AFK Weekly: FaZe Down as SEC Filing Reveals Business Woes
Hello everyone! Russian organization Virtus.Pro has had quite the tumultuous period after Russia’s invasion of Ukraine started in February. The team was barred from competing in tournaments such as the GAMERS GALAXY: Dota 2 International Series Dubai 2022 and the ESL Pro League because of its apparent ties with the Russian government.
Then in a move that can only be described as a PR disaster, it blamed “cancel culture” for its ESL Pro League ban, inviting flak from all corners of social media. Eventually, it seemed like it had distanced itself from esports for the time being, with its rosters competing under ‘The Outsiders’ tag. However, it has once again been thrust back into the spotlight thanks to the actions of one of its Dota 2 players.
VP’s Ivan "Pure" Moskalenko drew the letter ‘Z’ in an official Dota 2 Pro Circuit game when playing against Mind Games, a Ukrainian organization featuring several Ukrainian players. The letter ‘Z’ is reportedly the main symbol of public support for Russia’s invasion of Ukraine. Despite the player claiming that he “accidentally” drew the symbol on VP’s social media handles, the team was disqualified from the tournament as a result of this action.
In response, the organization issued a statement in which it disclosed that it had conducted an internal investigation but did not divulge its findings. The team also called the severity of Valve’s punishment “shocking” and terminated its contract with the player for his actions that caused the disqualification.
Incidents such as these only serve to further distance Virtus.Pro from a potential return back into mainstream esports. With a deteriorating brand and no signs of sanctions against the organization being removed, we may see it exit the industry in the near future.
- Vignesh Raghuram, Supervising Editor, AFK Gaming
FaZe Clan’s planned SPAC merger ahead of IPO listing in danger of collapsing
FaZe Clan's planned $1B USD public listing via a merger with SPAC (Special Purpose Acquisition Company) B. Riley Principal 150 Merger Corp. (BRPM) could be in danger after its latest merger filing with the U.S. SEC (Securities and Exchange Commission) revealed ongoing financial problems with the company.
According to BRPM’s amended S-4/A filing, FaZe failed to meet the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization projections), falling short by $9.74M because of less than anticipated transaction proceeds, increased revenue costs, additional executive hires, and a reduced production slate and budget for content. In addition, the report stated that FaZe's financial performance in 2022 may differ from what was forecast, and that the results for 2023 through 2025 may also be affected.
Additionally, it expects that public stockholder redemptions will exceed the Minimum Proceeds Condition, resulting in less than $218M in transaction proceeds, which may delay the company's acquisition strategy and limit its international expansion plans.
As a result, the FaZe Clan merger may be dead in the water according to Sports Business Journal’s sources, which could significantly hinder FaZe Clan’s plans to go public.
Key Takeaway: FaZe Clan is arguably the most well-known esports organization on the planet and its valuation was lauded by the esports industry as proof that there is real value in investing in the space. This latest filing shows that high valuations for many of the largest esports organizations in the world may be exaggerated and problematic. For FaZe this could be the end–or at least a long delay–in its plans to become a publicly traded company.
Riot Games introduces Valorant Pro Leagues featuring a new partnership model for 2023
Riot Games is overhauling its Valorant competitive esports format for 2023, which will now see the introduction of three regional leagues for the Americas, Europe, and Asia. Riot will operate in a long-term partnership model similar to League of Legends, with one major difference: there is no entry or franchise fee for participating teams. This is in stark contrast to Riot’s franchise system that has been implemented for League of Legends esports, where the company charged tens of millions of dollars for a franchise slot in its premier esports leagues such as the LCS, LEC or LPL.
Instead, Riot will “incorporate long-term partnerships with no entry fees to a select number of teams to ensure continued long-term stability for the world’s fastest-growing esport.” The company also stated that it will financially support "teams that meet the selection criteria" with an annual stipend and exclusive opportunities to collaborate on unique in-game activations and products.
These international leagues that feature weekly competitions and LAN events will serve as the qualification system for Valorant’s Masters and Champions tournaments, replacing the existing regional-tournament based structure.
Riot also announced that it would launch domestic leagues and a new competitive in-game mode that will directly integrate into the competitive circuit, giving aspiring talent a chance to play in the international leagues even if they’re not part of the “partnered teams.”
Key Takeaway: Valorant has been a constant source of esports innovation for Riot. From the first fully supported ecosystem for marginalized genders to now finding a way to do franchising that doesn’t incentivize outside investment, the game is setting a new standard for what publisher support looks like in the modern era. This model also creates far more opportunity for inter-region rivalry than the League of Legends structure, which can only serve to drive narrative and increase viewership. If we look back in three years and Valorant has claimed the title of World’s Biggest Esport, this new model will be a big reason why.
BLAST is partnering with sports solutions firm The Sports Consultancy to find suitable host cities for BLAST Premier’s 2023 season.
Rainbow Six Siege publisher Ubisoft could be a potential buyout target by several private equity firms, according to a report by Bloomberg. Talks are early but firms like Blackstone Inc. and KKR & Co. (which has made multiple investments in Epic Games) are interested in the potential acquisition.
