Hello everyone! This week, we had to bear witness to the continuing impact of COVID-19 on the industry, forcing multiple esports leagues to take drastic measures to protect their pro players and reduce the risk of infection. The Halo Infinite Anaheim Regional Championship dropped in-person spectators, while Valve took it a step further and canceled its first Dota 2 major LAN of the 2021-22 Dota Pro Circuit (DPC) season.
For tournament organizers, cases like Matthew "Crit" Franks lying about taking RT-PCR tests in order to compete in the Nerd Street Philadelphia LAN tournament aren't helping matters as they try to strike a balance between hosting an enjoyable event for fans while also taking necessary safety precautions.
Here’s a breakdown of this week’s most impactful and important esports business news and more in the latest edition of Esports Business Insights by AFK Gaming.
- Vignesh Raghuram, Supervising Editor, AFK Gaming
Valve cancels Dota 2 Major, enraging pros and fans
Valve canceled the first Dota 2 Major of 2022, which was scheduled to take place in February and conclude the Winter Tour of the 2021-22 DPC season. The company initially cited the rise in the number of COVID-19 cases and the subsequent increase in travel restrictions imposed by various countries as the primary reason behind this decision.
Even though the DPC points that determine the invites for The International Dota 2 Championships have been reallocated to other DPC events taking place later this season, Valve did not make any mention of the $500K USD prize money that was supposed to be distributed amongst the teams competing in this major. Additionally, no information about the knock-on effects such as player transfers was provided by the company.
Naturally, the reaction to this development was overwhelmingly negative with pros, prominent personalities, and fans alike criticizing Valve’s decision. Many, including Quinn "Quinn" Callahan have mentioned the daunting financial difficulties that players will face as a result of this move, pointing out that a career in Dota 2 is unsustainable except for those who do well at The International.
Others criticized Valve’s infamous communication issues, with some including Sumail "SumaiL" Hassan suggesting a strike to force the company’s hand.
In an email to its pro teams following the outrage, Valve reiterated its reasons for canceling the major and apologized for the lapse in communication. However, the email also indicated that Valve has also had difficulties with tournament organizers, who declined to host the event due to these factors.
However, despite canceling the first major of the season, Valve has said that it is currently working towards “bringing everyone together in one location” and hosting an offline event.
Key Takeaway: The International 2021 boasted the largest prize pool in esports history with $40M on the line for 18 teams that competed in it. However, the rest of Valve’s 2021 DPC only awarded $4.36M in total for the 96 teams that compete in it, each season. As a result, ‘The International’ tournaments seem to be the only ones that financially matter for the teams and players. This ecosystem is heavily skewed towards the top organizations that can consistently qualify for TIs, with tier 2 teams that can't make it, struggling to break even. A drop in revenue streams from LAN tournaments could spell financial peril for financially strapped tier 2 organizations.
Krafton Sues Sea Ltd., Google, and Apple over Free Fire in U.S. Court
Krafton’s renewed copyright infringement litigation with Sea LTD and Garena concerning the similarities between PUBG and Free Fire made its way to a California federal court this week. We say renewed because this is not the first time that Krafton has sued Garena over its battle royal game; in 2017 it filed a lawsuit against the company in Singapore but a few months later settled the matter. In 2018 it also sued Epic Games in Korea, but later backed off. The common denominator at the time was Tencent Holdings, which owns small stakes in all three companies. Tencent wanted to increase its stake in the Fortnite maker at the time. With Tencent reducing its stake last week in Sea, it is likely that Krafton felt more comfortable going after its biggest competitor in the mobile Battle Royale space.
The 108-page copyright infringement lawsuit filed in the U.S. District Court for Central California alleges that Free Fire and its latest mobile version of the game, Free Fire Max, infringes on core elements of PUBG. Krafton also named Google and Apple, among others, for not taking action against Garena’s game. Curiously, the company did not file a preliminary injunction asking the court to remove Free Fire from Apple’s App Store for iOS and Google Play for Android devices, or related content from YouTube (it has filed complaints to all three platform holders in the past).
Darius Gambino, a partner at Pennsylvania-based law firm Saul Ewing Arnstein & Lehr LLP and an attorney specializing in IP litigation, tells AFK Gaming that while this lawsuit might look like an uphill battle for Krafton, it may have some standing as PUBG was the first battle royale action game to hit the market with Free Fire using many elements that first appeared in that game.
“If Krafton can show that they were the first one to come up with those game elements and they are clearly in Free Fire, then you have that substantial similarity that supports copyright infringement,” he said.
Gambino added that the reasoning behind suing Google and Apple might be to apply more pressure to Garena/Sea to come to the table for some sort of settlement or licensing agreement. But beyond that, if Krafton wins it could open the door to litigation against other battle royale games such as Apex Legends or even Fortnite (again).
Gambino believes that Garena and Sea have two options: “They can say, ‘All right you've sued us now and we don't want Free Fire taken down so let's cut a licensing deal.’ The other option when you have this much money at stake, is to spend it on litigation.”
Key Takeaway: Because Krafton did not file for a preliminary injunction asking the court to remove Free Fire from any platforms, Garena and Sea will likely spend the millions of dollars it is going to take to fight in court over the next two - three years, all while continuing to generate hundreds of millions of dollars a year from the game. On the other hand, if Krafton prevails, other battle royale game makers better be prepared to be the next target.
Riot investigates TSM CEO Reginald over bullying allegations
TSM CEO and Founder Andy “Reginald” Dinh is being investigated by Riot Games and his own organization after multiple current and former employees accused him of bullying and verbal abuse at work. Wired reports that both investigations have been ongoing since late 2021, with Riot's being handled by O'Melveny & Myers LLP and TSM's being handled by an "independent subcommittee," outside legal counsel, and a private investigator.
