A rather memorable year will draw to a close in a couple of days, which also happens to be my first full year in a writing position at The Esports Observer. My colleague Trent came up with the excellent idea to have each of the full-time TEO writers put together an article highlighting their Top 5 stories of the year.
Looking back at the stories I got to cover throughout the year, it was challenging to select five stories. Still, the stories you’ll find below happen to reflect some of the major esports finance and business trends evolving throughout 2020, a year that was coined by a global pandemic of magnitude humankind last witnessed precisely 100 years ago.
I’m taking this article as an opportunity to step outside my usual number and pattern obsessive writing style. Instead, I’ll share my thoughts on what happened in 2020 based on my Top 5 stories of the year, my approach to writing news and analyzing esports business and finance, and add a couple of personal notes that have influenced my work.
Since this article focuses on my top stories, a couple of general trends developing out of China fell through the cracks because I did not get around to summarize them in a dedicated article. Nevertheless, I’ll point out two developing storylines as an honorable mention.
Riot Games parent Tencent, which is arguably the most powerful company in the esports ecosystem, pushed the two largest Chinese esports and gaming live-streaming platforms, Huya and DouYu, to consider a merger. Since the idea was first put forward, the boards of directors of both streaming companies agreed on terms for a business combination, which would see DouYu merged into Huya and Tencent controlling 67.5% of the new company’s voting power. However, the deal is yet to be closed as Chinese market regulators currently investigate the deal. If the deal goes through, the new Tencent-backed live-streaming powerhouse could easily go after the market share currently occupied by the likes of Twitch, YouTube Gaming, and Facebook Gaming.
Another live streaming company in Tencent’s portfolio, Bilibili, which raised $483M USD in its IPO in March 2018 on the Nasdaq, is currently preparing a secondary listing in Hong Kong. Bilibili is one of several mainland China headquartered companies listed in the U.S. planning for a secondary listing in Hong Kong as political tensions between the U.S. and China increased during the latter half of 2020. U.S. regulators and legislators could force Chinese companies, which are publicly traded in the country, to delist by the start of 2022 unless they agree to be audited by American auditors. Several Chinese companies already declined to do so as Chinese laws ban them from granting access to their books to foreign auditors as they could contain state secrets.
Unsurprisingly, my most common topic to write about throughout the year was reporting and analyzing how esports companies were struggling with the economic environment caused by the COVID-19 pandemic. Many of those articles featured companies, especially small and medium-sized ones, that were forced to close their business, introduce cost-cutting measures, and adjust to a loss of revenue streams.
In an effort to support those companies and their economies, many governments around the globe introduced measures such as suspending bankruptcy regulations and providing loans. One of the biggest of such measures was the U.S. Paycheck Protection Program, which was the centerpiece of the $2T economic stimulus Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was enacted on March 27.
When the U.S. Small Business Administration published data on Paycheck Protection Program loans granted during the global COVID-19 crisis, I published a report outlining which companies in the esports industry were among the recipients of the loans based on research our friends and partners at the Sports Business Journal prepared.
During the following days, we witnessed many people criticizing some of the esports teams on that list for receiving PPP loans despite recently closing multi-million dollar investment rounds. This caused me to write a piece illustrating how the PPP was designed to help those companies and why it is reasonable for esports companies to apply for the program.
Over the last 18 months, several companies within the esports industry went public, including a couple of pure-play esports organizations. One of which stood out, the initial public offering of a British esports organization going by the name Guild Esports. Despite very few knowing that name earlier in the year since the organization is not represented in any of the major franchised esports leagues such as the regionalized League of Legends leagues, ESL or Flashpoint Counter-Strike: Global Offensive leagues, or Blizzard’s Call of Duty League and Overwatch League; it made headlines in all types of publications. Primarily driven by its association with former soccer star David Beckham.
When Guild Esports first announced David Beckham as a co-owner in the company, I wondered what its long game was. I didn’t have to wait long to find out when it announced its plans to float on the London Stock Exchange early in September. Still, those plans took me by surprise, and I wasn’t a fan of the strategy, which is reflected in an opinion piece I wrote summarizing why Guild Esport’s IPO plans should raise red flags.
Following the announcement, I started waiting for the company to publish its IPO prospectus to understand the business better. Unfortunately, Guild delayed the document’s release as long as possible, making it available only hours before the company went public on Oct. 2, raising gross proceeds of roughly $26M.
I missed the event since I was offline and on vacation to be with my family as we accompanied my grandma on her last journey to a beautiful resting place in a forest cemetery near my small hometown somewhere in the middle of Germany. When I got back to The Esports Observer’s headquarters in Berlin several days later, I finally got to read through the 130-page IPO prospectus. Upon reading it, I was more than surprised that none of the mainstream finance and business media picked up on the details outlined in the document.
Specifically one thing caught my eye right away, Guild Esports’ influencer contract with David Beckham, which was signed before he invested in the company and practically guaranteed him one of the highest investment returns in esports to date. Therefore I sat down, put together all the numbers, and wrote an article highlighting Beckham’s deal with the esports organization.
Before I started working at The Esports Observer a little more than five years ago, I was very active in the German startup and entrepreneurship community. I took entrepreneurship studies at university, organized student entrepreneurship clubs at a couple of universities, and helped out in the umbrella organization supporting all student entrepreneurship clubs in German-speaking countries.
So when the first COVID-19 policies and measurements were enforced in Spring, I talked to many friends about the consequences for startups. Those conversations inspired me to look into the specific challenges and opportunities for startups within the esports ecosystem, focusing on potential financial bottlenecks.
Aside from nerding out about esports finance and business, I get the opportunity to cover the business of sim racing for TEO. As a long time motorsports fan, who got drawn into the fascinating sport by the Schumacher hype in the early 90s, it’s a pleasure to educate and inform about what’s going on in the esports’ sim racing niche.
When most motorsports series came to an abrupt stop due to COVID-19 policies at the beginning of the year, I pitched a comprehensive guide to understanding the esports niche, which culminated in this article for which I got the chance to interview several experts from both sim racing and real-world racing.
The interviews with sim racers, racing drivers, motorsports organizations, and esports organizers highlighted how much sim racing profited from a surge of events, professional driver participation, and mainstream media coverage. The aspect of permeability between sim racing and racing was one of the most emphasized strengths of sim racing, resulting in the expectation of further growth of the esports niche, which is becoming an integral part of motorsports instead of developing in parallel to it.
In addition to the interviews with several experts, we offered our audience a two-part explainer on how sim racing carved out its niche in esports. The first part explores what sim racing is, how it evolved, and which simulations are on the market. The second part looks into sim racing competitions, the cost of sim racing, and the sim racing ecosystem.
When I turn on my PC in the morning, the first thing I do is check my private stock portfolio and the overall market. Since turning to writing esports finance and business content, it has become my passion to educate on all things esports stocks. So once the market reacted to COVID-19, it was an obvious idea to look at how publicly-traded esports companies performed compared to the overall market.
In preparation for putting together the article, I looked into the previous economic crisis’s stock market performances to spot patterns that might repeat and found some very intriguing data on market volatility to underline the pandemic’s impact on the market. I also built a data model to compare not only the esports market but the individual segments of the industry to the overall market, which helped me point out that it depends on a company’s business model and revenue streams whether or not an esports company was among the economic winners or losers of the pandemic.