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Episode 34: Extort it like Beckham ft. Will Partin and Tobias Seck

Imad Khan September 22, 2020 14


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With the outcry from the League of Legends community over the Neom partnership and Saudi Arabia, I asked why there wasn’t similar outcry over China and its human rights violations. I put my thoughts and research together for an article over at Dot Esports.

Will Partin, researcher for the University of North Carolina Center for Information Technology and Public Life, returns to the show to discuss the complexities of the US-China relationship in regards to esports and why we aren’t seeing outcry.

Tobias Seck joins us on the latter half of the episode to talk David Beckham’s new esports team that has an IPO valuation of $65 million and why it should raise some red flags.

Transcript:

SPEAKERS: Imad Khan, Will Partin, Tobias Seck

Imad Khan  00:05

What’s up everybody this is FTW with Imad Khan. I’m your host Imad Khan. And joining me today on this Extort it like Beckham Edition is Will Partin researcher for the University of North Carolina center for Information Technology and Public Life.

Will Partin  00:17

Hey, thanks for having me back.

Imad Khan  00:18

And later on, we’ll have Tobias Seck of The Esports Observer to talk David Beckham’s crazily overvalued esports team. But first China. Last week, I wrote an article for Dot Esports that explained the lack of outcry over China’s human rights violations when such criticisms were quickly levied against Saudi Arabia. My conclusion was that essentially fans and casters were willing to take on fights with less risk. Given that Saudi Arabia has no relationship with eSports. It was easy to get criticism and boycott any deals as it was nothing yet established. But China has been the esports scene for much longer, and the government is far more heavy fisted in dealing with criticism. Surprisingly, I found that my article had some traction and it was getting some attention online. It wasn’t however, featured on the League of Legends subreddit. So Will, in my report I did reach out to a few casters just to get their opinions off the record, but none got back to me or chosen to speak with me at all. What do you make of that?

Will Partin  01:07

Well, there’s a couple ways you could look at it. But I think I tend to the obvious explanation, which is this is a hot button issue. publishers are extraordinarily invested in the Chinese gaming market. And ultimately, many of the people you know, who are casters to a lesser degree players are profoundly dependent upon the publishers for their livelihood and the cost benefit analysis of giving potentially critical quotes. It’s just not worth it if it’s going to get you blackballed. So obviously, I can’t get in the head of everybody who did that, or sort of chose not to give quotes, but I’m not sort of surprised that this is just like, hands off area for a lot of casters.

Imad Khan  01:46

In talking to Rod “Slusher” Breslau. You know, he challenged kind of a lot of my assumptions because I think when going into the piece, I was like, you know, why couldn’t the esports community this like young millennial generation, be able to push back you know, as it did Saudi Arabia, you know, I guess it was illuminating and trying to speak to anybody that you know, they were just so scared to even talk to me at all. We’re seeing kind of like what’s happening with TikTok, which was, you know, just sold to Oracle earlier today because of its relationship with ByteDance. And if there are any ties with the CCP, and then we have what’s going on with Tencent and India, and how, you know, all these apps are banned from China. I mean, is there a breaking point, do you think like, Is there going to be a point in time in which enough countries are going to essentially push back against China to where it might actually start forcing, you know, differences in internal domestic policy?

Will Partin  02:33

So I think the answer is yes. And forgive me a little bit of a diversion in this explanation. There’s a really interesting shift in the relationship between large technology firms and federal governments. So in the US in the 90s, when sort of the internet was being commercialized for the first time, a lot of the firms then pushed really hard for like a total like hands off completely deregulated, let us let us just innovate without interference. And many people Clinton era democrats and many Republicans from that period, were more than happy to do that. And you know, there was sort of the common song of, you know, we’re going to unite the world through information, which, of course, this really reaches its full potential with the creation of social media in sort of the early and mid 2000s. And so this was very much this principle of like, open access cross borders, unite the world, global village, etc. And it was in striking contrast to the way that China thought about its economy, because despite the fact that, you know, the China’s is run by the Communist Party. It’s not really a communist country, it’s much more akin to a kind of version of state capitalism, where there is a market, the market is the primary way the society is organized, but there’s much more aggressive state intervention into that market. And additionally, there’s a lot of support from the Chinese state to some of the largest technology firms there, for example, protecting them from potentially International, like IP lawsuits, and so you saw sort of two fundamentally different ideas about the relationship of tech companies to the state. And, you know, China had a much more sort of like tech nationalism approach, whereas many Western countries had this sort of like supranational. You know, we’re just gonna let the corporations do what they do across borders. And so it’s interesting because in the last sort of year or two, a lot of tech companies in the US have sort of changed their tune, they’re actually aligning maybe a lot more with this sort of strategic sort of thing that the Chinese have been doing for a long time, which is trying to forge closer relationships with their national governments, which also then entails somewhat of a closing of these platforms who they work for, where the money goes. So I think that’s where sort of, you know, we’re entering this this new phase of tech history where like tech nationalism is really kind of what’s going on. And so esports are an interesting vantage point because we see the stuff with India banning PUBG. But also, you know, esports are always sort of a window into pointing out that these things are never quite so easy. These companies In these are nevertheless entangled across lots of borders. And so it can never just be like we are open everywhere or we’re closed, there’s always a negotiation happening. And esports is a good example of that.

