It’s been a rough few days for esports website InvenGlobal. Last week, Inven published an interview with Robert “Hashinshin” Brotz. The interview was unedited. The massive story was a large […]
Freelance LEC reporter Tom Matthiesen jumps on the show to talk about the fiasco involving the LEC partnering with Saudi-led city development Neom. A pet project by crown prince Muhammad Bin Salman aims to be a futuristic city in Saudi Arabia that’s meant to attract tourists and diversify the country’s portfolio while modernizing it in the eyes of the West. The problem is that Saudi Arabia is far from innocent. There are numerous human rights violations, discrimination against minorities, the use and abuse of poor laborers, plus the ongoing proxy war in Yemen. It was something that the League of Legends players or community could not stand for. But, it’s in stark contract to how the league views China. Riot Games is wholly owned by Chinese conglomerate Tencent. Meaning that an American developer is completely in control by a Chinese company with close ties to the Chinese Communist Party, or CCP. The announcement that this year’s World Championships in Shanghai fell on deaf ears as the Uighur minority in the western province of Xinjiang are facing existential uncertainty through what the UN defines as an ongoing genocide. For Matthiesen, he feels that many League of Legends fans are more willing to turn a blind eye to China because the country is so integrated into the world economy. In a sense, it’s impossible to escape the shadow of China, so why fight?
Halfway through the show, Michael Arin, the editor in chief of the Esports Bar Association Journal, discusses the antitrust hearings that occured in Congress last week and the implications that it may have in the esports industry. All the major players, Facebook, Amazon, Google, and to a lesser extent Apple, have a major role in the esports economy. If these companies are potentially split up, it could mean that Twitch, YouTube Gaming, and Facebook Gaming are made into separate companies. But really, things are far more complicated.
SPEAKERS: Tom Matthiesen, Imad Khan, Michael Arin
Imad Khan 00:03
What’s up everybody? This is FTW with Imad Khan. I’m your host Imad Khan. And joining me today on the Saudi funded development edition is freelance LEC reporter Tom Matthiesen
Tom Matthiesen 00:12
Imad Khan 00:12
And later on we’ll have editor in chief of the esports Bar Association Journal Michael Arin. But first Neom. Earlier this week, it was announced that the League of Legends European Championship Series or LEC had signed a deal with Neom, a Saudi funded city development project. Crown Prince Mohammed bin Salman is aiming for neon to be a major tourist attraction in the future as the country continues to diversify its assets. But as soon as rumors of the deal began to percolate, fans, casters and players online were quick to criticize the deal. Given Saudi Arabia’s track record on human rights abuses, discrimination and violence towards members of the LGBTQ community, the ongoing war and humanitarian disaster in Yemen, plus the killing of Washington Post columnist Jamal Khashoggi people expected more of Riot Games. Within 24 hours right reverse the decision and will not be partnering with Neom and will likely have to find another partner in the Middle East region. So Tom, what does this neon fiasco mean for the Elysee in the Middle East region moving forward?
Tom Matthiesen 01:08
So I think it’s important to put this into perspective that I think in the long run, this will probably not be as you know, deleterious to the relationship right has hosted events in Saudi Arabia in the past. Obviously, it does weigh in that this is the Neom is a pet project of the Saudi Arabian Crown Prince Mohammed bin Salman himself. We just really don’t know what when done behind the scenes, first of all, forming this partnership. And second, when it was taken down, it’s just very, it’s not known to the public what has gone down with Riot and with these negotiations, but yeah, I cannot imagine Neom being very happy with this partnership being canceled so rapidly.
Imad Khan 01:50
And yeah, Saudi Arabia does have a fund that invests in multiple companies to help diversify its portfolio including companies like Uber and in the past when Uber has been questioned about these instances including the killing of Jamal Khashoggi Uber has been very kind of hands off saying that they have condemned, you know what happened but still are very appreciative of the of the Saudi dollars flowing into the company. I was surprised by how quickly Riot was able to about-face on this.
Tom Matthiesen 02:19
Yeah, that is something that many people were surprised about, as well. positively surprised. I have to say, you know, obviously, the deal going through in the first place, is a big red flag. And I do hope as many people do, that there will be systemic changes within at least the LEC partnership. I do hope that there will be some reforms within the LEC’s partnership department that these deals in the future will not be allowed to go through. And they really thought they would get away with it. But you have to acknowledge the fact that they were so quick to respond and it is a bit weird, right that on one hand, the LEC promoted this partnership only Their Twitter would still the LGBT flag in their logo in their Twitter profile, and promoting a deal with a country that is so notorious for violating the rights of those very people.
