Esports and Investing
Hey lovely gamers, shockingly the sun is shining here but in true gamer style I'm sat inside in front of my monitor instead – to be fair, I am sat next to a window at least. Recently there’s been a lot of advertisement on my socials for investing in esports (and having just spent a year living with a serial investor – who took every chance possible to tell us about investing and explain economics) I thought this would be an interesting topic. I'm going to put a quick disclaimer here now, I am not the person to ask for investing advice, nor do I understand every intricacy of it (living with an economics student didn’t help me understand it) – but seeing as esports is a growing industry and investments are needed to keep up growth, I thought we could discuss it today. Not least because more and more companies have been pushing for average people to invest in esports and not just huge corporations, so today we are discussing investing in esports; including esports franchises (which is apparently a growing thing here), the controversial topic of NFTs, Bitcoin, investing in organisations and companies and so on. So, get comfy and let’s get into it!
As today’s blog is all about financial investing within esports, investing is going to be defined as any amount of money – although investment is often considered in terms of big money (and we will discuss the large financial investments) but because we are going to be talking about NFTs and Bitcoin it’s important to note that investment in this blog will be a range from anywhere between pocket money amounts (at the start) to millions. As well as for the obvious notion of receiving a profit – though as we will discuss later, the benchmark for a profit/positive outcome differs somewhat in esports than perhaps conventional investment of fluctuating currency or property e.g. a team qualifying for play-offs in League can be considered a positive outcome as this will then directly increase the profit being received. Furthering the point of defining investment by any sum of money, this definition is to be able to discuss the different levels of esports investing, especially the jump from Bitcoin investment (even in larger sums) to outright investment in teams building rosters and buying out other teams at local levels, as well as investing in international gaming companies to hold shares within that company e.g. Fnatic had a public investment (crowdfunding) scheme in November of 2020 which was overfunded (but more on this later).
We’re going to start this discussion at the lower end of esports investments, namely the somewhat controversial topic of NFTs – quick sidenote, this is one piece of investment I have had plenty of listening time on due to the economics student I lived with being a big fan of these. NFTs have been rising in popularity in the mainstream and they have been increasing in popularity arguably since the introduction of them into esports mainstream by G2 (who first advertised their NFT partner in 2021) and Fnatic (who began their programme in 2022). For anyone who doesn’t know what NFTs are, NFT stands for non-fungible token, which are effectively digital drawings (or anything digital media) bought, sold and traded online for profit in a blockchain which shows the chain of previous and current owners and are a part of the wider crypto currency. So before we go any further, let’s cover why NFTs are so controversial, as part of crypto currency there is a substantial risk involved for investors, and as such there is argued to be a large portion of the investment which is nothing more than a glorified scam – or at least very susceptible to scams, specifically for those who are not seasonal investors. Secondly, NFTs have an adverse environmental impact, they are known for damaging large parts of the natural world and seeing as we are already aware of the current environmental issues which are widespread (just take a look at the effects of global warming on the British summer just gone – 40 degrees Celsius isn’t natural here) people are understandably wary of anything that is going to make the environment any worse. And thirdly – and most important to anyone who likes art, this is how artists often lose out, if sites copying artists’ work and selling it cheaply wasn’t bad enough, their art can now be put on an NFT taking away what little control they had left over their own work – however there are some scenarios artists can profit from NFTs if they act earlier enough to be in control of their work.
So yes, they’re pretty controversial.
But nonetheless, June 3rd 2021 saw G2 announce their latest partner Bondly, who fashion themselves as a brand for peer to peer payments among friends and family, as well as colleagues and strangers, and as such is part of crypto currency through NFTs. While researching G2’s NFTs based on the information from their original Twitter post of their NFT partner (Bondly) back in 2021, the pages discussing any worries fans had at the time (which, from a look at the comments section, was a lot) have since been deleted. This is obviously doesn’t sound great. Some further research on the since deleted posts; it transpires that G2 have since sued Bondly for (knowingly) not delivering on their NFT project. I don’t honestly know what to tell you, but this just goes to show volatile and problematic NFTs can be in esports, so make of this information what you want to, and I’ll link the articles on the subsequent sueing of Bondly and failure on the project at the end of this blog in the list of sources.
