The Realities of Financing an eSports Team

The Realities of Financing an eSports Team

August 10, 2016
in Category: Articles
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The Realities of Financing an eSports Team

We have spent a lot of time talking about the South African scene needing more cash in order to grow, but we’ve never really explained why. This week we chatted to MSI’s Miles ‘B4d R0b0t’ Regenass about the actual costs involved in running an eSports organisation.

There is a whole lot more to keeping a team above water than many people realise, before we even start talking about player salaries or gaming houses. From travel and accommodation expenses to feeding the players and making sure all their equipment arrives undamaged and on time, it’s not just rocking up at a LAN with a 2L coke and a polony gatsby, and playing some games.

What’s the problem you ask? There are plenty of cheap flight options in South Africa and there’s cheap accommodation if you book well in advance, you say?

Well, while you aren’t wrong, as always things aren’t that simple. Before any LAN event there will be online qualifiers, so teams often don’t know they need to book flights and a place to stay in Cape Town or Johannesburg until a couple of weeks before the event.

If we asked you how much money a local eSports team would need to run at full capacity, not including player salaries, what would you say? Because Miles’ answer was a bit of an eye-opener for us.

“You need more than you think. My honest opinion, before salaries, I think teams should be getting between R50,000 and R100,000 a month to cover their costs. If it was R50,000 a month, they could travel to one event a month and they would have R10,000 for food, drink and stuff. You’d be surprised how quickly you can go through that kind of money with a team of five guys over five days.”

You’re right, we are surprised.

“If you take five guys from the Cape and bring them up to Joburg, on a bad weekend where flights are expensive, that can be R40,000.”

But I mean it’s chilled, MSI Global reported consolidated revenue of $2.7billion in 2014, R50,000 is like $17 at the current exchange rate, right? Wrong.

“Everybody has this belief that MSI has millions and millions of dollars to spend. And while they do in the world, their strategy is very much based on how many sales they generate in the region.

 

I don’t think sales are big enough in this region for all these different technology brands to support these teams at the level they need to be supported.

 

We’ve set a yearly budget, which I think we were already over in May.”

It sounds pretty bleak, but fear not, Miles has a plan.

“I think now is the time to start looking for partners that are outside of gaming. Obviously the standard route is, ‘We’re a gaming team, so let’s get sponsored by a peripheral brand, like Roccat or Logitech or SteelSeries.’

 

Teams need money coming in, and I believe that needs to come from outside of organisations or vendors that produce gaming products. We all want BenQ on our shirts, but BenQ only sell so many monitors in the region. They just don’t have the money. But who possibly does? Volkswagen? Ford? A soft drink company? Monster does really well here. Red Bull does really well here. There’s other energy drink companies.”

There is also a fantastic opportunity to get the global side of brands on board as more and more South African teams start qualifying for trips overseas because they will be gaining exposure on an international scale, but there is definitely a need to get more non-traditional brands on board locally in order to grow the scene enough to earn those trips to Europe.

It’s always easy to blame brands for not putting enough into local eSports – the big, bad money men. It’s obviously their fault. They’re just greedy and could easily afford to sponsor more teams if they wanted to, but they’d prefer another Ferrari instead…

However, let’s break it down by sending an example MGO from Cape Town, let’s call them AWPsie Daisies, up to Johannesburg for a LAN.

“It’s 15 okes, and you’re all in Cape Town. So that’s 15 x R3,500 in flights. That’s the one fee. And then there’s accommodation. Let’s say we put you in a backpackers or a guesthouse at R250 a head x 15. Let’s put that amount of money aside. And then you possibly need some money for food and drink. So let’s put that aside. And then you want hardware. I have gaming notebooks. If I gave you the cheapest one I had at R15,000 x 15. Let’s put that aside. Let’s add all that money up. What you’re actually asking me for to put my name on your shirt is hundreds of thousands of rand.”

R281,250 to be exact. And that’s assuming it’s one night and you don’t want to eat or drink any food, which, to be honest, we’ve all done at a LAN but isn’t preferable behaviour for a team trying to win a tournament and impress a sponsor. When you think about what else brands can do with that kind of money, it almost seems silly any of them sponsor teams at all.

“There’s no logic. And it’s not feasible. And I know it sounds like I’m being really rude and aggressive, but what they want for their team, that isn’t even going to get on a podium, is what I would spend on the whole quarter on print and social media, and online advertising. In three months. And they want it for one weekend.”

Which, and we’re going to pretend this happened by accident, brings us nicely round to exactly why we are so adamant about getting more South Africans to watch local teams and events.

Apart from what the players can do to convince brands to back them (Pro tip: Look out for our article next week), viewership numbers and engagement from fans is one of the only things that will convince companies local eSports are worth sinking their Randelas into.

