest from
Saudi Arabia and China as there was no
appetite left in na for Esports no
buyers have materialized and Allied has
since decided to diversify away from
Esports they're now banking on Chinese
mobile gambling apps to get the business
Back in Black and just like the orts
teams we covered before Allied is just
months away from being delisted from the
NASDAQ with the Publishers teams and
venues all on their way out the only
folks left in Esports are Saudi Arabia
online casinos crypto exchanges and
shell companies because no one's talking
about any of this the grifters are still
coming in each worse than before just
last month a Swedish org called ninjas
and pajamas and a Chinese org named
Victory 5 merged together to IPO on the
NASDAQ to confetti and Applause is Nip
group making money no did winning Cs and
LPL championships improve their losses
no how does nip group intend to become
profitable one day beyond selling
merchandise and winning tournaments by
repeating what every company has
attempted to pull off in the past decade
all at the same time Esports education
like Guild Talent man management like
FaZe venue rental like TGs event
production like Allied and content
creation like games Square nip group is
led by Mario hoe the 29-year-old son of
a billionaire maau Casino Tycoon and
with a Victoria Secret supermodel for a
wife Mario claims to have been a math
prodigy and the youngest graduate in
finance at MIT both of which cannot be
verified Mario ho does not appear
anywhere in the UK's International
mathematical Olympiad or the British
mathematical Olympiad the former which
lists out every winner starting from
1967 and the latter which lists out
every winner from 2003 onwards there's
no one with the first name Mario or even
just the last name ho in either of these
lists on his Instagram Mario brags about
hacking the lights on the MIT Green
Building to play Tetris despite
overwhelming documentation that this was
a multi-year long stunt that had been
accomplished by students 5 years before
Mario even attended MIT it had become
just a regular campus exhibit and all
Mario had done was just taking a photo
with with it on another Instagram post
he brags about winning a Ferrari over a
game of rock paper scissors his bio has
been updated to just one line the
youngest ever Asian founder of a
us-listed company with connections to
Chinese Elite and Saudi royalty it's not
a mystery as to how nip group got to
where it is and who NASDAQ as the stock
exchange is ultimately pandering to the
Esports industry has been dominated with
these kinds of characters from the
get-go and Mario just happens to be the
latest
Esports was built on two theories one is
that viewership would one day reach
critical mass and two is that these
viewers would be worth just as much to
advertisers as viewers of the NFL or NBA
but how much are gen Z eyeballs really
worth to Brands when they're broadly
speaking too young to have disposable
income but also immature enough to still
be impressionable to online gambling
energy drinks fast food crypto and
streamers when twitch can't even turn a
profit themselves monetizing these same
eyeballs it's hard to imagine how anyone
else in a segmented mutually dependent
landscape like Esports could fare any
better the other variable is that people
get older the Millennials that grew up
watching LCS and playing League after
school have moved on to other games or
other Hobbies as every generation does
in life it's a mistake to believe that
people will stick to playing or watching
one video game for the rest of their
life and building a billion dooll
business on that assumption is like
drawing blood from a stone if we look
back at the roots of Competitive Gaming
play players never really needed huge
prize pools and six-figure salaries to
compete they didn't need stadiums or
coaches they did it out of passion and
pride in run-of-the-mill auditoriums and
plastic chairs it was about glory and
not money and it was about proving that
a kid from Kansas could match a top tier
Korean Starcraft Pro that a Japanese
player could perfectly Parry every
attack at 1 HP to clutch a winning
Street Fighter that a band of Americans
could upset the top Korean seat Against
All Odds in league and that two
teenagers from California could pull off
a move that no one had ever seen before
in Smash gaming is a skill but as the
past decade of Esports has shown it's
not a talent that the world is ready to
put a dollar on