How The Saudi Takeover Of Esports Happened #1

The significant majority of the esports industry will be in the hands of the Saudi Arabian government for the foreseeable future. Here's how we got here.

This week saw the news that the Saudi Arabian state, through the vast wealth of its Public Investment Fund, had acquired another ailing esports property that it would use to further expand their ever tightening stranglehold on the industry. The Electronic Sports World Cup hadn’t run a tournament since 2018 but is now set to be the brand that will be used the esports component of the Gamers8 festival in Riyadh. They wasted no time in installing a puppet at the helm, Ralf Reichert who was the co-founder of ESL whose company sold out to the Saudis in September last year. Although industry news doesn’t usually make much of a ripple in player circles many seemingly felt the need to publicly post about these developments, which would have been a fascinating phenomenon were it not for the hashtag #ad at the end of their positive musings.

Increasingly there is nowhere to go in esports that is untouched by the Saudia Arabian state and the majority of the space seems to think that is just fine. After having killed the golden goose of venture capital, lied to every sponsor, milked the crypto cow till it was dry and complete backroom deals with representatives of Russian oligarchs, the low rent hustlers that have brought this industry to its knees have found a new sugar-daddy, one for whom they are happy to be down there for. See how they shamelessly lined up at The New Global Sport Conference, a begging bowl in one hand, a breath mint in the other and absolutely no scruples to be seen anywhere.

It represents a grotesque betrayal of the founding principles of esports, particularly jarring when it’s being done by many of those who were there before even I was. For me, it is also surreal to see so many people who have at one point or another lecturing me or my colleagues about our viewpoints or behaviours, suddenly co-sign human rights abuses that go against everything they performatively sermonised about. I’ve written about this behaviour extensively, a new type of hypocrisy where the person engaging in it is absolutely convinced they can still stand for the values their paymasters despise. You know the type… Morons who call moderate Western conservatives “nazis” while sliding into bed with genuine theocratic fascists… Clowns who see no conflict between waving a rainbow flag in June before working with a government that tortures, imprisons and executes homosexual people… Halfwits who make a public showing of how bad gambling is because it ruins lives actively promoting events that are designed to obfuscate the mass murder of immigrants or war crimes. This is something happening in sports too, like the example of a football player who wanted all the plaudits from advocacy groups for simply wearing rainbow laces not understanding the criticism now he plays for a team in a country where if he wore those laces he’d be jailed. You know it’s bad when an overtly satirical piece I wrote to condemn this type of behaviour was seen as genuine by many.

As one of the few journalists covering this, and it’s understandable at least why that might be the case, I am often asked what can “we” do. Well, by all means boycott the events, but it won’t make a difference. The die is cast and soon Saudi will own not just the leagues, tournaments and the production companies that run them on a freelance basis, they will soon own the teams that compete in them too. Eventually all roads will lead to Saudi because that is what they want and the only way to stop that is for people to say no to the money. I’m many things but stupid isn’t one of them. Esports as we knew it is dead. It’s a Saudi regime entertainment product now,  one that will be used to normalise atrocities and to encourage future generations to adopt political apathy ahead of its scheduled arrival. You can’t do anything.

The second most popular question is “how did this all happen” and that is one probably worth addressing. Maybe one day things will change and we will be in a position to hold accountable those who lacked the moral principles to truly look out for esports best interests. Of course by the time judgment day arrives they will be nowhere to be seen, sipping a breakfast mimosa in their remote beachfront mansion without a care in the world but their stock portfolio. No, this is a story where the bad guys win and many of you played a part in that.

Indifferent Fans

Let’s start there then. The first thing that primed the esports industry for the Saudi takeover was the fans. There has been a huge disconnect between expectation and commitment in the average fan’s brain that sent us into the financial spiral we’ve been in for approximately 14 years. In the early days it made sense to give away the “product” because we were desperately trying to mainstream a niche within a niche. It’s hard to believe now but gaming culture wasn’t mainstream coming out of the 90s and if you need a yardstick to judge the accuracy of that statement the South Park episode “Make Love, Not Warcraft” was released in 2006. The knowledge that there were groups of people building entire competitive ecosystems for gamers just wasn’t on the normie radar.

After a hard reset with the 2008 global financial collapse and then the advent of streaming and video technology the reach was greatly increased and people by and large liked what they saw. What started out as thousands of enthusiast viewers became tens of thousands and then hundreds of thousands, many of them casual viewers that were there simply because it seemed to be the next big thing. This is the moment where everything got fucked up because just as the mainstream were about to open the door for us on the basis of our audience size no-one actually wanted to ask the vital question which was “would any of these motherfuckers pay for this shit?”

As we’d find out not many would and so the supposed “golden years” of esports were in fact little more than debt management and robbing one party to pay off another. The fans rejected pay per view, they rejected sponsors they didn’t like and refused to buy products from the ones they did. They whined and tanked exclusive broadcast deals and complained about ticket prices. All of which would be fine if their expectations were in line with the fact that they refused to contribute anything meaningful by way of a revenue stream. Of course, fans being fans, not only did they not temper their expectations they actually demanded more. They wanted the best production, their favourite commentator with a $10k a day rate, their team to sign the best player and win all the time. They wanted award winning TV level production with no sponsors or ad breaks getting in the way and huge prize pools for the competitors. All of these demands and more had to be met and it had to be free. After all, if the viewership number is big that’s all that matters, right?

