Why the esports pragmatist is taking center stage as esports winter sets in

Why the esports pragmatist is taking center stage as esports winter sets in

August 16, 2023  •  5 min read  •  By Alexander Lee

Ivy Liu

For a while, all esports industry news was good news — but as esports winter crested the horizon over the past year, cynicism, not hype, became the industry’s prevailing mood.

In 2023, esports industry leaders are looking to thread the needle between these extremes, adopting a more pragmatic tone as they attempt to steer the industry toward profitability by acknowledging both its strengths and weaknesses.

As brand spending and venture capital slows down in esports, some observers have begun to take any kind of news as a sign of the industry’s imminent collapse. There was NRG’s April acquisition of CLG, which was decried as a sign of doom before company leaders explained the logic behind the deal; when the Olympics announced an esports event in March, much of the online esports community mocked the announcement for seemingly missing the mark.

Most recently, Sentinels’ equity crowdfunding initiative set off alarm bells among industry observers after the organization disclosed that it currently has enough runway to operate for only two or three months without additional cash infusions. 

Sentinels are spending nearly $700K a month on player and content creator salaries

They say if they don’t successfully crowdfund, they are only able to operate for 2-3 months…which only extends to 4-5 months if they do. pic.twitter.com/tsTLwRWv1g

— Hunter (@HUN2R) August 8, 2023

A balanced tone

Amid the gaggle of voices commenting on Sentinels’ finances, a new type of perspective cut through some of the noise: that of the esports pragmatist. Two of the most highly engaged responses to the tweet above, which highlights Sentinels’ precarious situation, came from esports executives pushing back against some of the cynicism. One of the top comments came from Gen.G CEO Arnold Hur, who tweeted that “this is part of the new normal in esports. Every org is trying to do new things to stay alive.”

Hur’s comments reflect the Gen.G founder’s generally pragmatic approach to esports. Over the past year, he’s gained a following for his honest takes on the esports industry’s many challenges — takes that are consistently undergirded by Hur’s confidence in the long-term viability of esports as a product. 

Hur’s moderate stance, acknowledging esports’ issues while trumpeting its benefits, has become a model for a new type of esports executive less focused on the flashy, hype-induced side of competitive gaming. Under Hur’s leadership, Gen.G has moved away from the traditional esports business model, instead leaning into its role as an agency connecting brands with the gaming audience

“In an industry as public as this one, I think it’s important to have the right level of transparency with core fans, and view them as not just a customer but a key stakeholder,” Hur told Digiday. “Though there are relatively few certainties in this industry, I can guarantee we will never find a solution if fans don’t want to participate in it. As we make big changes to the sport that our fans love, we should endeavor to at least explain our thought process behind them.”

Another of the most-engaged responses to Sentinels’ struggles was that of Marco Mereu, the CEO of the esports organization M80. In a tweet, Mereu reminded readers that Sentinels’ disclosures did not mean the organization didn’t have ample pathways to continue operating after running through its current war chest. “They could and probably do have numerous sources to access to continue to operate,” he wrote.

Mereu told Digiday that his relatively optimistic view of the Sentinels kerfuffle was informed by his own work leading esports organizations such as M80 and XSET. Sentinels’ largest monthly expenditure is player salaries, a number that Mereu said is already on its way down across the industry.

“In esports, your salaries are generally 40 percent, or potentially even more, of your overhead,” Mereu said. “The cost of that is beginning to go down, and will continue to go down over the rest of the year, and into next year, until we get through this correction.”

Time to rebuild

As the esports industry contracted over the past year, it was natural for cynical views of the space to rise to the top. The esports pragmatist agrees with many of the common criticisms of the industry — its overreliance on brand partnership revenue, its inflated player salaries, its toxic fanbase issues — but remains confident in the value of the broader gaming community, and esports organizations’ ability to reach casual gamers. 

“I think everyone’s kind of sprinting towards doom and gloom because it gets clicks and likes, but there’s a lot of positives in the industry,” said Alex Gonzalez, head of the esports organization Luminosity Gaming. “Look, ‘Rocket League’ just broke their viewership record. The FGC [fighting game community] is having a renaissance. And there’s a lot of nuance to the Kick situation, but more streaming competition is always great.”

Instead of feeling burned by the esports industry’s struggles, more pragmatic esports executives see esports winter as an opportunity to build and perhaps steal market share from older and more competitively focused orgs. These organizations, such as M80 and XSET, see many esports organizations’ competitive teams as more of a liability than an asset.

“XSET, from day one, did not look at ourselves as an esports org like 99 percent of the groups out there,” said XSET CEO Greg Selkoe. “We are a gaming lifestyle brand and community; while we have esports, it is one part of the larger spectrum of gaming culture we serve.”

Positive signs notwithstanding, esports pragmatism does not equate to a denial of all of the esports industry’s problems. Esports winter is real, and many companies are sure to fall before the industry can become truly sustainable. 

But both industry leaders and industry critics might be best served to approach esports with a pragmatic view of the industry’s broader struggles — not the doom-and-gloom response to all industry news that has become somewhat common over the past year.

“It’s not optimism; it’s just seeing the facts as they are from the inside,” said Axel Arizzi, CMO of the Italian esports org Dsyre. “I think I’m being realistic.”

https://digiday.com/?p=514522

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