Imad Khan 03:13
In a statement Alberto Guerrero, said, as a company and as a league, we know that it’s important to recognize when we have made a mistake and quickly work to correct them. After further reflection, while we remain steadfastly steadfastly permitted to all of our players and fans worldwide, including those of Saudi Arabia and the Middle East. The LEC ended its partnership with them effective immediately. So in the statement, they’re acknowledging that, you know, this was a mistake going so far as to say it was a mistake, then that, you know, kind of has me wondering because also on Friday, League of Legends announced that it would be hosting its worlds in Shanghai and given pretty much everything that’s happening within China because China too, is not innocent of human rights violations, most notably with what’s happening with the Uighur minority in the western province of Xinjiang.
Tom Matthiesen 03:55
Imad Khan 03:56
Why is it that right is so quick to about face on Saudi, but where’s the outcry in regards to China?
Tom Matthiesen 04:02
Well, it’s going to be very difficult for Riot to ignore China, they are owned by Tencent. After all, that’s a multi billion dollar conglomerate based in China. So Riot Games is fully owned by a Chinese company. And it’s going to be very difficult for them to just say, you know, we’re going to cancel our events in China. Also, China’s a very big market for League of Legends. So I don’t see that happening anytime soon. Obviously, at least with the Western faces of the company, that is quite hypocritical. And people are very right to condemn and question and call right out for these partnerships continuing and for these events continuing. And that is something that was commonly heard criticism at the time of this announcement as well, that people were saying, okay, you have cancelled this partnership, but you are still also partnered with Nestle who are a very shady company, at least in their business, what they do selling bottled water and stuff like that. They partner with Kit-Kat, who, you know, they cut down rain forests in order to provide palm oil for their product. And that those are all things that people called right out for. And I think it’s definitely fair to some degree, where do you draw the line? And that is a very difficult decision to make. It’s a very large gray area is all different shades of gray. But I think the problem with the Neom partnership was the fact that it was so in your face wrong going on. This is literally Saudi Arabia, giving the LEC money when they are building a mega city on the grounds of a tribe that’s being evicted forcefully. And in a country where LGBT rights are so you know, grotesquely violated,
Imad Khan 05:44
Right. But that’s not to say that Tencent isn’t this independent company within China. Clearly Tencent has very strong ties to the CCP, and is likely getting some kind of funding from the Chinese Communist Party or the Chinese government in general.
Tom Matthiesen 05:57
Yes and yes, Tencent is on very good terms with with Chinese government, yes
Imad Khan 06:00
Yeah, I see what you’re saying in the fact that like Neon is very directly funded by the Saudi government that gets literally a pet project of Mohammed bin Salman. But because there may be this, like, you know, very opaque screen in front of Tencent does that then make it so that the League of Legends community can ignore what’s happening in China?
Tom Matthiesen 06:19
No. And that they are not really ignoring it? I think it’s more than that something they’ve learned to live with, and something they’ve accepted, they just cannot do anything about the company that makes their game is owned by a Chinese conglomerate who has very good relationships with the Chinese government itself. And that is something that cannot change, but where they will speak up and that in in and of itself, I think is a good thing that at least you know, when when they see that a line is being crossed, a new line is being crossed, that they speak up so massively in the they, do not quietly accept this, but there definitely is something to say you know, what, what is the the line you draw for yourself. And I think that’s something that everybody’s faces every day, like you said, First, you know, Uber is also getting money from Saudi Arabia, Facebook is getting money from Saudi Arabia, should we stop using those services then as well? And that is a very ethical question. But I think the grim reality is and something that is very tough maybe to realize, or maybe people have actively realized it and decided to live with it this, that in the end in this world, it seems that money just talks and you cannot avoid having products delivered without any of these shady ties. It’s very rare that this happens, all these major companies are in a way connected to slave labor or any other human rights violations or they violate nature. And that is some so difficult to avoid that. And you see that in a league of legends community as well.