The backlash received by G2 over their NFT programme was then replicated when Fnatic announced in April 2022 their own NFT programme. Fnatic’s NFT programme which exists under the name of ‘keys’ is still running at time of writing (September 2022) and works the same as any NFT programme, you buy the ‘key’ as part of the membership, which unlocks exclusive rewards (the same as G2’s programme) and when you stop wanting the key? You sell it. As Fnatic’s programme is still up, the prices are available online and are as follows, the citizen key is listed as being free of charge with an unlimited number, the core key is listed as being 250 USD and limited to 1000, and finally the pioneer key is listed as being 600 USD (yes you read that correctly) and limited to 1000. At this moment, I’d like to pause the discussion to just point out that the ‘keys’ do not look like any key I have ever seen before – not really related to this article but definitely unique. Anyways on with the article, a reminder post by Fnatic about their NFT/membership programme stated over 165k people had signed up and that was still before the pre-sale and membership programme went live. As Fnatic is running their NFT programme as membership based the rewards range a lot more than the average NFT investment, namely into annual jerseys, VIP Fnatic experiences, a physical card, and so on. But onto discussing the backlash that was received, similarly to the G2 backlash, a lot of fans were repeating similar sentiments, bad for the environment, not wanted by fans and not increasing fan community engagement – as it was noted as being meant to do. So that’s NFTs.
The next lower end of esports investment (that has the potential to range into the very high end) is Bitcoin, probably one of the most well-known forms of crypto currency, and known for being especially volatile (experiencing severe crashes). Esports has seen Bitcoin steadily move in, especially into the angle of esports betting. Similarly to NFTs, Bitcoin works on the idea of buying, and trading for a profit, and is also becoming a larger part of esports as a popular crypto currency among esports fans. Bitcoin is thought to be popular among esports fans for two main reasons, for one it can be used online to make in game purchases and for two it can be used when betting/wagering on matches. There is also speculation that we could see Bitcoin and other cryptocurrency become part of the prize pool for tournaments, though unlike the former two reasons, this seems unlikely to become as popular as quickly – namely because cryptocurrency can’t be used to pay building fees, player’s wages, etc as it isn’t used widely enough within mainstream society for this to be effective. The logic behind this speculation is understandable but until the general population use cryptocurrency – and trust it widely, this seems highly unlikely, at least for the time being. Though, for the discussion of betting while using Bitcoin, there was no shortage of esports sites using Bitcoin as a means to bet (amongst other crypto currency) some of the top listed sites include BC.Game, MyStake and Chipstars. Evidently, esports and Bitcoin are going to become more entwined in the future, with reports of a deal between TSM and FTX Trading Limited back in 2021, as a sponsorship deal lasting 10 years of 210$ million for a name change of TSM as part of the deal to TSM FTX. However, the naming rights aspect of the deal were blocked by Riot Games and therefore the name change was not allowed in North America. So while Bitcoin rises in popularity in esports, there are still blockades in place before it can become widely used or integrated into the industry; but should we be inherently wary of it? It is still crypto currency at the end of the day, so for those who aren’t big fans of investing and the risks surrounding any crypto currency, staying away from it is probably a good idea for the individual, but it looks like crypto will be becoming a more permanent fixture in esports in the future.
Onto the next form of investment, this one in particular has been advertising a lot on my social medias and is centred on esports franchises of training grounds/arena. Firstly, I want to preface this by saying I hadn’t heard of this until it started advertising to me regularly over the past few weeks, but I do live near to a university which has a custom built and state of the art esports school – complete with training grounds – so I found this whole idea very interesting with some very large potential pitfalls. The company that was (and still is) repeatedly advertising to me is an American company, and advertises itself as ‘legendary esports training,’ offering training as well as the chance to franchise an esports arena in games such as Overwatch, Valorant, etc. the website states the franchises are offered in both the USA and UK but there seems to be a lack of information overall aside from a list of what is included when opening an arena (such as unlimited teams and players and custom jerseys that you could end up paying more for), and the need for 25k in liquid capital. The company in question (Valallan) reportedly acquired the North American Esports League – which is fundamentally a youth league for esports, which is great, there is some background to the company and the interest in bringing the same franchises to the UK is an interesting idea.
