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Gaming rules the entertainment industry, so why aren’t investors showing up?
As gaming’s popularity reaches epic heights, venture investors’ activity in the industry doesn’t seem to equate with the overall size of the games market. Spurred by an unreal year where traditional entertainment has been upended by the COVID-19 pandemic and consumers find unity in virtual worlds like Animal Crossing and Fortnite, gaming has never been more popular.
Late-stage investors have shown that they have a tremendous appetite for businesses in the gaming industry. They’ve been pouring capital into established gaming companies like Scopely, which on Wednesday announced a $340 million investment round at a $3.3 billion valuation. But venture capital simply hasn’t given the gaming industry and the broader synthetic market the attention it deserves given its place in the entertainment and cultural firmament.
Just ask LeBron “Bronny” James Jr., the son of the NBA’s biggest star, who became a professional athlete this week — as a gamer with one of the most popular teams in online gaming, FaZe Clan. Or look at Unity, the creator of a popular game development engine, whose stock price has nearly doubled since its public offering in mid-September. Since opening trading at $56 per share, the stock has nearly doubled in value and is now trading at $100 per share.
In the first half of the year gamers spent $36.8 billion on games through both the Android and iOS app stores, according to data from SensorTower. New game installs are also up for the year. The app analytics company said that new game installs were up to 28.4 billion over the first half of the year. Annually the 15 billion new game downloads in the second quarter represented a 45.2% year-on-year growth in gaming.
Then there’s Bitkraft, one of the only venture firms to focus on the totality of the gaming industry, which announced the close of its most recent fund, a $165 million investment vehicle. The firm, which added a former Goldman Sachs managing director earlier in the year to capitalize on the opportunity in what the firm calls “synthetic reality” investments, raised $25 million more than its $140 million target. One of these things is not like the others.
“I’ve been in the games industry for 23 years now [and] I’ve always had this huge fundamental conviction of video games not only dominating the entertainment industry but sort of taking up a big part of what society is — where video games create the digital identities that define evermore of what we understand of ourselves,” said Jens Hilgers, Bitkraft’s founding general partner. “We feel that these are times of acceleration … it’s great to see how we’re leapfrogging one or two or three years of the games industry in this crisis and it makes it more exciting to invest in these times.”
The Unity public offering, and its emphasis on markets outside of gaming, seems to prove Hilgers point and show just how much opportunity remains around the notion of synthetic reality in business and entertainment.
“Their thesis around democratizing access to gaming tools by letting hobbyists use the tools for free is smart, if you want to win the market,” said Alice Lloyd George, founder of Rogue Ventures, a new investment firm focused on frontier technologies and gaming investments.
Lloyd George compared Unity’s business to its biggest competitor, Epic Games, and noted that both have broad aspirations. “Both of them want to use their game engines beyond pure gaming,” Lloyd George said of the two big new gaming platform developers. “Unity is really well-positioned because they’re so strong on mobile. That positions them well for AR and VR. And you need onramps for the developers for AR and VR.”
Engagement and the future of entertainment
When Scopely’s co-chief executive Walter Driver talks about the attraction of gaming properties for players — and the reason investors have been willing to value his Los Angeles-based company in the billions of dollars — he talks about the connections between players. “People have found — and investors looking at the space have found also — that people value the connection they’re getting from interactive experiences. It’s not just our relationship with the players, but their relationships with each other,” Driver said. “Inside of most passively consumed media experiences, you don’t have an identity. You don’t have friends.“
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FaZe Clan’s Lee Trink, Troy Carter and Nick ‘Nickmercs’ Kolcheff are coming to Disrupt 2020
Esports, an already booming industry, have taken on an even greater significance in the wake of the coronavirus pandemic. With traditional sports stalled or… er, different, esports and gaming in general have given folks a fresh way to enjoy competition.
Perhaps no esports organization has more clout or recognition than FaZe Clan. That’s why we’re so pleased to have FaZe Clan CEO Lee Trink, investor Troy Carter and world-famous streamer Nick “Nickmercs” Kolcheff join us on the Disrupt 2020 stage next week (September 14-18) to talk all things esports.