Imad Khan 07:55
Assuming the neon deal had gone through and let’s say G2 or rogue, these LEC teams essentially boycotted these events. What would their punishments have been?
Tom Matthiesen 08:05
I think it’s very difficult to say. We know at least that these LEC teams were kind of informed about this deal. As reported by ESPN. There was a meeting and business representatives of these LEC teams were present and there was on one slideshow, apparently a brief mention on the Neom partnership, but other than that teams weren’t really involved and informed about it. So we don’t know what the punishment would have been. We do know that the casting talent the on air talent, went to Riot and said, Listen, as long as this partnership is up, we are not costing the LEC which is obviously a very bold statement. They’re literally putting their jobs on the line, and very commendable of them that they did that. Yeah, it’s so difficult to say what the punishment would have been for these teams. We know at least one team owner Carlos, the owner of G2, he spoke out publicly on Twitter And he said, we will not ever be part of a direct relationship with anybody committing genocide or anything of the sort. So what the punishment would have been for these teams, and well, they could have just gotten fines for not showing up during the matches, that is something that happens teams have a fine for when they turn up too late for an event. But in the long term, what this partnership would have done, I think it’s very difficult to say these teams have are still in a three year partnership when they bought into League of Legends European Championship. So what the specifics are of that deal and what the specifics are when these teams decide to step out. Because of a partnership like this, it’s very difficult to but Riot Games generally is pretty severe with their punishment. So I think maybe these teams could have received a pretty big fine.
Imad Khan 09:49
And then I guess, last question, I mean, how do you think history will look at these nascent times of esports in which these companies are choosing to go to these countries that are having these you know, human rights violations. And the same way that history has not been kind to the United States or France or Spain or all the other countries that competed in the 1932 Summer Olympics in Nazi Germany.
Tom Matthiesen 10:11
The important thing is to know that there is another esports organization that is partnering with Neom. Currently, it’s Blast, they host mainly CSGO events, and people are criticizing them because they have not yet actively spoken out against their partnership, they have not withdrawn it. And that partnership even goes further as in Blast actively with the partnership helping develop Neon. So that’s even a worst case then the LEC. Now I do think that this is definitely a blank page in the history books of the LEC. And this will take a lot of time to be rebuilt, and I think it’s up to Riot to choose their future partners very carefully, but also commit even more to sending out that message that what they stand for is not in line with what the Saudi Arabian government practices when it comes to human rights. When when I look at it, it all seems a bit like a facade because in the end, I think many corporations right games included, are mainly after one thing and it’s making money. And they just test the limits of how far they can bend the borders and how far into the gray area they can get before they cross the line basically. So how this will look in the history books and how people will look on Riot Games. I think definitely people will still remember this. This was such a big event and so many people spoke out against this, this will not be forgotten. But since this is an incident and since the LEC is so beloved by millions. It’s this is the most beloved League of Legends competition in the world praised for its production praise for its tone, and definitely something the fans deeply care about. So while this is a wound that will need healing, I definitely think that Riot Games now will take this step to carefully make sure that people will at least quote unquote forgive it as in not have it be an active part of the discussion and you already see that kind of people have mostly forgotten about it. As people do know they are outraged when it matters. And then when it gets sold, or it gets addressed, then they quiet down we saw it with Blizzard with the whole Hong Kong and blitzchung affair, people were up in arms for weeks until Blizzard decided to soften the punishment and partially reverse what the punishment is to blitzchung. And now everybody is happily playing Hearthstone again. So that is something that will just need time. But I am confident that Riot Games will heal from this.
Imad Khan 12:44
Well then let me cross apply that same question about all the countries that participated in the 1932 Summer Olympics in Nazi Germany. And then, with esports continuing to have this event or having worlds in Shanghai in the midst of genocide in western China. I mean, would is is going to be that blank page for esports?
Tom Matthiesen 13:02
No, that won’t be part of it is that what happens in China. Unfortunately, for many fans in the West, for many people in the West is a bit of a distant thing. Also, it’s not being covered a lot in the news at the moment, so few fewer people are aware of it. And I think those two factors mainly combined into people just being accepting of the fact that this is happening happening in China. As I said earlier, people know that this is that Riot Games is owned by China. And that is something they have come to learn to live with. And I do hope I honestly I do hope that people get up in arms about it, because obviously what’s happening in China is horrible and should be addressed and it should not happen. But people here will not have as much influence as they had on the neon deal because Riot Games is simply owned by a Chinese conglomerate
Imad Khan 13:54
Then why are fans so willing to acquiesce to Chinese malfeasance, which is You know, let’s say 15,000 miles away from anything happening in the US, but not so much to Saudi Arabia, which is, I don’t know, 13,000 miles away happening from the US, right? I mean, isn’t aren’t we playing semantics here? Like what? What is the reason why there’s up in arms for Saudi but not for China?