So, the first thing that strikes me about this investment out of all of the investments that we are going to discuss today, is how the website for any aspect of the entire investment with this company, across the board doesn’t note that any prior knowledge of esports is needed, yet articles about the company imply they are targeting people involved in esports. Yet this isn’t noted on their website, specifically in regard to opening an arena, which specifically details building and managing teams. Furthermore, when trying to find their registered franchise arenas – as listed under the arena section of the website – no locations are revealed, further research noted some major cities in the USA but still not concrete locations. By no means am I attempting to give financial advice here, but the lack of locations specified, as well as the fact that the general technicalities of running an esports company seem to be have been blissfully skipped over, brings a lot of questions to the discussion of esports training ground franchises in particular. Aforementioned, perhaps most concerning is the lack of need for an understanding of esports, when entering something as important as franchising training grounds – if it was only investing in an esports company then it wouldn’t matter as much, and even if the arena was purely for hosting, it arguably still wouldn’t matter as much. But the fact this franchise is meant to be about developing talent – and makes no mention of the need to hire coaches, or any esports based staff, is highly concerning. I haven’t requested information (as I don’t have thousands to throw at this – and that is required to request information) but I can only hope the details are included in the information pack sent to potential investors. Yes, passion and interest is great, and people can always learn, after all everyone has to learn somewhere, but when the website makes no mention of actual detail on the specifics needed for running an esports arena (which is actually a training ground when you read the website),makes me wary as to who is actually operating and investing in these arenas. Of course there is profit, its esports, there is always the possibility of profit, but a worry with any arena or training grounds franchises – and with no way to see any of the operating franchises or who is running them is – would be that young hopefuls could be taken in thinking they are going to reach their goal, without realising the necessary details to reach those goals e.g. coaches, support staff, are not actually in place. As I said earlier, I couldn't verify whether these details are included in the information pack sent to investors but I sincerely hope they are included.
A quick Google search also revealed a list of reasons these esports franchises are such a good investment (I’ll list the site who were saying this at the end), the primary reason is that esports is growing – yes it is, but that doesn’t mean just anyone should start throwing thousands around. And that there are large profits to be made – of course there are, once again its esports, and of course they want investors, so the glossy information for any of these investments isn’t going to detail how easy money problems can be. But nonetheless, the reasons listed for this being such a great investment are wearing rose tinted glasses. Especially the point of the lack of regulation, this was sited as being good reason to invest in esports, but this can easily be one of the biggest pitfalls of the whole investment of training grounds. Specifically pointing out the lack of regulation in esports, devalues all the dedication people have put in to keeping esports above board and fair and ensure no one is exploited (e.g. young age or unequal wages), and signposting the lack of regulation as a good thing just seems shady for the want of a better phrase.
Franchises aren’t a terrible idea, bringing new teams into any league will always be difficult but building up talent so that it can eventually move onto high level teams (if the franchise is only in the lower levels) is a good thing. That is good for developing players and helping parents who are unsure about esports come to terms with it and what possibilities are open to their child – also good. It could be good for creating whole female or co-ed teams at all levels of play and across all games in all competitive divisions. These are all solid reasons, moreover training grounds in local areas that aren’t close to capital cities is positive for those who aspire to get into esports pro play but cannot drop out of school because they aren’t well known or not able to get to a large/capital city to attend academies. It also helps grassroots companies gain investment to move their company forward into the bigger leagues of esports – and this can allow for multiple levels of teams under that company, again not a bad thing, it creates a path for players at that company to move forward in their career e.g. an academy team to the main roster.
Coming out of researching these franchises (regardless of who is running them) has left me with one huge overarching question, at the end of the day, arena, training programme, schools or whatever else the investments are moved into, they’re still investments of financial capital at the end of the day. So what happens if they fail? If these franchises work on a rolling subscription to the overarching company, how does it work if the franchise makes consistent losses, falls into debt, cannot pay the subscription? What happens to those players at the arena? What about any unsold merch? And so on and so forth, this isn’t information I could find publicly available but it is something that would be good to know anyway. So that’s franchises in esports.
