The Crooked Economics of Esports

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 with thousands of fans. All this value in theory would be captured by new 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 each used viewership to rake in billions over decades.

There was so much hype that everyone expected the economics to solve itself over time. Brands jumped in to sponsor. Even the billionaire owners of traditional sports joined in, enticed by the prospect of owning the next Dallas Cowboys or Manchester United. With the media and Wall Street all heralding esports as the next big thing, this future seemed certain.

Fast forward to 2024 and esports has fallen apart. Many teams have shut down having run out of money or been sold for parts. Viewership has declined and questions have been raised on whether this audience is valuable when Twitch itself can’t turn a profit. Publishers have cut support and shuttered leagues. Many pros have exited esports, channeling their starpower into more sustainable streaming careers or leaving gaming behind entirely.

The fall of esports has never been covered by mainstream media. As a result, the industry remains rife with con artists, scammers, and shell companies who continue to run the scene with little scrutiny. The pump-and-dump has continued and the people running esports these days make even the most delusional Silicon Valley venture capitalists and founders look like saints and angels. In this episode, we’ll break down the fraudulent business of esports and analyze 8 different teams across NA and EU, 4 publishers, and 2 middlemen.

0:00 Bang & Whimper
3:20 Sponsor Break (NetSuite by Oracle)
5:25 Mutual Dependence
10:36 NA Corruption
22:21 EU Idealism
33:59 Pointless Middlemen

[ModernMBA]

0:00 Bang & Whimper
3:20 Sponsor Break (NetSuite by Oracle)
5:25 Mutual Dependence
10:36 NA Corruption
22:21 EU Idealism
33:59 Pointless Middlemen

[paulhenderson]

As someone who was a huge fan of early Overwatch League, I feel like it was always obvious there was no clear path to profitability. Teams paid tens of millions to enter OWL and only got some ad revenue and meager merchandising

[alexdirac]

At first i misread the title as "the crooked business of escorts" and was very disappointed.

[PayPal]

One thing never mentioned is that games constantly change and their meta is in constant flux. Compare this to basketball or soccer where the changes come over decades of minor tweets. Compare this to say Overwatch which can add a new hero every couple months or can nerf another one out of all pro play. This change makes it very difficult to commit large amounts of capital on a team or player that could become obsolete in a changing meta a year or 2 down the road

[BS-jwnf]

the real problem is not letting the sport grow grassroots with healthy support from the developper and organic interest, instead C student MBAs and marketing folk decided to dump in a bunch of money for shits and giggles to see if they could silicone valley this thing. Clearly failed, now the sport will just go back to it's natural point and will slowly grow as more people get interested in more serious gaming.

[klumzyee]

as someone from the industry. this was well made and thank you for calling out the endless amount of shady millionaires who ruined a once fun community

[Mr.GD]

> Player wins a tournament
> Player demands more salary
> Player move to team with higher salary
> Game release patch
> Player does not cope up fast
> Loses tournaments
> The team who bought the player at peak career is now at loss
> Releases the roster

[Sid-ynwo]

love that you don't just make videos on topics that every other YouTube analyzer is doing, your topics are always unique and different

[MountainFudgecake]

I got into League around the S2 Finals and was regularly watching the NA LCS during 2013-2015. One of the biggest issues with teams was that the players' skill had to also coincide with good streaming and fanbases. The reason TSM was a huge name at the time was because their members were prolific content creators and streamers. When the "iconic" members of a team were replaced with lesser known players, the viewership suffered. TSM fans loved Dyrus, not the TSM brand. I lived in Indianapolis for a while and when Petyon Manning left the Colts there were a lot of fans who rooted for the Broncos in the post-season since they just loved Peyton so much. The problem is much worse for eSports since changing alliances isn't region dependent so your players are your entire identity. If your brand is extremely roster-dependent, is your brand worth anything at all?

[flipdbit]

36:47 Saudi, online casinos, crypto, and shell companies. I'd like to see that Venn diagram.

[nikoforsyth]

9:20 Nintendo is actually worse than passive. They often interfere with tournaments that are getting too big.

[JesseHouston]

Great video!

One concept I think plays into account is how fundamentally the sports themselves are commercial entities looking to ensure that they extract as much capital from the ecosystem as possible. Kids can play basketball in the street with only a ball and a hoop, but you can’t play StarCraft unless Blizzard lets you, and blizzard will want to ensure that they are making net positive revenue through your practice. Further, the number of rent seeking entities extracting from the consumer (middlemen, twitch, leagues, game companies, etc ) are all attempting to extract at every angle without a meaningful revenue sharing model on stuff like merchandise

[NativeAlternative]

This vid should be mandatory viewing for any media outlet that wants to cover the "hype" of esports, especially as Saudi money is putting the industry back in the spotlight.

One thing you could have added was exactly WHY esports lacks the largest revenue source of sports: media rights. Many of the biggest NFL or even Premier League teams can make a loss when they host a home game, but overall stay in the black due to the insane amount of TV money coming in.

Esports, being almost entirely on streaming platforms, makes next to none of this money. Mainly due to:

1. Steaming as a whole has a terrible advertising model compared to traditional TV, where individual channels sell ad spots that best match their audience at that time of day. This is why Twitch is unprofitable, and why Netflix, MAX etc. are trying to incorporate ads. Subscriptions just aren't enough.

2. Streaming platforms don't want (and really don't need) to pay for exclusive esports content. The publishers also probably wouldnt want to limit the exposure to their games.

3. While pay-per-view is reliable and lucrative in sports, esports fans would not pay even a fraction of that price. They are far too used to watching everything (live and VOD) for free.

Maybe as more legacy media companies turn to streaming this may bring more rights bidders and money for esports, but I wouldn't bank on it.

[davidl.e]

Interviewer: "So what are your skills and expertise?"
Mario Ho: "I'm a son of a billionaire."
Interviewer: "Hired."

[rawrss]

I wouldn't trust Mario Ho to make a sandwich, let alone be head of NiP. 😂😂 I hope we can all come back to the great video in a few years and laugh at the downfall together.

[kristiyangerasimov]

so the players made a name for themselves, bled the companies dry and offloaded marketing expenses to them. Then the publisher organized tournaments made bank off the venues and team fees, so that the middlemen both paid for the show and made no money? Now players are streaming and jumping into collabs and cancellation scandals while the middlemen go out of business and the moral of the story is that the talent in esports holds all the cash and attention of the consumers

[technetium]

eSports was artificially pumped, because they expected it to rival sports, but if you see how sports were like when it first started, the players were literally unpaid, there was nothing supporting a salary so there were none, and currently nothing is supporting an eSports player's salary, so of course its dying

[kolonarulez]

I used to love documentaries about esports stars and behind the scenes. Even then it seemed like an industry propped up on "future success" but it looked so fun and hopeful.

[HdbeWydvd]

And by pumping the salary, they broke the korean esports scene. T1 is over 50 million in debt and no company in lck is profitable at the moment.

[moshiadnfusionfallfa]

For a 40-minute video, this fails to explain or even mention the biggest problem that esports has: the fans are not willing to pay to watch these competitions. You mentioned sponsors, but if you think anything is profitable because of sponsors then you'd be wrong. Traditional sports are profitable because of broadcasting rights. The amount of money sponsors pay does not come even close. Cable providers around the world are willing to pay many millions in order to have the rights to air these leagues in order to get people to subscribe to their services. Paid subscriptions to streaming services work in a similar way.

If we as fans are not willing to open our wallets to watch esports, then we shouldn't expect it to become profitable anytime soon. That or the devs (or whoever runs each esports league) find another source of revenue that is equally as sizable.