Tom Matthiesen 14:16
Well, I think China does at least a much better job at getting away with things in general. It’s in all the products, many products we use. And I think in general, when when we look at people like do people still get up in arms about their iPhones and there are Samsung products or whatever it is being made in these horrible working conditions? No, don’t there are groups rightfully fighting for this? And when you ask people about it, they will definitely condemn condemn it. But this is just something that unfortunately, people have come to learn to live with. And this Saudi Arabian thing is very new in esports. This is a new line being crossed China has been in esports for a long time with people as with products that are being made in China. They just have accepted it. I think this is true in every layer of society, not just in esports people know what’s happening in China. It’s horrible, but it’s almost inevitable that he uses Chinese products. And the China is involved with this. And Saudi Arabia, however, is new to esports. This is very new Mohammed bin Salman wants to make Saudi Arabia some sort of seemingly progressive nation that’s futuristic, and is, you know, hanging out with the cool kids in that sense. But the fact of the matter is, and I think, again, this is true in every layer of society, that people have kind of come to accept that you cannot evade China at this moment. And that is said, It’s tragic, and I wish it were different. But there’s no way around China and even less so for Riot Games because they are owned by Tencent.
Imad Khan 15:56
Well, let’s see if the handwringing around China metastasizes into some sort of action.
Tom Matthiesen 16:02
I hope so. Yeah, absolutely.
Imad Khan 16:04
With that, Tom, thank you so much for jumping on.
Tom Matthiesen 16:06
Thank you very much for having me.
Imad Khan 16:09
And now we’re joined by Michael Arin, editor in chief of the esports Bar Association journal.
Michael Arin 16:14
Hi, pleasure to be here.
Imad Khan 16:15
Earlier this week, the heads of Facebook, Amazon, Google and Apple virtually came together to address Congress in antitrust hearing. accusations were loud from Congress persons about the predatory practices being used by said companies. Of course, all these companies have some hand in the esports business from Facebook gaming, Twitch, YouTube gaming, and to a lesser extent, the Apple App Store and Apple arcade. So Michael, just for listeners that are kind of maybe wrapping their brains around this for the first time. What, what’s the purpose of these antitrust hearings and where does this history come from?
Michael Arin 16:50
So that’s a great question actually, because the antitrust laws can be fairly complex and are pretty difficult to understand but in essence, antitrust law just seek to promote competition in the United States markets. And this comes in the form of three main ways regulation. Section one of the Sherman Act prohibits every contract combination or conspiracy in restraint of trade. And courts have interpreted this to prohibit unreasonable restraints on trade. So when you think about the classic cases of price fixing that is one person telling a competitor to have the same price. That’s exactly what we’re getting at with a contract combination conspiracy in restraint of trade. Section two looks at monopolization. So these are the big oil barons, railroad barons, and now today of potentially the tech and information barons, and they say that while possession of a lot of market power might not be bad, and in fact, that is something that we heard repeated frequently during the hearings is that big is not bad. But when is coupled with anti competitive conduct, such as predatory pricing and the like. Then we began to question that maintenance of monopoly power. And then finally, a big Question is mergers and acquisitions and the antitrust law seeks to prevent those mergers and acquisitions that would lessen competition and increase concentration in a market. And so these hearings looked at the the four businesses that you discussed, and the four CEOs were essentially there to answer any and all questions about the accusations against them and their four companies. Congress is just trying to determine are the antitrust laws that we have today that were created over 100 years ago, still adequate to protect consumers and their choice over getting the best products for the best price today, when new harms are present, and new ways of achieving monopoly are being discovered by these companies.