Imad Khan  05:11

You know, I wonder to what extent countries like the United States can really push back against China now that the US pulled out of the TPP with Trump’s election, right, because then that ceded a lot of potential regional power that the US could have had, and, you know, gave it over to China. Now, it seems that in this fight between China and India, India’s kind of on its own, you know, maybe Japan or Korea could do something, but I, you know, it’s very, it’s very doubtful, but you know, if like, the US was in the region, and, you know, working with the other Southeast Asian countries and like some kind of trade bloc, that then that this kind of pressure could be exerted?

Will Partin  05:43

Yeah, I think I think it does make sense and there’s still a there’s a lot of question marks here of what exactly is gonna happen. It’s sort of a question for a lot of these states is like, do we try to do our own thing? Do we try to like hook up with the international Alliance where we’re always going to be sort of second fiddle to you? nighted states and to a lesser degree, the EU, it’s it’s uncertain what that region is going to look like going forward. But I think the common theme is there’s going to be a lot more protectionism from tech companies and a lot more willingness on behalf of states to intervene to prevent foreign sort of tech companies from getting sort of a critical mass in certain countries.

Imad Khan  06:21

And then let’s go to Riot Games because, you know, in regards to at least what happened with the Blitzchung situation last year with Activision Blizzard where I think it was Marco Rubio and AOC. Maybe that sent a letter directly to Activision Blizzard saying, like, hey, what is going on here? Why are you stifling the speech of pro democracy as an American company? Now, do you think Riot is in itself in a very precarious situation, given that it’s owned by a Chinese company and given the relationship between the US and China is just becoming more and more terse?

Will Partin  06:50

Totally. I don’t envy them being caught between this and then they’ve certainly even in some of their public statements or sort of times, I’ve gone to see people At Riot speak, they talk sort of candidly about, you know that the biggest game in China is that Arena Valor is, you know, just enormously popular, but it’s kind of just a League ripoff, but League is also available there. And so they’re they’re not really sure what to make of that, because somehow their parent company is also their biggest competitor. So these weird contradictions that happen in the sort of enormous conglomerates. So in that sense, Riot is definitely caught in a difficult place. And I think their strategy is, I think, fairly conservative, they try to play down the controversies and not lean into them and try to, you know, ensure they don’t happen, or to head them off before they actually happen. To avoid sort of a Blitzchung incident.

Imad Khan  07:42

Yeah, what I can tell you is that esports teams owner II team owners are like, actually, like legitimately scared to ever mention anything even mildly negative about China. You know, let’s assume there is a world in which North American and European teams and let’s say even South Korean teams, do exert pressure and say Hey, Ryan, We’re kind of done with this, what would happen if these teams actually did try to like push back? I mean, what would the response be from the Chinese government?

Will Partin  08:08

I think they’d probably lose their franchise spots. That’s like an incredibly harsh penalty. But, you know, you’re you’re, you’re there in the league at the behest of the publisher. You know, if Riot was in a position of, hey, you know, it’s this team or like souring a relationship with the CCP, one of those a lot more powerful than the other ones. Esports is obviously a big thing for riot, but like, it’s the majority of the money that company is still making is from League of Legends and not necessarily its esports scene. You know, the incentives I think, aren’t there.

Imad Khan  08:41

Yeah, you know, it will be interesting to see what happens with the 2022 Winter Olympics that are happening in China. I mean, they’re already calls for it to be or they’re already boycott calls. And, you know, we’ll see if the international community does rally behind those calls for boycott and it you know, it’s not without precedent, it’ll be interesting to see kind of what happens. I think this year’s Worlds will go on without a hitch, I think that it’ll be a huge blockbuster event with tons of viewership. And there will you know that you won’t see a player taking off his jersey with a Uighur flag underneath or anything crazy like that, you know, and definitely will not be like the Olympics in Nazi Germany where Yeah, it was kind of an area for protest as well. Will, with that, thank you so much for jumping on.