Activision Blizzard’s Q1 2022 financial results revealed a 22% year-over-year decline in net revenue to $1.77B, while net bookings decreased 29% to $1.48B. Net income for the period also went down 36% to $395M. Losses have been attributed to Call of Duty’s sales tanking and "product cycle timing" at Blizzard, along with an “increase in legal and other professional fees,” primarily due to costs associated with its proposed acquisition by Microsoft.
The 2022 LCS Spring Split playoff finals series between Evil Geniuses and 100 Thieves peaked at 387K viewers, according to Esports Charts. This was significantly lower than LEC Spring 2022 (735K peak viewers), the LCK Spring 2022 (1.37M peak viewers) and only slightly higher than CBLOL Split 1 2022 (306K peak viewers) which many consider as a minor region.
ESL Gaming has expanded its partnership with data and analytics company Nielson by three years, enabling the former to use Nielsen’s Quality Index Media methodology to regularly report monetary valuations to its brand partners and advertisers.
Unleashed Brands (a portfolio of companies that claims to help kids learn, play and grow) has acquired XP League, a youth focused esports league that claims to offer video game competitions for elementary, middle and high school students, and provides individualized training for coaches and players.
The Overwatch section of Twitch broke 1.5M concurrent viewers for the first time ever thanks to the launch of Overwatch 2 PVP beta. Fans watched streams en-masse to secure access to the beta, bringing Activision Blizzard’s hit shooter back to the forefront of the streaming site once again.
Team Vitality extended its partnership with electronics manufacturer Philips Monitors in a multi-year deal that will see the latter become the exclusive monitor partner and be featured in the jerseys of the organization’s League of Legends and FIFA teams.
Team Liquid and Alienware unveiled a new esports facility called The Pro Lab, which claims to be the industry’s first data-centric, insights driven training program for esports athletes.
Telecom company Globe has launched a "Game Well Played" campaign in the Philippines to break the stereotypes and stigmas about gaming and esports. The campaign was launched with the #KakalaroKoYanWithGlobe movement in which popular game personalities described how gaming had positively influenced their lives.
Over 98% of Activision Blizzard shareholders have approved the proposed $68.7B takeover by Microsoft. However, the planned merger is not finalized and still requires regulatory approval from the Federal regulators in the U.S.,and other jurisdictions. The companies expect the deal to close by June 2023.
A Labor complaint was filed against Epic Games at the National Labor Relations Board, accusing the firm of refusing to hire someone because of their labor advocacy activities and support for unions. The complaint was reportedly lodged by Cher Scarlett, a former employee at Activision-Blizzard and Apple.
People on the Move
April closes with a strong list of movements and promotions in the esports and gaming industries, but as the global economy begins to feel pressure from supply chain woes, inflation and a stagnating U.S. economy (and investors become concerned about the bottom line) you can expect to see a number of layoffs like what happened at Netflix this week.
Here are this week’s movers and shakers:
Tiffany Lam joins Riot Games as its new creative director.
Jared Berbach trades his job as strategic product leader for VALORANT to a new role as game director on Wild Rift at Riot Games.
Jay Massaad announces his departure from Berlin-based esports venue LVL.
Damian Estrada announced that he is leaving 100 Thieves and his role as director of product marketing.
Alyssa Homan jumps from Activision to Blizzard Entertainment to take on the role of senior design lead for Overwatch and Overwatch League.
Christopher Lee leaves Netflix Games to rejoin Microsoft as the new GM of XBOX portfolio planning and partner marketing.
Feng Wu joins Cloud9 to take on the role of lead product manager.
FaZe Clan promotes Nikhil Jayaram to the role of director of talent.
Activision Blizzard promotes Matt Reshke to senior manager of product - Call of Duty Esports.
Alexander Lin joins Activision Blizzard as its new influencer relationships manager for the Warcraft franchise.
Vinayak Rao leaves his gaming-focused biz dev role at META (Facebook) to lead game-related investments at VC fund Fundamental Labs.
Aaron Moore has joined marketing firm Wasserman to handle esports-related partnerships for crypto exchange FTX.
Stephanie Hawkins leaves Immortals Gaming Club to join Wavemaker US as its new associate director of sports & live, with a focus on esports and gaming.
Michael Wyatt joins Riot Games as principal game designer - MMO R&D.
Aidan Redman exits GAME Digital to join The Esports Awards as its new community manager.
Marta Juras has been promoted to business development associate at Win.GG.
Kristeen Laut exits NAMCO BANDAI to join Capcom USA as senior partner marketing manager.
Andy Gentile jumps from Vicarious Visions to Blizzard to work as a designer on Diablo IV.
Maurice Tan is promoted to the role of director of digital brand communications at Corsair.
MIT Sociology Professor T.I. Taylor has joined Juked's board of advisors.
Kansas City Pioneers CEO Mark Josey joins the Kansas City Esports Coalition advisory council.
Zachary Usinger Smith-Son leaves Crunchyroll to take on the role of senior writer at Subnation.
Thach Quach gets promoted to the role of EMEA director of marketing at SEGA of America.
Former Kabam exec Kris Davis joins PlayStation as senior director of mobile.
Alicia Sedlock joins PlayStation as its new senior software engineer.
Pinnacle Solution appoints former SIS Betting executive Rohini Sardana to the role of business development director.
Joe Whelan has left Disney's streaming division to take on the role of head of sales, brand partnerships at DraftKings.
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