Imad Khan 18:43
You know, when listening to these hearings, the thing that kind of struck out at me are some of the practices that these companies were doing, for example, Amazon would get into negotiations to buy a company, then be able to look at its underlying technology, steal that technology and then integrate it into its own platform and then never actually buy the company. Or Facebook and Google would essentially strongarm companies and say, either you let us buy you for a good price. Or we’ll just copy your technology and run you out of the business. Does this sound to you, as you know, things could be cross applied to those anti trust laws that were written 100 years ago?
Michael Arin 19:17
It depends. This is something what is discussed today as platform capture, essentially, the operator platform. Let’s take Amazon as an example, because it’s a very easy example to understand. Amazon operates as the operator for its market. So if you want to sell on Amazon Marketplace, you have to agree to its terms and conditions and the like. So if I’m an independent seller of let’s say, batteries, and I want to sell a product, I have to agree to certain rules imposed by Amazon. Now the problem is that let’s say we get into a niche category where there’s maybe one or two sellers of the product, Amazon on their end as the operator of this marketplace place gets data on essentially these these, let’s say battery sellers. And they’re able using their rules to determine how they price these batteries, how they sell them in what quantities at what time when or sales being made. And then what Amazon does his actually come out with its own product, let’s say the Amazon brand, its private label private label batteries to compete with that person that was selling on their platform. Using their platform power, they make sure that their competitors are actually delisted or not promoted in a way to ensure that people buy Amazon’s product over a third party’s product. And so platform capture is not new. It is something that has happened for years, but the Information Age really complicated this because you have companies like Apple and like Amazon, who essentially serve as gatekeepers to a market, and that’s the real concern that we have is that these gatekeepers are restricting competition on the very platforms that they compete in.
Imad Khan 21:10
Yeah. So in essence, what you’re saying is that these platforms that are own micro economies in which they have total control, and then can strong arm, any minor threat with precision and ease.
Michael Arin 21:21
Exactly. And that’s one of the big concerns and how they do it really takes a couple of different forms. We mentioned the Amazon example of simply selling competing product on the Amazon Marketplace and driving the other person out of business, or in the case of Facebook and the acquisition of Instagram or WhatsApp, simply telling the owner of Instagram for instance, that we are going to compete with you. And if you don’t want to be running to the ground using Facebook’s data using Facebook’s market power, just sell to us and we’re going to acquire you and we’re going to prevent competition through acquisition.
Imad Khan 21:57
Well then let’s try to circle this back into esports. So all of these companies have some kind of influence in this space, whether you have Amazon and Twitch, Facebook and Facebook gaming Google with YouTube gaming, and I guess Apple with its App Store. And you can argue that you know, many of the top mobile esports exists on its app platform. And if the company continues to do its Apple arcade, it might develop a competitive title at some point. So if these companies were to be broken up, I mean, what would that mean for its respective eSports plans?
Michael Arin 22:28
So I think you need to address each of these companies in turn. But let’s also verse say that whether or not a company will be broken up is actually a good question. Many of the Congress people during the hearings raised ways of addressing the antitrust problem, why hasn’t the antitrust law been able to cope with these big information tech giants? Some say that is just a matter of enforcement, and that more cases need to be brought against tech giants like Amazon And Google, on the other hand, sometimes it’s a remedy problem. So do we need to just impose fines like we’ve been doing, seeing, actually, Facebook just faced a $5 billion fine by the FTC. Or perhaps we go more behavioral and ask them to change their policies, or what you were referencing and as the structural remedies actually gaining a lot of traction in the United States, although it is seen as a drastic essential hammer to these companies, it may be appropriate to divide them up and to actually split up the company in a way to make each part of the company competitive without allowing that conglomerate power to be maintained. And so take for example, you have Amazon, right. And they have their Amazon Marketplace. They have their Amazon Web Services, they have Twitch, and they have all their independent product lines on the Amazon Marketplace. You might see Congress and the antitrust division or the FTC asking Amazon to divest itself from certain businesses. So when you start seeing scrutiny of Amazon, you start being concerned that perhaps they’ll have to divest Twitch or they’ll have to divest Amazon Web Services. Both of these services are critical infrastructure for eSports. Because they allow content to reach the end consumer. And as a divestiture you might be reducing efficiencies achieved by putting those companies together. So Amazon Web Services and Twitch, for instance, or even just the marketplace and Twitch, you’re going to see some changes to the company. It’s unclear what those changes may be, but it might disrupt a bit of the esports economy.
