Posted Jul 24, 2022, 9:54 AM
It is a day that will go down in the financial history of esports. On Wednesday, the American structure FaZe Clan entered Wall Street: an operation, mounted via a SPAC, which valued it at 725 million dollars. Unheard of in the stock market history of e-sports clubs that continue to grow in power around the world.
Emerging in fourth place in the world of e-sport structures, in terms of valuation, in the ranking compiled by « Forbes », FaZe Clan is not only defined as a professional e-sport club but more broadly as a structure boxing in the entertainment category. The group has therefore opted for a very hybrid model mixing professional e-sports players, as well as influencers and streamers, but also celebrities like Snoop Dog. A way to broaden its spectrum in terms of audiences, advertisers, and to diversify its income.
In France, a structure has been talked about a lot for several months and has also opted for a mixed model: Karmine Corp, also known as KCorp. At the end of June, the group filled the Accor Arena in Paris, bringing together 12,000 people who came to watch live matches. Two renowned influencers are notably behind this company. Kamel “Kameto” Kebir and his one and a half million subscribers on Twitch and Amine “Prime” Mekri who has a similar fan base on YouTube. “Having content creators reach out to a community helps strengthen KCorp’s storytelling. We want to consolidate these fans around the brand”, underlines Souleymane Wague, one of the co-founders.
Profitability already achieved by KCorp
Created at the end of 2020, the team has also been able to quickly build a track record in professional e-sport, in particular on the game League of Legends, one of the two benchmark franchises in e-sport with Counter Strike. KCorp’s flagship professional team plays in the French League (LFL) of League of Legends and hit a big blow in the transfer market at the end of 2021 by enlisting the Swedish Martin « Rekkles » Larsson, a League star of Legends. Profitable, the KCorp plans to generate up to 4 million euros in revenue in 2022. « It’s 10% of our potential », assures « Prime ».
Today, almost all of Karmine Corp’s turnover is generated through merchandising (the group has sold 40,000 jerseys in the last 18 months) and sponsorship (which includes a recently signed partnership with Orange). Eventually, the group would like to join the League of Legends European Championship (LEC). But places are expensive in this closed league operating on the model of the paying franchise, like the NBA. A year ago, the BDS organization bought the guaranteed place (the « slot ») in the LEC from the German football club Schalke 04, for 26.5 million euros.
For now, only one French club is present in this championship: Vitality, a big name in French e-sport. Launched in 2013 and employing 115 employees (including around thirty “pro” players), this firm has a model that more closely replicates that of traditional professional sports clubs. « We focus on the competitions that matter and on the composition of the most competitive teams possible », details Nicolas Maurer, CEO of Vitality. “We are involved at the international level in eight games in a large number of competitions and we have three performance centers in Paris, Berlin and Mumbai”.
“Teams cannot rely on broadcast rights”
At the start of the year, Vitality raised 50 million euros – its largest funding round to date – which it will invest over three years. A windfall that allowed him to strengthen his team aligned with Counter Strike, but also to clear the losses since the group does not expect to be profitable before the end of 2024. « The majority of teams are not profitable, especially those focused on competition, between the costs of « slots », player transfers, staff and high-level infrastructure », notes Antoine Sopetti, deputy general manager of Sporsora. Even FaZe Clan – which expects to generate $90 million in revenue in 2022 – has warned Wall Street that its operating loss will approach $20 million.
“Teams cannot count on broadcasting rights because e-sport still relies on free broadcasting, which is a real weakness for their economic model”, underlines Bertrand Amar, director of esports at Webedia. Even though more than 260 million people watch, at least once a month, an esports competition in the world, according to Newzoo. A paradigm little tasted by the Stock Exchange which has not been enthusiastic about the IPOs of e-sport structures (Guild Esports, Astralis) which preceded that of FaZe Clan in recent years.
260 million people
« E-sport under-exploits certain sources of income such as the sale of virtual content within games and everything that revolves around the web3 », believes Antoine Sopetti. A certain Vitality has also signed a three-year partnership with the Tezos blockchain at the start of the year. « We are developing with them a community platform centered on the fan experience », explains Nicolas Maurer. Experimentation and research into new economic models are only just beginning for e-sport clubs.