The final area of esports investment we are going to discuss before the solutions segment of this blog and conclusion, is about directly investing in esports organisations, arguably similar to franchise investment, this is at the higher end of esports investment (though I have seen somewhat small amounts available to invest). As mentioned earlier in this blog, we are going to be discussing how investing in esports organisations directly has impact, focusing on three specific examples. Excel Esports (and in their BBC documentary how investors were focusing on the detail of playoffs or not), X7 (a UK based org who bought out a series of teams) and Fnatic (who ran a crowdfunding campaign in 2020 with Crowdcube). Let’s discuss X7 first as they are the most recent team to appear in League of Legends specifically in the NLC which is the local ERL of the UK and Nordic region. X7 was founded in 2020 and the first esports organisation to have a governmental sponsorship funding (as according to the X7 website). Throughout 2021 into 2022, X7 acquired three UK based esports teams (Bulldog Esports September 2021, Absolved November 2021 and London Esports June 2022), putting them years ahead of their investment plan – making it a successful investment for the investors. The organisation is still seeking investment, and the details of this can be found on their website. Second organisation to discuss in terms of investment is Excel Esports, the team as NLC and LEC competing League of Legends teams and the 2020 roster team’s documentary featured many of the investors watching the team’s LEC matches in Berlin and discussed how investors saw success of their investment. Within the BBC documentary, Excel Esports founder Kieran Holmes-Darby (who founded the organisation alongside his brother Joel Holmes-Darby) explained to viewers that for the investors, success was measured by whether the team achieved play-offs contention or not. Which was something the team managed to do in 2022 (qualifying for play-offs in both spring and summer split), breaking the meme-ed curse of Excel always missing play-offs – and we can assume satisfying investors. The final example of investing directly in an organisation that we will be discussing is Fnatic’s crowdfunding in 2020 which was done through the crowdfunding platform Crowdcube. Fnatic’s crowdfunding was overfunded, raising 1.7 million pounds with various amounts for investors to invest, ranging from 50£ upwards (this was at the time of the campaign and may have subsequently changed - and is based on my memory). As recorded on Crowdcube’s website, a total of 3.4k investors were part of the crowdfunding and average share price was £4.67 (at time of writing) demonstrating clear success from the crowdfunding programme – and we can assume happy investors seeing as Fnatic has such a strong track-record, which is of course a huge incentive when investing directly in an esports company. And that completes the summary of the various types of esports investments.
So now that we’ve discussed various forms of investing in esports currently, are there solutions to the issues that are arising with these forms of investments? Fundamentally, I'm still no financial expert, so there is not a reason to listen to my investment advice; however, it is still worth considering if the issues that arising could be gotten around. NFTs specifically (though wider crypto currency) is arguably the form of investment causing the most conversation and issue within esports right now, it’s volatile, known for having large amounts of scams surrounding it, and out of all these forms of investments its known for causing damage to the real world which when it comes to the environment is a pressing issue – and one that we can’t bury our heads in the sand for. The simplest solution here, is to keep NFTs out of esports. Don’t invest in them, don’t let orgs bring in NFT programmes and memberships, and if orgs ask for feedback on the idea, tell them to discontinue it. Although Fnatic’s programme is still running, we’ve already seen how G2’s came to a dramatic and costly end, NFTs aren’t needed in esports right now – and especially not while they are so volatile. As for the other non-crypto methods of investment, that is more down to individual awareness, orgs can be open about their investments, and the same for esports franchise companies, but the realistic solution is for the individual looking to invest to do heavy amounts of research. Research is the realistic way to improve the risk factor for investors, and combined with industry knowledge, I'm sure we can all agree we’d like to hope that would save any further issues. Especially as investments are fundamentally what keeps many orgs afloat when prize money isn’t coming in and is also how orgs rise to be in a position to win that prize money in the first place and what start up esports franchises to be used to maximum potential in the future.
Conclusion time, this was a blog I was nervous to write about as I am no financier in the making and I do not pretend to understand the stock market in complex levels of detail, but having seen more and more advertising about esports investment, it felt like an interesting topic to research and consider the full implications of. So that's all I have for this blog, hope you enjoyed it and found this discussion topic to be an interesting one.
Thanks for reading, hope you enjoyed it, see you on the next blog!
Byeeeeeeee ʕ •ᴥ•ʔ
Notable sources of information –
The Verge – NFTs Explained
G2 NFT Partner Twitter Announcement 2021 –
Academy Moralis – What is Bondly
PC Gamer G2 Sues NFT Organisation for 525 Million Dollars
NME G2 Esports Files Lawsuit Against Bondly Over Botched NFT Deal
Fnatic NFT Membership Programme Twitter Announcement (sign up reminder post) 2022
Fnatic Membership (NFT programme)
Fnatic NFT Membership Reddit Thread
The Esports Business Journal Fnatic CEO NFT Membership Programme Interview
Bankless Times Bitcoin Popular Among Esports Fans in the UK
Dot Esports TSM Crypto Exchange Deal
Valhallan (Esports Arena Franchise)
FranchiseWire 6 things to Know About Esports Franchises
Esports News UK – Insomnia i69 Franchising Esports and Future of Leagues
EsportsLane Esports Franchises
Fnatic Crowdcube Crowdfunding 2020
BBC Excel Esports Fight For First Episode 1 –
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