Ahead of a three day summit that began today in Paris, France between ESL and a number of Counter-Strike: Global Offensive organizations, DBLTAP spoke with representatives from Cloud9 and Astralis about their approach to the ongoing dilemma about the ESL Pro League and the new B Site league, which will be run by FACEIT and replace ECS, according to sources. DBLTAP has reported in recent weeks that Cloud9 have already committed to the “B Site” league, while Astralis --who initially appeared ready to side with B Site -- have not yet decided on their future.
Below are the following responses by Cloud9 president Dan Fiden to questions DBLTAP asked the Cloud9 organization. (Editor's note: The responses have been lightly edited for clarity and grammar.)
On why Cloud9 has committed to forming and competing in the “B Site” League: Two reasons: First, we need to be clear: CS as structured today doesn’t make economic sense for teams or TOs. In an effort to fix it, TOs have been trying too hard to make it recognizable or palatable to companies unfamiliar with esports in general and CS specifically. This is what things like changing CT and T to offense and defense are about, and it’s why most CS looks like a half-assed NFL broadcast. We wanted to go deep instead of wide, and we wanted to accept and lean in to who we think the CS community is and what they love. It’s why we partnered with Thorin so early, for example. Second, we never intended to avoid a specific TO, and our project is not against any one TO.
I personally spent months working one-on-one with the management of ESL trying to find a middle ground that would work for them and lead the teams down a path to economic sustainability. Unfortunately, those conversations failed. The reason for us is that we were unwilling to grant ESL the broad exclusivity (that) reporters like you are talking about now. We ultimately partnered with FACEIT for a number of reasons, but one of them was that they understood that, in order for CS to thrive in the long term, everyone in the ecosystem needs a path to economic viability — TOs, teams, and players.
On why, if CS is not economically sustainable, how come so many organizations are involved: In 2015, private investment money started to flow into esports at scale. These investors were investing in the promise of esports very generally, based on things like viewership increases. But it was early, and they were investing in all kinds of esports businesses — teams across a wide variety of games, TO’s, coaching platforms, etc. In 2018 and 2019, the investment was much more focused — into team organizations with representation in the so-called “franchised” leagues. There is a reason for that: Investors believe in the direct relationship these teams have with fans and the long term, defensible position they have in these leagues.
Both B Site and ESL has owned slots in their leagues, and that’s because every large company has conceded that this structure, at least partially, is required in order for organizations to have economic stability. Because CS:GO has the best fanbase, viewership, and history in esports, there is an opportunity to solve the economic problems in the ecosystem today, using investor money. But if we can’t solve this issue, investors will shift their money elsewhere. Despite how great CS is as a game and an esports, the money will move into things that are sustainable. Cloud9 makes more money from Rainbow Six than we do from CS right now, for example. Riot will release their shooter. We love CS and believe in CS, which is why we’re not being risk averse about CS. We’re putting millions of our own dollars — Jack’s money, my money, our investors’ money — into doing the harder thing, which is trying to make it work.
People like Jason Lake from Complexity talk about an esports bubble. There is a CS bubble right now. Why? Because it’s a game that has amazing potential, but has never worked economically as an esport. So what happens? Either we solve it, and make it work economically, proving the potential we all see, or we wait for it to pop. Unfortunately the pop will hurt the least economically diversified people most — the players."
On if they were involved in the ESL "EPL Circuit” negotiations and concerns they have for the proposed ESL agreement: I can’t comment on private conversations or negotiations between me and Ralf (Reichert) or others at ESL. That said, I can comment on what’s been reported about the ESL deal. First off, ESL is an amazing organizer of big tournaments like Cologne, and clearly doing a deal with ESL would be the easiest path for us as teams. But let’s be clear, Cloud9 loses between $1M and $2M every year on our CS operation, and I would challenge any top 20 team in CS to prove to me that they’re not losing a similar amount. Today, the majority of revenue for big multi-team organizations like Cloud9 are from sponsorships, and most of these are not game-specific. Most of the orgs I know have not done any allocation of this revenue, meaning a data-driven attribution of this revenue based on the overall reach of the organization by game.
