Bonjour, my name is Romain Bigeard and I'm the team manager for Unicorns of Love. Unicorns of Love is a pro-gaming organization based in Berlin, and 5 of our employees have a really weird job: they are pro-gamers. Meaning they earn money by playing video-games.
What is the business model of a pro team?
A team like Unicorns of Love has an income around half a million to a million per year. This money is mostly coming from Riot, Sponsors, a bit of merchandising (we are selling stuff online).
We are not getting money from prize pool, that's a fake idea some people have about esport is you are earning money by winning tournaments. Yes and no. You are winning tournament so it makes you famous, but the money you're winning through those tournaments will most of the time be for the players and not really for the team. So forget about the prize pool.
So that's more or less how we are getting the money.
How are we spending the money?
At Unicorns of Love, for example, we have 5 players with 5 different nationalities, which are employees, we have to pay them. We have a coach in charge of the game and what's happening in-game.
We also have a manager, which is in charge of everyone outside of the game, so it's me for example for Unicorns of Love. My job is basically to make sure we have money, we are good on social media, they sleep well, they eat well, they train, we do the administrative stuff, logistic around events, when do we leave, where do we sleep, stuff like this.
You also have a CEO, in our company it's a bit specific because the CEO is actually the Dad of Sheepy (the coach), so we are really a family-based company.
The more and more competitive esport is getting, the more you need people. You are going to need lawyers for contracts, social media experts, someone in charge of videos - someone in charge of the content, you are going to need a cook maybe, you are going to need a lot of different stuff. And it helps teams to actually take better care of players.
This is why we need more and more staff to take better care of our players, so we need more money to pay that. If you go back to our table, you can see: we could get more money from Riot, from sponsors, or from merchandising. Merchandising will only get bigger if you keep winning because you get exposure.
So, most logically the money is going to come from either Riot or sponsors.
The obvious answer would be to get more money from sponsors. The problem is we have a limited reach in esports, so sponsors money cannot reach millions. To understand that we are going to dive a bit into Marketing
A marketing department into a company is usually here to create value on your product. You are going to try to put your product under the lights so people are interested and are going to come and buy it. You are basically going to turn the money from your marketing department into reach, into people. You are going to spread awareness around your product.
Esport actually has a sexy reach because our players are young, our players are between 15 to 20, now the game is starting to be a bit old so I would say 15 to 25, they are mostly male, and there are a lot of them. It's really interesting for brands to be able to talk to you as early as possible about their products.
Talking about sponsors, I see 2 different kind of sponsors into esport.
The first kind are going to be "endemic sponsors," they have been here forever, they were there at the start of esport. It's going to be all the sponsors with stuff connected to a gamer. I'm talking about keyboards, mouse, headsets, computers, screens, chairs, tables, food, drinks, anything you can eat, glasses, software... whatever, this kind of stuff. They have been sponsoring esports for a long time now.
We are not talking about brands the size of Apple or Google, for example, so they have a limited marketing budget. Non-endemic sponsors have a way bigger marketing budget, I'm talking about Coca-cola, or one of the last big known brand who entered esport was Gilette for example, sponsoring ESL/IEM.
We have a slow transition from endemic to non-endemic and this bump of money is definitely going to help teams but for the long long term, sponsoring cannot be our business model backbone, it's not possible
It does not matter if you are an endemic sponsor or a non-endemic sponsor, I don’t believe you can be the main income to finance an esport team.
Esport teams are not able to handle millions of euros of sponsoring. If tomorrow, RedBull is coming to Unicorns of Love and give us 10 millions € of sponsoring, I'm actually going to advise them against it, I'm going to say it's a lot of money and we cannot turn this money into enough reach for them.
An esport team is a limited share of the esport reach, because when you aim at this target, this reach I was talking about, the 15-25, they consume movies, music, video games. You have the esport, let's go into esport. You have a couple of games. You have League of Legends, yes, but you also have DotA, Counter-Strike, Hearthstone, Heroes of the Storm. Amongst all them you select League of Legends. And in League of Legends you have to select one region, because you have tournaments in Japan, Korea, Australia, Europe, North America, Brazil, Turkey... everywhere. So you select Europe, and in the 10 best teams you have Unicorns of Love. That was a long journey to explain to you that our reach is limited. Esport is booming, esport is a really really big boom business, still the share of reach we can get as a team is limited.
Europe is more than 20 languages and even more countries linked to it, so when you are selling reach, when you are interested into buying reach, you have differents approaches.
In the US it's kind of easier for a team to sit down around the negotiation table and get money from sponsors. In Europe, let's say I sit with a French sponsor, he's selling a French product so he would like to reach out to French people, so his first question is going to be how big is your French reach, and i'm going to try to explain to him my team is amazing because we have a Russian, we have German, we have 2 Koreans, we have a Spanish...
But at the end of the day we play the European league so you know we talk a bit of French people kind of... but they're not always understand that. It's taking time, and we are doing a better job at the moment to explain to sponsors why our reach is awesome, but it's still easier for NA than for us.
One of the solutions Riot designed/tailored to get some revenue sharing for North America, is turning their league into a franchising system. So at the moment, all the teams in the league are playing the same tournament and if you are bad you have chances to get relegated, demoted. The franchising system is cancelling that. Basically you have to buy your spot in the league, and you're going to stay there. It's a model which works for baseball, basketball, hockey in the US, so sponsors already know how it works. They know if you invest in a franchised team, you're going to work for 1, 2, 3, 4 years with them, so it's way better for sponsors.
While in Europe, with the promotion system, you can be demoted, and basically you're going to lose your sponsors. So it's harder to build trust with sponsors in a non-franchised system. On the other hand, the up and down system creates lot more stories and a lot more drama, because "this team was supposed to qualify and they failed," stuff like this.
What is going to happen to Europe? That's a really good question, and I trust Riot to give us the best answer possible they have. So far they have been unlimitedly committing to esport, so 2018 is going to be a really interesting year - what are they going to do?
The esport department needs to give teams more money, as I explained earlier, teams are growing and we need a sustainable income which can not come from sponsors. So Riot needs to find a way to give us more money.
Let's go in England to check how clubs, football clubs, are actually earning money. So basically they are selling their rights, all the clubs, they give their rights to one company. This company is then going to TV channels, and those TV channels have to buy the rights to have the football clubs streamed on their channels. Those TV channels later on will earn money through advertising, from you (from the reach), and that way you have a sustainable income because the more interesting football is going to be, the more people are going to watch, and the more money is going to come to the team.
If you apply this model to League of Legends, it puts Riot in the center. Riot would be this company taking our rights and selling them to TV channels, which is what they are about to do for 2018. They recently signed a deal with a company called BAMTech, and BAMTech got those rights so they are going to be in charge to sell them.
I think a second way to get money would be actually to get the skin money, but for that you would need internally at Riot to find a way to analyze how much esport is actually impacting League of Legends, and what would happen tomorrow if esport is gone.
The easiest way to make our job easier is actually you, the Reach. The more you are going to talk to people, the more esport is going to have people watching it and listening to it and discussing it.
The dream is going to be for me, or for any other manager, to sit around the negotiation table with a sponsor and the sponsors will have heard already of esports - that's going to be way easier for me to explain what we are doing.
I strongly believe esport is the future of entertainment. Why? Because our population are more and more connected and you have an unlimited ocean of possibilities when you use video game tools to have entertainment and tournaments and fights, for example. So, it's you, basically. Esport needs you, and we need you to talk about esport.