Key Questions Answered Regarding esport Teams

Article 2: Esport Teams

Following on from my ‘Five esports basics’ article (link here), the next in the series is one which excites a lot of people. It’s one where the passion of the fan truly comes through – the stories, the drama...the esports teams. 

Some of you may be thinking “what?!? There’s such a thing as esports teams? I don’t get it”. Fear not, yes it’s true, esports teams exist, and I’m here to guide you through this new and unfamiliar world by answering some of the more common questions I receive from brands and agencies wanting to learn more about esports teams.

What is an esports team?

To help you get your head around it, let’s consider Manchester United – a football team that most people are familiar with. Now imagine if Manchester United played football, cricket, rugby, and basketball. This is what an esports team does, but instead of playing football, cricket, rugby, or basketball, they play League of Legends, FIFA, Counter Strike, DOTA2, and so on. 

Esports teams are set up much like a traditional sports rights holder in their professional structures. Continuing with the Manchester United example, instead of having a Director of Football, an esports team will have a Chief Gaming Officer, and instead of a Football Manager/Coach they have an Esports Manager/Coach. I’m sure you get the picture…

How do esports teams make money?

The traditional way of an esports team making money was simply by winning tournaments and sponsorship. However, as the industry has matured so have the revenue streams of teams.

It’s becoming more competitive than ever to win leagues and tournaments and gain access to their lucrative prize pools, just as it's more competitive than ever to gain access to the purse strings of brands for sponsorship. This challenge resulted in innovation between the orgs, where new business models were formed around areas such as merchandise & apparel, physical/digital products or fan engagement and content.

New teams such as 100 Thieves (valued at $190m by Forbes, 2020) really started taking these alternative models to the next level. By creating lifestyle brands, they managed to prioritise the monetisation of apparel & merch, content and fan engagement over traditional success by entertaining fans.

Proving that you don’t need to be the best team ‘on stage’ to succeed.

What about esports players and talent?

A big part of any esports team is its talent. Without talent the team dies. With the right talent the team thrives. Much like in traditional sport the talent has a lot of power. Dealing with young millionaires – and many of them teenagers – is difficult.

Esports professionals should be viewed as athletes (let’s not get into the “is esports a proper sport?” debate today!). They receive base salaries which can be over a million pounds a year. They have individual sponsorship(s), train up to 14 hours a day, six days a week. They live in professional training facilities with coaching staff and a complex performance infrastructure, which varies depending on the title they play, the team they are part of and several other factors. Make no mistake, teams view these players as assets in their own right.

Are there transfer and loan markets like in traditional sport?

Yes! There are loan markets and transfer markets between teams for talent. In some cases, the transfer fees exceed $1m. There are even unofficial transfer windows in some games such as DOTA2 where, after the biggest tournament called ‘The International (TI)’, a lot of players transfer to new teams. 

Do fans love the team or the players more? Where’s their allegiance? 

To answer this question it’s important to first explain a bit more about the audience and their attitudes. The esports community see themselves as global citizens. They don’t follow teams typically based on geographic affiliation. Occasionally there is regional affiliation where, for example, in the League of Legends World Championships fans and teams will cheer on their respective European or North American teams. But it’s very rarely – if ever – an England vs USA conversation. 

The fans therefore are unique in their attitude and outlook. Because they don’t have local connections that bound them into tribes, they tend to be less ‘loyal’ to an individual team. Instead, they tend to follow a player more than a team.

This is the trend but there are of course exceptions (and this is where it gets more complex). An esports team will always have a hardcore fanbase that follows them no matter what. But it’s the player the fan will typically support. This means the fan will be cheering for whichever team their favourite player is on. So in a sense, a fan is likely to support many teams over the years. It’s like when Cristiano Ronaldo left Real Madrid to join Juventus. What happened? A load of fans followed him. Real Madrid lost millions of fans on social media whilst Juventus gained millions. It’s the same principle.

Who owns the teams?

There are a wide range of team owners in esports with each property having its own portfolio of investors. Historically, teams were owned by a single individual, small group of friends or family. But as the industry has grown, so too have the financial demands. This means that most teams have to look outwards for investment. As a result, we’ve seen some big names enter the space on the investment front. At Fnatic they had the Raptor Group (who also owned AS Roma at the time), Nick Fry (ex-Mercedes F1 CEO and co-owner of Ross Brawn GP) plus one of the owners of the Russian Facebook platform, VK, among family offices and others. 

With this investment comes new challenges for teams – namely profitability and sustainability. In the early 2000’s the Premier League teams saw an increase in broadcast revenue but failed to convert this into increased profits. This resulted in teams focusing on new and innovative strategies such as expansion into hospitality or their academies seeing an influx of new investment. 

I would argue that esports teams today are facing similar challenges as the football clubs did in the early 2000’s. Due to an increase in player fees, salaries and operational costs, it’s still very difficult to offset growing expenditure and increase the margin of profitability – if at all! On top of this business challenge, on a professional playing level, it’s more competitive than ever to win tournaments and gain access to their big prize pools.

This all results in unique challenges that each team is facing on some level. Some teams are looking to expand their global fanbase and open new offices in new regions, others are looking to spend more on better talent to win, while others are looking at new trends and titles to gain a first mover advantage. It’s exciting to see the different approaches play out, let’s see who wins.

This only scratches the surface but hopefully I’ve covered some of the most relevant frequently asked questions.  

Let me know if you have any other questions and I’d be happy to provide an answer. What do you think of esports teams? Valuable asset that can be utilised for sponsorship? Or complex and daunting?

Keen to hear your thoughts! Thank you for reading.

Craig