Will Partin  09:19

Absolutely. It’s my pleasure.

Imad Khan  09:21

And now I’m joined by Tobias sec of The Esports Observer.

Tobias Seck  09:24

Hey, thank you for having me.

Imad Khan  09:25

David Beckham is minority investor in Guild Esports, a new company that is planning to go public on the London IPO with a valuation of $65 million. So far, this team has a Rocket League squad and one FIFA player. So devise your own criticism of Guild Esports is IPO on TEO and why it should raise some red flags. But before we get into that, I want to ask how is Guild Esports getting this valuation? Is it just because of Beckham?

Tobias Seck  09:49

I guess that’s where it all comes from for now because if you look into the actual company, there’s not much history as already mentioned a they do have to use sports teams right now one FIFA player from Germany and a Rocket League squad that’s kind of doing decent as well. But the company was only founded about a year ago in September 2019, under a different name at four slots eSports back then, and they basically all that did back then is raising investment from an investment firm. They didn’t do anything in esports back then. So the whole first year basically for the company was just looking for potential investors, which they then found in a fundraising round dated during the summer worth approximately 5 million British pounds, which is roughly 6.5 million US dollars. And one of those investors was David Beckham via his investment vehicle DB ventures which is connected to all his companies basically and also the companies of his wife, Victoria Beckham. And nothing happened so far for that company at that point and basically with that second investment where back and was involved, the company reprinted two good esports and started in esports, with that big goal of theirs to become one of the as they say top 10 esports teams within three years. I think overall it’s five or six esports players for now.

Imad Khan  11:20

You know, I think a lot of people are pointing to the potential like snake oil salesman kind of situation that’s happening here, where we’ve seen esports teams come in with crazy valuations. You know, there was famously I think two years ago, Forbes reported that you know, Echo Fox was valued at $400 million or some absurd number and it came out to be what we learned that you know, that those numbers were greatly exaggerated to put it mildly. So these kind of valuations I guess, aren’t new but I think the reason people are taking notice is because of the name Beckham, right? Like, okay, then does that mean that people who are lay to the industry are thinking that oh, maybe they’re these things are actually worth this much when you know, that’s not case because like no esports teams are really profitable that I can tell correct?

Tobias Seck  12:04

Absolutely. I mean, they’re definitely one or two eSports organizations as of now that are profitable. But they’re definitely the exception. In general, looking at the valuations of esports teams, as you mentioned, Echo Fox, which was one of the ones Forbes valued back then and we know the valuation was everything but accurate. But even those high valuations that would be around because the valuation, the company initially looked for back when they did the last funding thing around was for the next financing round to be about 130 million US dollars. Now they’re looking to raise about $26 million in that IPO at a valuation of 65 million US dollars, which is still super high and something that was only associated with the top esports organizations so far that have years of history that have a strong brand, a big following successful esports athletes competing for them. I think that’s kind of the big disparity between what we’re seeing with good esports now and their valuation, other esports organizations, there’s just no assets that the outsiders at least could see. But that name that is attached to the company that is Beckham’s name, which obviously helped the company to raise quite a bit of attention for decades and bring them in the talks for this kind of valuation.

Imad Khan  13:33

Yeah, you know, I think that’s, that’s interesting, right? Because like the initial funding under they had was so much higher than what they’re going in with the IPO. And I wonder if this is a case of like, buy my pizza for $120. But I’ll give it to you to just kind of 50% off. I mean, it’s still a $60 pizza, right? Is this like still too much? But do you think there’s some of that going on?

Tobias Seck  13:52

It’s a group of people just testing out the market, of how much they can get away with it I’d say. Because in that case, it’s really just the trust into a group of people. And I guess a brand attached to it to, in the future, build an esports organization with a sustainable business model, which we haven’t seen many of yet. But it’s basically just that trust into the future. It’s a bet into something that doesn’t even exist at this point,

Imad Khan  14:24

Just to illustrate so I mean, when they did their first evaluation that 120 million that would put it on par with overactive media and misfits gaming right and they have a team in the LEC they have an overwatch league team they have a Call of Duty League team fortnight players and a few other like smaller FGC titles right? And of course they have the backing of the Miami Heat, so that initial valuation was completely absurd, but even half that I mean, they just have so little, how do you think the IPO is gonna go IPO is gonna go for them?