We have, and so we understand pretty clearly how each of our games performs as a business — as a return on the money we spend. CS, while it’s an amazing game from a reach perspective, underperforms. Why? Player costs are as high or higher than any other game, and support costs, including coaching, housing, etc., are higher than any other game. In addition, revenue derived from our event and league participation is lower than nearly any other game. We received roughly $70K from ESL last year, and that’s the biggest league revenue distribution we've received for CS. We spend more than $70K on CS in a single month. On sponsorships, we have, and continue to receive, requests from our partners to be excluded from CS because the content is edgy. That’s all to say, the economics for CS teams are not great. ESL not unreasonably has an economic incentive to create a monopoly in the CS ecosystem. If the reporting is accurate, would have wanted for us to give up exclusivity in fact or in practice across leagues, tournaments, the CS:GO rankings, CS platforms like ESEA, and they would have wanted us to give up these rights for 4+ years. I want to be clear: ESL is a company, and companies are not people, and are not your friends. They are machines built to create monopolies, so I don’t personalize ESL’s decisions at all. ESL wanted these rights to enable them to have a monopoly.
But here’s the thing about a monopoly, once one exists, all leverage disappears for anyone else. So, in essence, the deal required in order for teams to give up monopoly control to ESL would have to be pretty great, right? But the terms being reported aren’t great, at least for teams or players. They wouldn’t allow C9 to break even on CS until ESL was generating roughly $20M in profit annually from CS, or more than 50% margin. In my view, a partnership where one partner is make more than 50% profit every year and you’re not even breaking even isn’t a partnership. Our investors aren’t in esports for fun, and they aren’t in esports to lose money. We’re all in esports because we think it’s a business that can be really big — bigger than traditional sports. So we decided to do the harder thing, and to spend our own money to try to make something new."
On why they believe other teams are leaning toward ESL: I don’t know, genuinely. Some might not have the money to invest in something like what we’re doing. That’s reasonable. However, if you don’t have $2M to invest in CS and you lose $2M / year in CS, how can I view you as a long term partner in building CS? Maybe there are economics between ESL and some teams I don’t understand. I guess others could think we’re going to screw up the product. That’s a reasonable concern — we’re a startup. But we’ve placed our bets on people I think know better than anyone else in CS what the fans want — guys like Thorin. So I like our chances. What’s being reported about the ESL deal is that it’s long term — potentially 6 years. I hope that the organizations and players who weigh in on these decisions are thinking long term. It’s not about what roster is on top today, and it’s not about short term economics. This is about the economic viability of the scene, and making the choices that will fix it."
Below are the following responses by an Astralis spokesperson to questions DBLTAP asked the Astralis organization.
DBLTAP: In which of the two new leagues will Astralis participate?
Astralis: We have yet to make a final decision. There are a lot of good thoughts behind the new league formats and both concepts pose a potential large improvement for the players and the teams, providing the necessary long-term sustainability for all parties. However, we should all be aware that handing the keys to one player could come with a cost to the ecosystem and hurt Counter-Strike at-large, so we have to tread with care.
DBLTAP: What will be the deciding factors for the organization?
Astralis: First, we think that both leagues must be transparent about overall terms. This weekend’s video by Thorin is a good first step by B Site. Valve has made it clear with their September blog post that they won’t allow setups that could compromise the ecosystem, so we should be discussing openly what that is. (I’ll be the first to hold up a mirror in the light of previous critique)
Secondly, while we are all here for the love of the game, Astralis Group - and other teams - have obligations towards our shareholders. Financial returns and sustainability are necessary to keep the teams alive, healthy and continuing to invest in players and infrastructure. The players have found representation in the CSPPA and teams are slowly starting to align on what constitutes healthy participation in leagues and tournaments, so we are generally positive that shortly the industry will have come together for a sustainable future.
DBLTAP reached out to four teams who are rumored or expected to sign with ESL asking for an on-the-record comment, and none responded or agreed.