Several employees told Wired that TSM is dominated by a culture of fear. Dinh allegedly verbally abused and yelled at players and employees, with some claiming that he called them "stupid" or "worthless." He allegedly berated employees after hours and yelled at them publicly for the sake of making an example of them, according to the report. In addition, TSM's CEO is accused of bullying pro players, causing several of them to cry.
In an email exchange with Wired, Dinh said that he sets “an extremely high bar,” and when he feels that someone is not delivering, he “directly and bluntly” shares that feedback. Nevertheless, he admitted that his “vocabulary was at times too harsh and ineffective.”
This is not the first time that Dinh has gotten himself into trouble with Riot. He reportedly was fined $5K USD for a Tweet he made against Cloud9 player Philippe "Vulcan" Laflamme earlier in February claiming that the latter would be “out of a job” if not for the LCS.
While Riot did not reveal any further details about the announcement of its findings, TSM expects to reveal the results of its investigation later this month.
Key Takeaway: Many of the most successful esports organizations are helmed by outspoken former players ready to go to war on social media. The results of this investigation into TSM could have ripple effects across many of the teams that were built in the early, chaotic days of League of Legends.
Riot is working very hard to distance itself from its own toxic workplace culture and Activision Blizzard continues to feel the effects of managing similar allegations poorly. There is a reckoning taking place across the entirety of the esports industry and it is likely that more allegations and investigations will come to light over the next several years.
How can we serve you better
We hope that you’ve enjoyed and benefited from reading Esports Business Insights from AFK Gaming over the last several weeks. Now we need your input and feedback to make this newsletter the best that it can be going forward.
To help us grow and allow us to continue providing more exciting stories and insights on the biggest developments in the esports industry, please fill out our reader feedback survey.
Krafton wins $10M lawsuit against PUBG Mobile cheat makers
U.S. and German courts have ruled in favor of Tencent and Krafton in a lawsuit filed against a hacking group that designed cheats for PUBG Mobile. The group has been ordered to pay the developers $10M in damages and reveal the process through which the cheats were built into the game.
IEM Katowice 2021 returns to LAN and will feature a live audience
ESL has announced that fans will have the opportunity to attend IEM Katowice 2022 for the first time since 2019. The tournament will feature a combined $1.5M prize pool, StarCraft II and CS:GO competitions, and will aim to celebrate ten years of IEM Katowice.
Take-Two acquires Zynga for $12.7B
In what would be the biggest acquisition in the video game industry, Take-Two Interactive is set to buy Farmville developer Zynga for almost $13B. According to the company this acquisition is part of its strategy to diversify its portfolio and establish a “leadership position in mobile.”
Fnatic partners with L'Oréal Men Expert
Fnatic has announced that it has signed a partnership deal with L'Oréal Men Expert, a deal that will see the esports organisation and the health brand teaming up for a variety of activations. Fnatic will also integrate the health brand into one of its web series, pregame social media content, and its jersey.
Immortals sign multi-year naming rights deal with Progressive Insurance
North American esports organization Immortals has signed a multi-year naming rights deal with Progressive Insurance. As a result, the LCS team will be rebranded as Immortals Progressive.
On the horizon
The 2022 League of Legends season finally resumes this week with the LCS, LEC, LPL, and the LCK kicking off. If Riot Games can manage to pull off yet another successful season across its various regions, it could lead to an even more one-sided PC MOBA market.
With Valve under pressure and the Dota 2 esports ecosystem in disarray, Riot has an opportunity to consolidate its lead in the MOBA esports market and perhaps make a significant foray into the Eastern European and Southeast Asian regions, where it has traditionally struggled.
Valve, on the other hand, will need to act swiftly to prevent esports pros from abandoning professional careers in Dota 2. Already, several players have publicly announced their intentions of shifting their focus to streaming. With TI allegedly being considered a ‘passion project’ for the company and TI being a relatively minimal source of revenue, it will be interesting to see if this results in Dota 2 going down the same path of the now abandoned Team Fortress 2 esports scene or if it can recover and follow in the footsteps of CS:GO.
People on the Move
With Envy Gaming taking over the lease for Esports Stadium Arlington it looks like some of the current staff has been laid off. So far we can confirm that Director Of Corporate Partnerships Ben Collincini, Director of Global Partnerships Tyler Wentz, Manager of Partnership and Event Fulfillment Stephanie Mayer, and Chief Revenue Officer Chino Lee are no longer with the company.
Other notable moves this week:
Nathan Lindberg has left Twitch after more than six years with the company.
Andbox has hired James Frey as its new CEO.
Jeff Pabst has left FaZe Clan for an executive role at talent agency Loaded.
Mohammad Ali Hasan joins Bearclaw Gaming as chief legal officer.
Matthew Geyer named vice president of gaming at WWE.
Han Zhung Looi takes on the new role of specialist, global partnerships at Secretlab.
Aaron Chambers has been promoted to global head of PlayStation esports product and programs.
Haven’t subscribed already?
Get a weekly recap of all the latest developments in the global esports industry.
Insights, analysis and opinions on the above provided by our team of experienced journalists in collaboration with thought leaders across the global esports industry.
How can you support this initiative?
1. Invite your colleagues. (only those that you believe we’d truly add value to)
2. Give us your unfiltered feedback.
3. Send us tips about developments that you would like to see covered.
4. Reach out to us using afkgaming.com/contact, if you think you could provide a unique insight in collaboration with our writers.
5. Fill out our reader feedback survey.