One of the biggest issues with unprecedented growth we’ve seen in the past few years is that the backbone of our industry is still extremely fragile. Most teams are barely profitable, with quite a few operating at a loss. And there still aren’t enough non-endemic brands involved (those which have larger marketing budgets) to offset the rising demands placed on teams. While this is more of an issue in Europe than North America, it’s still an issue that affects teams globally. Expectations on teams have risen significantly — they must develop more significant infrastructure/support than ever before, need to pay their players more (in some cases beyond what they can afford). All this just to stay competitive. To stay alive.

Gaming, Tech, Media & Sports Executives Launch eSports Franchise “Immortals”

With the introduction of angels, conglomerates and venture capital — player salaries have increase by almost 200%. I’m a huge advocate of this, as it’s extremely good for the talent, but we also have to be mindful of what that means for the industry as a whole. Investors are wisely seeing eSports as a great opportunity and some are getting in early. And so, we see a massive land grab for market share, which turns industry founders firmly against each other in the fight to maintain relevance.

The large influx of investment coming into the space is through capital injection or acquisition, and these events tend to snowball. The highly publicised moves by Turner and WME in creating the ELEAGUE or the tournament organiser consolidation by MTG in Europe piqued the interest of prominent individual and institutional investors around the globe — all this, as the level of interest in traditional sports is fading as kids are more inclined to go digital.

Meanwhile, eSports is experiencing compound annual growth in some areas in excess of 50%. In some ways, the barrier to entry is still relatively low, but it is increasing every 6 months. For example, an LCS slot in 2013 was worth about $80,000; 2014: $400,000; and 2015: $800k-$1.2m. These prices are inflated in the present market, but could be a steal in the near future, especially if the LCS is to franchise. If that were to happen, teams would no longer face the uncertainty of relegation in 6 months, which is a much more attractive proposition for brands and investors. The only thing the teams need to do, specifically the newer ones is survive in order to retain their position within it.

Mark Cuban, serial entrepreneur and owner of the Dallas Mavericks at the Intel Extreme Masters San Jose (2015)

I am less concerned about the North American market as the access to capital here is much easier, not only from investors, but also from endorsements and broadcasting deals. A European organisation like Fnatic has to negotiate with regional budgets of Nike in the UK, France and Germany. In contrast, TSM can speak to a representative in the US that has access to a much larger budget. This easy capital allows North America to increase salaries and, in turn, provide better infrastructure, while European counterparts struggle to keep up. I would expect that European teams will start taking on venture capital and try to monetise more significantly through merchandising over the coming year.