Imad Khan 24:47
I mean, if for example, Amazon and Twitch are separated and broken up into separate entities. I mean, then it seems that you know, Twitch’s underlying kind of mechanisms rely on AWS Is it even practical to really say that Oh, now these are two separate companies, when in reality they rely on each other so much?
Michael Arin 25:05
I think it’s a great question to be asking and whether or not splitting off a company actually is appropriate whether or not we want to deprive Amazon of its inherent efficiencies of having AWS and Twitch together. On the one hand, splitting it up will allow competitors to Twitch like YouTube or now Facebook Gaming actually compete without having to create a similar service like AWS, because that would be a barrier of entry, because the efficiencies aren’t achievable without that partnership. On the other hand, like I said, there are efficiencies and it seems to be that they are passed on to the consumer, we’re seeing lower and lower prices, and like Twitch, we’re seeing no prices at all except for ads. And that is inherently good for the consumer. It gets very, very tricky about when and how to split up a business, because in the end the antitrust law Law seeks to promote competition. And if a business is split off in such a way, that it no longer becomes effective or profitable, or they have to raise prices, then the antitrust laws failed because the consumers will be paying more for wrose product.
Imad Khan 26:18
In the case for Twitch and Amazon at the moment, Twitch is essentially so small in the Amazon ecosystem that it’s not even showing up in its quarterly reports yet, are all these like small esports arms, whether it be Facebook gaming, more Twitch, or they just essentially like too small to be broken up? Or maybe that aren’t even could be said in regards to Facebook and Instagram where maybe Instagram was like a small and scrappy competitor that Facebook bought early and then blow it up into this massive thing.
Michael Arin 26:42
The question really is about the future of the company because well, twitch might be a small proportion of the revenue generated by Amazon. It is by no means a small company in and of itself. Can it be successful as a standalone company? I think that yes, absolutely. I think it would be still be a competitor to YouTube and to Facebook Gaming. But you’re right, it might not make sense to split it off because it’s just too small. And in fact, during these congressional hearings, we didn’t see a lot of attention to Twitch, Amazon’s marketplace seemed to be much more of a pressing issue. Similarly, in the questions about Alphabet and Google, YouTube was featured only a couple of times, primarily because Congress was concerned about Google’s use of user data and sharing that with YouTube or between its branches between its ad branch that allows personalized ads through the Google search services, and YouTube’s collection of that data, including from streamers from content producers and from children was a big concern. And it makes more sense when you see a bigger branch of a company like YouTube be separated off from a company like Alphabet that has so many products under services that it makes sense to hack off YouTube. With it, it’s esports arm essentially,
Imad Khan 28:02
When will be the next time we’ll start hearing more and more about the fate of these companies in regards to this congressional investigation.
Michael Arin 28:09
So the investigation, this hearing was essentially a culmination of a year’s worth of work. This is the sixth hearing in the series. And after reviewing over 1.3 million documents and having several other discussions with these companies, we’re likely to see the recommendation by the antitrust subcommittee in a couple of weeks, as I mentioned before, it’s very difficult to determine how they will respond to these big tech companies, because we heard so many different voices whether saying the antitrust law is good as is when it comes to more enforcement, or if we need a real revamp of antitrust law to make sure the consumers, viewers of esports for instance, are protected from these big tech giants.
Imad Khan 28:59
Well then, and if two weeks with a we’d love to have you back on the show
Michael Arin 29:02
that sounds wonderful Imad
Imad Khan 29:04
And that was FTW with Imad Khan. If you like the show please rate subscribe and share. Your support will help the show grow checkout ftwimad.com for transcripts and links to our Patreon. If you’d like to follow Tom and his writing you can find him @Matthieist. That’s M-A-T-T-H-I-E-I-S-T. If you’d like to follow Michael he can be found @ArinMJ on Twitter. That’s A-R-I-N-M-J. To follow me and my writing over at the New York Times The Washington Post and elsewhere, you can find me on Twitter @imad. Annie Pei is our producer questions about the show can be directed to her at Pei_Annie on Twitter. Joe Domeq is our Outreach Manager and Ron Lyons is our researcher. With that, we’ll catch you guys next week.
Imad Khan July 27, 2020
It’s been a rough few days for esports website InvenGlobal. Last week, Inven published an interview with Robert “Hashinshin” Brotz. The interview was unedited. The massive story was a large […]