By Dan Ciccone, SVP, Managing Director at REV/XP
As we all watched “rostermania” unfold leading up to the Call of Duty World League roster lock about a month ago, I was intrigued by the rumors and speculation put out by fans and endemic press outlets as to why events were unfolding the way that they were and why so many announcements came so late. As REV/XP was initially launched to help pro teams secure and better monetize their sponsorships, we now represent several pro esports players and personalities to assist with contract negotiations and individual endorsements. Thus, I wanted to share some firsthand insight and present some conclusions as to why individual pro players need representation.
Before I offer my analysis, however, I want to communicate upfront that I am not looking to place blame on pro orgs, leagues, or publishers for the state of player affairs, nor do I want to imply that these parties are self-serving and do not have the best interests of the players in mind.
So why all the confusion? Why the delays? Well, many issues exist because there is this notion of “this is how we’ve always done things in esports.” Part of what makes the space special is how close the inner circle is in professional esports. Many deals are discussed and agreed to over lunch or a beer. It’s great, but times have changed. While convenient, this laissez faire approach ignores the fact that professional esports has changed dramatically over the past 5 years. Many player/org issues that have arisen are primarily due to the fact that the professional esports scene has evolved more rapidly over the past 24 months than it has in the past 10 years. While it is great to see esports now at the forefront of the entertainment industry, it is coming at a rapid pace and with a price. The price is more pressure on orgs to generate revenue for investors and to be accepted by publishers to compete in franchised leagues like OWL and the LCS. So while we have seen much “outside investment” in esports over the last 18 months, many of the orgs are struggling to keep up and evolve with the financial demands of professional esports without updating/altering player contracts to coincide with these demands. This is due to a number of reasons:
- While many games have become more organized and offer more structure with new schedules and rules, many leagues now require orgs to spend millions of dollars to be recognized by the publishers for official slots to compete – as an example, a few years ago, any team on the planet had a shot at becoming champs in the LCS. Now, it’s going to set you back at least $20 million for a slot in the league.
- Traditional sports franchises are buying existing esports orgs and realizing that their traditional sports business model does not complement, and cannot replace, the inherent structural differences between the operations of an esports organization and a traditional pro sports team.
- VC companies are buying orgs – people who know little to nothing about esports are buying into the space as an “investment” and treating the space like a commodity that will be flipped in a short amount of time for a nice profit. There is a sense that because esports is inherently digital, there are all of these untapped revenue streams and that’s just not the case.
- New sponsor interest has increased due to coverage by traditional press outlets which legitimizes and influences non-endemics to get more involved. Most pro players do not share in team sponsorship investment, so while millions of dollars flow into orgs from investors and sponsors, it is not necessarily translating into increased salaries for the pro players.
- Demands on the player have increased substantially. In the past, players would subsidize their salaries with revenue from YouTube and Twitch. Unfortunately, to the previous point, many org sponsor deliverables are placed on the backs of their pro players who have many more demands on their time to perform their pro duties – more structured schedules, more tournaments and more traveling means that beyond their salaries and potential prize earnings, pro players have less time to create their own content and monetize their own social followings. Salaries have not kept pace with the growth of viewership and investment and many players are seen as a marketing tool or as a means for an org to get more social followers vs. being treated like a pro player.
- There are more lawyers involved – many on the corporate side and too few on the players’ side. This leads to confusion over contracts, buyouts, and deadlines which had a major impact on this past round of rostermania.
- There is no transitional period for pro esports players the way that there is in traditional sports. Many 18, 19, and 20 year old men and women go right from high school into a professional esports career. There is no system in place to prepare them for the pros and no real structure for drafting players. The easy fix here is for leagues to instill some sort of dedicated drafting and bargaining period forcing orgs and players to come to terms within specified periods and having leagues insure proper documentation is in place before individuals can play professionally.
- Finally, and most concisely, many pro players do not know who to turn to for help with their contracts and blindly sign agreements.
So back to my opening statement as to why this post seems so late relative to the timing of rostermania. Quite simply, economic hardships exist today that did not exist 18 months ago and many pro players that we represent had contracts that were a mess. It was a necessity to prematurely announce moves ahead of league deadlines, with some contracts taking months (yes, months), to negotiate. Why did it take months? Again, economics have changed, new entities are coming into the space, many contract clauses are outdated or not even applicable, and player contract deliverables escalated dramatically at a time when the pros have more demands on their time from the leagues and publishers. That being said, while there was frustration on both sides, I can honestly say that negotiations never became contentious and (for the most part) everyone was approaching the exercise as a win-win….yet one more reason why I love the esports industry.
In closing, we launched REV/XP well-ahead of our competitors to create a fair value exchange between sponsors and pro teams – we’re now taking that model to individual pros and personalities in esports to insure that they get the recognition and security they deserve during (and after) their careers. Players need a voice…a loud voice, but a reasonable voice. When pro players are not distracted and confused by what the obligations and options are in their contracts, and when they are afforded necessities at events, everyone wins…orgs, publishers, event organizers, players, sponsors, and the fans.
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