For years South African gamers have shown how dedicated and hardworking they are, with little to no financial return. Let’s start giving them the support they deserve so that doesn’t have to be the case any longer.

glhf.

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9 comments

  1. axtremes

    I’d say the key to the whole equation is sufficiently impressive broadcast numbers so that the sponsor feels they are getting a good return on their marketing investment. And tying into that point, extremely high standards of broadcast quality and quality of content – knowledgeable and engaging casters, panel analysts and interviews. We can’t make excuses for it being SA. International brands want value for their investment and that means the whole local eSports industry needs to up their game and start attracting bigger viewership and delivering the quality the fans deserve.

    1. GLHF (author)

      You’re 100% right. We need to up our production value, as people like to say. With an improvement in broadcasting quality, we’ll hopefully see an increase in the number of local people watching local streams/broadcasts. Evetech mentioned similar things to us, hopefully we’ll see some world class broadcasting from their new studio.

      1. axtremes

        Thanks guys. Really appreciate the kind words. I think ECL will do a lot to tell us where we are at in SA with regards to production quality. It seems like the guys are aiming for a big jump in quality versus what has been seen before.

  2. Danny

    Looking at 2016, this is a year were there was and still is significant improvements, especially if it comes to tournaments. This year is a HUGE difference. Together with this, games are regular broadcast … OK … they still need some work … actually a lot of work. However, one drawback is that viewers are not always aware when and where they can watch the streams … and this is one of the BIG problems. You have to advertise when, where and who is broadcasting. Also few teams are geared for marketing. Only Bravado does it effectively.

    On the other hand,….. previously it was always Bravado Bravado … This year a lot of the teams are more competitive and it spices up the scene.

    Yes, viewers are still few and exposure is slowing climbing. The sponsers will get their worth for their buck and it is a good time to jump in early and secure a decent team.

    BTW … a team such as Carbon has no sponser. How do they do it? You numbers should be spread over several events and over several sponsers and you do not fork out a laptop each time .. and flight tickets do not cost that much … and not all are staying in one city, the full MGO team does not always attend …..and NO …. it does not cost that much. What I see is that teams have to look for sponsers. Maybe it is time that sponsers should evaluate the scene and approach the teams. There is some good advertisement to be made. Given the amount of tournaments and looking at the prize money … there is definitely some money available for investment and also the willingness to do so.

    1. GLHF (author)

      The example was a worst case scenario, when notice is late, the team needs gear and the tickets are expensive. It could cost that much. Miles has had people asking for that.

      As for brands approaching teams, that’s all well and good. But then all brands are going to approach Bravado, Aperture, Carbon and the other top teams who are winning and active on social media. If you have a smaller team that isn’t in the Telkom DGL Masters, you still want a sponsor. But why should a brand give you money if they are not going to get any exposure from it? It doesn’t make financial sense. That’s why a team needs to approach a brand and tell them what they can get in return for their investment.

  3. Pingback: SA Gaming News Wrap

  4. Danny

    I think you misunderstood me. This is business and I do understand that sponsers need to get a return on their investment.

    What do the teams have to sell? Their skill and success. So naturally the top teams will have more to sell and will thus get the sponsers.The lower teams will have to fight and try to earn their place in the sun. In business that is how it works.You start small and invest in yourself. After you have proven yourself, then you have something to sell and your business/brand becomes something worth. Unless you want to be politically correct and allow some one to earn a huge salary without working for it just because they are at the lower end of the gaming pool, thus requesting that sponsers should finance these teams instead of the top tier teams, is naive.

    What I do say or imply, is that even the top tier teams are not even sponsered and that is what I call “shame”. The only one thatis seriously sponsered is Bravado, because they were always the top team. But no more ….. What is now happening is that the top tier teams are sponsered by the tournament organizers for flights and accommodation plus prizes.

    The question what I also ask myself is …. do sponsers, or advertisers, outside the gaming scene even understand the gaming scene, its scope, etc. Energade, etc. is not a drink used by gamers. The gaming scene is relative small and thus high value products will feature best unless they are similar to Telkom, ISP, etc.

    What I am saying really is that the gaming scene has exploded in 2016, with the most support and investment coming from tournament organizers and their sponsers. What is required is that other sponsers must come forward now and invest in the individual teams. With international exposure the teams now need to be significantly supported. Think about how many tournaments are presently available for South Africa to play international…. hell … I think 5 … if I count the world championship. (which the SB lost against Tunisie)

    1. GLHF (author)

      You are right, this has been a big year for local eSports. And it does present sponsors with an opportunity to get involved and start mutually beneficial relationships with teams. But as you say, the sponsors don’t know much about eSports, so it’s up to the teams to go out there and tell them. From what we’ve heard, Bravado’s management team works really, really hard to get the team sponsors. Maybe the other teams need to follow their example?

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