Trink, co-founder and CEO of FaZe Clan, has a rich history in the media and entertainment industries, serving as general manager and COO of Virgin Records before being promoted to president of EMI’s Capitol Music Group. At the helm of FaZe Clan, he’s helped build out one of the most followed esports organizations in the world.
Troy Carter has had an equally impressive career in media and entertainment. He was instrumental in building the career of Lady Gaga, among other artists, and also served as head of global creator services at Spotify. He’s now the CEO and founder of Atom Factory and an investor in FaZe Clan.
Nick “Nickmercs” Kolcheff is a professional gamer and streamer who rose to fame as a competitive Fortnite streamer. Uniquely, Nickmercs uses a controller instead of a mouse and keyboard, which has further popularized him among other controller players who crowd to his stream each day. He is currently the most-watched Call of Duty streamer across any platform and is consistently among the top five watched channels on all of Twitch.
We’re excited to chat with this illustrious panel of experts about the evolution of esports, what sets FaZe Clan apart, and what entrepreneurs can learn from the viral growth of the organization over the years.
Pick up your pass to join us at Disrupt 2020 happening from September 14-18. You can get access to this session, founder how-to content on the Extra Crunch Stage, tons of networking opportunities and access to hundreds of startups in Digital Startup Alley with a Disrupt Digital Pro Pass (just $345 for a limited time). Or for those on tighter purse-strings, you can get access to the Disrupt Stage, breakout sessions and the expo for just $45. Join us today!
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Quibi links up with FaZe Clan for a game show that would let winners join the FaZe team
Quibi has linked up with the popular esports team FaZe Clan on a new game show that would let six subscribers for the new short-form streaming service compete for a slot on the FaZe roster.
The show is called “FaZe Up” and it’s an example of the new types of entertainment and game shows Quibi’s looking to try to appeal to younger demographics.
For FaZe Clan, one of the dominant esports franchises in popular culture, the game show is a chance to find new talent and extend the reach of its entertainment studio, gaming teams and fashion line onto another platform. For Quibi, bribery is certainly one way to win an audience.
WndrCo, the parent company for Quibi, is keeping the production in its family of portfolio companies, as the show is being produced by the WndrCo-backed entertainment and sports media company, Whistle Sports.
“We have had an incredible partnership with FaZe and couldn’t be more excited to take it to new heights with this show, especially on a unique platform like Quibi,” said Michael Cohen, president of Whistle. “Whistle is all about incorporating our fans into our content and so the fact that the Quibi audience gets the ability to participate and immerse themselves in this experience is a truly perfect fit.”
Quibi describes the show as part contest, part competition show “and 100% FaZe.” Six contestants, chosen from Quibi’s audience of subscribers, will get the chance to win money and a slot in the FaZe Clan roster.
Directed by William Silva Reddington and produced by FaZe Clan, Nathan Gaines, Dennis Lisberger and Mike Basone, with showrunner Harrison Nalévansky, the new show will use voting tools from Quibi and FaZe Clan’s key members to select contestants for eligible slots to compete and eventually join FaZe Clan.
The six winners will then be flown to the FaZe Clan mansion to live at the house and compete in gaming and reality show-style events to determine who deserves a slot on the team.
“Over the past 10 years, FaZe Clan has not only contributed to the growth of the gaming lifestyle and the esports community, but we have broken barriers and are not afraid to disrupt the status quo,” said FaZe Clan Head of Content Oluwafemi Okusanya. “In 2020, we plan to do the same with content creation and media distribution. The ‘FaZe Up’ show represents our next chapter in content creation with our first premium production effort and in collaboration with innovative partners like Whistle and Quibi.”
The addition of FaZe to the roster of creative talent that Quibi has amassed puts a different spin on the company’s pitch of high-end, short-form content. The company has already attracted Jennifer Lopez, Liam Hemsworth, Catherine Hardwicke and Antoine Fuqua, who are all attached to projects slated to debut on the platform.
Quibi doesn’t debut until April, but it’s teasing updates and information about what’s to come — including more news about “FaZe Up” at Quibi Insider, its newsletter about all things Quibi.
