The Crooked Economics of Esports

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

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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