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The Current State of the Esports Industry
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The esports industry is still facing challenges. According to industry leaders, players, and executives interviewed by Decrypt’s GG, everyone in the esports sector is fighting for survival. The COVID-19 pandemic halted live events in 2020, leading to a temporary pause in the industry’s growth. Despite this, esports continued to grow as people sought entertainment while staying at home.
However, leagues and events have faced significant obstacles. For example, FaZe Clan was sold for $16 million last month after CEO Lee Trink’s departure, and TSM no longer has FTX sponsorship due to the exchange’s collapse in November 2022.
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Pandemic Bubbles and Revenue Woes
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Before the pandemic, concerns were raised about the esports industry existing in an overhyped bubble. Some esports organizations were heavily reliant on advertisers to support their budgets. Former Evil Geniuses CEO Peter Dager described how successful his organization was but revealed that revenue was close to zero.
Esports player Andy “Smoothie” Ta mentioned that the vast majority of League of Legends teams are not profitable from esports. According to Ta, “In terms of pure business—esports currently—there isn’t really like a winning model.”
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Venture Capital Struggles
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Dager pointed out that esports attracted more “capitalistic actors” over time, leading to financial difficulties. He stated that investors put money into businesses without revenues due to hype and attention from VCs. This led to a culture where fans did not spend money on esports due to years of freebies.
Glover also highlighted VC involvement as a critical factor, mentioning that venture capital investments were made without a clear business model.
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Widespread Layoffs
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Several major esports organizations have experienced layoffs due to economic challenges. Evil Geniuses laid off over 20 employees earlier this month. Similarly, FaZe Clan, 100 Thieves, Esports Engine, TSM, and CLG have also laid off staff this year.
Despite these layoffs and financial challenges faced by many organizations in the industry, there are some who are focused on ensuring long-term financial sustainability rather than short-term gains.
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Hot Take: The Future of Esports
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The future of esports remains uncertain as it continues its fight for survival amidst revenue woes and widespread layoffs within various organizations. As the industry grapples with its current state and seeks ways to generate different forms of revenue beyond relying solely on fans’ support, what lies ahead for esports remains unknown. However, it is evident that changes need to be made in order for the industry to adapt and thrive in the long run.
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