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Where FaZe Clan sees the future of gaming and entertainment
Lee Trink has spent nearly his entire career in the entertainment business. The former president of Capitol Records is now the head of FaZe Clan, an esports juggernaut that is one of the most recognizable names in the wildly popular phenomenon of competitive gaming.
Trink sees FaZe Clan as the voice of a new generation of consumers who are finding their voice and their identity through gaming — and it’s a voice that’s increasingly speaking volumes in the entertainment industry through a clutch of competitive esports teams, a clothing and lifestyle brand and a network of creators who feed the appetites of millions of young gamers.
As the company struggles with a lawsuit brought by one of its most famous players, Trink is looking to the future — and setting his sights on new markets and new games as he consolidates FaZe Clan’s role as the voice of a new generation.
“The teams and social media output that we create is all marketing,” he says. “It’s not that we have an overall marketing strategy that we then populate with all of these opportunities. We’re not maximizing all of our brands.”
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Pro gamer Tfue files lawsuit against esports org over ‘grossly oppressive’ contract
Turner “Tfue” Tenney, one of the world’s premier streamers and esports pros, has filed a lawsuit against esports organization Faze Clan over a “grossly oppressive, onerous and one-sided” contract, according to THR.
The complaint alleges that Faze Clan’s Gamer Agreement relegates up to 80% of the streamer’s earnings from branded content (sponsored videos) to Faze Clan, and that the contract hinders Tfue from pursuing and earning money from sponsorship deals that Faze Clan hasn’t approved.
Tfue’s lawyer, Bryan Freedman of Freedman + Taitelman, took the complaint to the California Labor Commissioner with issues that span far beyond financial contracts. Freedman wrote that Faze Clan takes advantage of young artists and actually jeopardizes their health and safety, noting an incident where Tfue was allegedly pressured to skateboard in a video and injured his arm. Freedman also wrote that Faze Clan pressured Tfue to live in one of its homes where he was given alcohol before being 21 years old, and encouraged to illegally gamble.
From the complaint:
In one instance, Tenney suffered an injury (a deep wound that likely required stitches) which resulted in permanent disfigurement. Faze Clan also encourages underage drinking and gambling in Faze Clan’s so-called Clout House and FaZe House, where Faze Clan talent live and frequently party. It is also widely publicized that Faze Clan has attempted to exploit at least one artist who is a minor.
Faze Clan issued the following statement on Twitter following the news:
A follow-up from FaZe Clan on today’s unfortunate situation. pic.twitter.com/qm6sK8v88B
— FaZe Clan (@FaZeClan) May 21, 2019
Faze Clan claims that it has taken no more than 20% of Tfue’s earnings from sponsored content, which amounts to a total of $60,000. The owner of Faze Clan, Ricky Banks, took to Twitter to make his case, showing the incredible growth of Tfue’s popularity across Twitch and YouTube since signing with Faze Clan.
I recruited Tfue to FaZe Clan in April of 2018. These are graphs from both his YouTube & Twitch channels following the mark of our relationship. pic.twitter.com/c7m3QwsoTZ
— FaZe Banks (@Banks) May 20, 2019
As it stands now, Tfue boasts more than 120 million views on Twitch, more than 10 million YouTube subscribers and 5.5 million followers on Instagram.
Banks also reiterated Faze Clan’s official statement saying that the company has taken 20% of Tfue’s earnings from branded deals, totaling $60,000.
OK LAST TWEET – To clarify Turners contract does outline splits in prizes, ad revenue, stuff like that. But again we’ve collected absolutely none of it with no plans to and that was very clear to him. We have collected a total of $60,000 from 300k in brand deals (20%). That’s it
— FaZe Banks (@Banks) May 20, 2019
The Tfue claim, however, seems to take issue with the content of the agreement, not necessarily its execution, and the general legality of these types of gamer agreements across the esports landscape. Moreover, the complaint alleges that Tfue lost potential earnings due to his agreement with Faze Clan and their own conflicts of interest with various brands interested in a sponsorship.
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