Tobias Seck  14:52

I’m afraid it might actually go well for that, which in the long run might be pretty bad for the esports industry as a whole. I mean, we’ve seen one proper IPO with the Australis group, which is kind of comparable, for example to the Overactive Media Group. They do have two of the most successful esports teams. They have the history, they have sponsorships deals in place. They have a structure in place, they have staff that has proven themselves in place, and they were able to raise at a valuation of $75 million US dollar, which is barely more than Guild Esports is looking for right now without any support staff without any franchising slots, as you mentioned, but just with that one name attached. And the question that comes up in my mind is obviously the name Beckham, and it’s absolutely indisputable, was able and is apparently able to raise money, but looking into what he is currently doing, where his business focus most likely is with his as project the inter Miami FC Which is a multi billion dollar project that just started this summer as well. And the fact that the back end print doesn’t mean financial success necessarily. So if we look, for example, at the Victoria Beckham fashion label, which is also part of the whole DB venture ecosystem, that brand has been generating losses for the last 11 years, and I think in 2019, it generated losses of around 45 million US dollars. So while they’re able to raise awareness and financial liquidity, they’re not necessarily associated with building good business models.

Imad Khan  16:39

So it seems that the IPO is going live next month. And I guess we’re just going to see how it goes.

Tobias Seck  16:44

I’m really, really looking forward to the prospectus. And in the long term, I hope to be proven wrong, being kind of skeptical about the company. Not too hopeful, but I really, really would like for them to find the success because it will be kind of giving the direction for esports in general and raising finances for esports organizations. Because so far we’ve mostly seen the traditional way of raising venture capital risk capital from people and entities who are specialists and that going on to the open market and collecting funds from basically you and I who might not have any idea what is what exactly is what the business model is not realizing that, hey, this company doesn’t even have esports team franchises and doing the kind of traditional esports marketing of Hey, we have more viewership then I think they said Wimbledon and other sports leagues like that, which is kind of the way to approach outsiders that don’t really know much about esports and try to get in the and maybe sell the sports a little bit above its value. For now, at least, but at the end of the day, we have to wait and see how it goes, how the IPO goes and how in the long run, the company does for itself. And I guess, in representing esports as a whole, through that big name that is attached to it, it will always draw all the attention and it will be in mainstream media and everybody will look into it and see if it goes well or if it fails.

Imad Khan  18:24

Right. So I guess we’ll have to check back next month. Thank you so much for jumping on device. Thank you for having me.

Tobias Seck  18:29

My pleasure.

Imad Khan  18:31

And before we close out the show, here’s our fan of the week question. It comes from Logan gnostic,

Logan  18:36

he asks. Hi, I’m Logan gnostic, and I just wanted to ask, Where do you feel that esports media should go? Because right now you have a bunch of these media companies coming out. You got juked you got VNN. g4 is coming back. You’ve got a lot of a lot of news outlets coming out and where do you feel that it’s going in terms of you know, are we going to see an ESPN of esports or are we going to see something Like that, whether it be ESPN or G4 or Venn or Juked, you know, any of these billion other things coming out Twitch, like where do you feel that esports media is going and where should it go?

Imad Khan  19:12

That’s a great question. Logan, you know, there has been a lot of companies that are trying to break into this space, whether it be through the news side or through the entertainment side. And we’re seeing like you said, Venn and G4 and all the others coming in. And honestly, I think they’re all trying to figure it out. Still, I mean, the way esports audiences have consumed media it’s been largely through Reddit, Twitter through documentaries and videos posted by the teams themselves. So to have this kind of like third party media company come in, observe and report or make content around the scene. You know, it’s difficult because the consumers The fans are so used to getting their content from you know, the these already established places. So it’ll come with, you know, creating, obviously a good quality production, but building that trust and building that trust is really difficult. You know, you did mention like well, we get an ESPN for you. Sports I mean, there is an ESPN eSports vertical but I think what you’re getting at is like a dedicated sports channel that’s just for eSports. And even then I feel that’s really difficult because the way these words audience has consumed information online has largely been text based or through YouTube videos. I don’t know which company will first crack the code best. It’ll be tough because these fans just really like staying within their bubbles online, but really a good question to think about

Imad Khan  20:26

And that was FTW with Imad Khan. If you liked the show, please rate, subscribe , and share. Your support will help our show grow. To see full transcripts or links to our patreon, head on over to ftwimad.com. If you’d like to follow Will and stay up to date on all the research he’s doing in the world of esports, you can find him on Twitter at  william_partin. To follow Tobias and the work he does at The Esports Observer, follow him at TobiasSeck. If you’d like to follow me and my writing at the New York Times, the Washington Post and elsewhere, follow me at Imad on Twitter. Annie Pei is our producer. If you have any questions or would like to submit a fan of the week question, reach out to her at Pei_Annie on Twitter. Joe Domeq is our outreach manager and Ron Lyons is our reasearcher. With that, we’ll catch you guys next week.

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