There are two things that are incredible about this. The first is that there’s a cult of cretins that still push this bullshit today even though we have years of data and evidence that show it’s complete horseshit. The second is that at the time, despite it being so abundantly clear it was doomed to failure, the stakeholders and industry leaders actually agreed to this arrangement. They pandered to the fans, they did everything they could to appease them without ever taking a serious inventory of how many real fans there actually were.

You see, I hate to say it as bluntly as this but being a “fan” of something, having the nerve to call yourself a “supporter” provides nothing of worth in and of itself. Sitting at home watching a Twitch stream and rooting for a specific team to win is worthless. At that point you’re not a fan, you’re a rubbernecker with delusions of importance and should be treated as such. Put on a jersey you bought, fire up the stream on a PC you picked up with a referral code, pay the $4.99 to watch it in 4k and buy a ticket when the finals come around… Now you’re a fan. Now you may have your sense of entitlement and make your selfish, shortsighted demands. This is the deal that sports fans have made for decades and it works. The sad truth is the average esports fan would simply go and do something else if they had to pay just a single dollar to watch a tournament and for some reason we still push the myth that esports is the next big thing.

I’m not saying that having a paying fanbase would have stopped greed and selling out somewhere along the line but the fact that esports has run on fumes for years means that Saudi can come in, buy everything and do it for relatively cheap. After all, they don’t care whether the fans pay or not at this stage. All they care about is getting your attention and it’s clear that they do.

Incompetent Management

Contrary to how the average team owner, particularly the ones from America, make it appear running an esports organisation isn’t difficult. I’ve been management in several and ran my own so I think I get to say this. It’s like any other business. You hire the best people you can afford to perform jobs to the best of their ability, which you assess prior to their hiring. If you succeed and make money you can reinvest and maybe aim for better performance by replacing people along the way or hiring others you believe can improve your existing team. This is all balanced by how much revenue you generate and you should have a set target for when you believe you will become self sustaining beyond the initial investment. If you miss that target, your business failed and you go do something else. In an esports context you know about the brands that succeeded and you won’t have heard of the thousands that have fallen by the wayside down the years.

The problems all started when owners simply couldn’t adhere to this simple model. First it was that they wanted to “win at all costs” and that meant offering insane contracts to players they believed were the best. In esports players do not generate revenue in the same way sports stars do. The fans do not buy their merch in record numbers in the same they do when Messi signs for your club. Esports players shy away from media work and most esports organisations don’t really know how to monetise media anyway. Players also have relatively short careers and their peak can last a single patch in video game terms. This reality leads most well adjusted people to conclude the single most irresponsible thing you can do as an esports owner in the ecosystem is overpay the players… So of course that’s what they all did. They simply HAD to have the players they want, they simply HAD to win everything, they simply HAD to steal the limelight from every other organisation out there.

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When the ultimate hard reset happened in 2008 the old Warren Buffet quote – Only when the tide goes out do you learn who has been swimming naked – was proven to be the truest thing ever said. We lost lots of people that had unsustainably achieved their excellence. When esports bounced back in 2010, propelled by new games, new tech and expanded reach, many of the owners that had survived the financial collapse of two years previous developed delusions of grandeur. Businesses that should long have been viable, that were only still operational due to secret bankruptcies or rebrandings that separated them from debt were now

Failing to recognise the new wave of investment was a glorified bailout. The new normal was public facing owners, many of whom were former players or personalities and therefore came preloaded with of narcissism. Then by virtue of being the public faces proselytizing about how the esports dream worked for them they were the ones best positioned to take the first waves of venture capital money and investments. You can imagine what they did with it. They overspent. On everything. Player salaries spiralled out of control, techbro style offices were rented, dozens of superfluous staff were hired to be little more than professional buddies and suddenly every esports brand was in startup mode.

Every time the investors popped their head around the corner to see how they were doing the feedback was uniform – “we’re doing great, just look at these numbers” before handing over documents and decks. It mirrored the exact kind of lies companies like Facebook told to their advertisers but ultimately more heinous in terms of the wide reaching industry consequences. When the numbers couldn’t be fudged then in lockstep they just invented new metrics and assured everyone profitability was right around the corner. All it was going to take was one more afterparty, one more collaboration with a popular rapper, one more influencer deal, one more energy drink launch…

“Then I told them we’d be profitable by year three, we just needed another $60 million…”

Now we are all living with the consequences of their actions. The word “esports” is a joke among investors, just another buzzword that has fallen by the investment wayside like so many before it. Sponsors have learned now that to do any kind of deal with an esports operation is irresponsible, the return of investment a mirage and the partnerships predicated on lies. Games developers increasingly view the orgs necessary for salaried pros as parasites and wish very much to cut their entire section out of the pyramid. So they downscale, “make adjustments necessary to ensure our longterm survival” as they put it but the cutbacks necessary to eke out an existence in 2023 have only affected the rank and file… You won’t see any of the people who brought us to this ruin having to sell one of their Porsches any time soon. Eventually when they sell up their share of the company they put secondary to the fulfillment of their own pathetic fantasies they will walk away with millions and immediately be given millions more in seed money for whatever next harebrained scheme they come up with.

And so just as esports universally becomes a product not worth owning one party enters the space with sums of money that cannot be counted and no consideration as to whether what they spend it on is wise or not. Because of American esports owners there’s only one bidder left at the esports auction… SOLD to the gentleman wearing the shemagh in the back row. No more lots today.