The massive terms shocked both the cryptocurrency and esports industries when cryptocurrency exchange FTX announced a 10-year, $210 million sponsorship and naming rights deal with top esports team Team SoloMid (TSM) in June 2021.
When we look at both esports and cryptocurrency we see how both are dominated by young, tech-savvy adults who grew up around the video game industry, thus there is a strong overlap in the participants. They cherish digital goods and have seen as esports and cryptocurrency have grown from niche pursuits into sizable industries.
In August 2021, FTX announced a seven-year sponsorship agreement for Riot Games' League of Legends Championship Series (LCS) league. Financial details of the agreement weren't made public. In April, the exchange signed Brazilian team Furia to a one-year contract worth roughly $3.2 million, according to the club's statement to Esports Insider.
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Such agreements occurred at the same time that FTX also lavishly spent on traditional American sports, including agreements with Major League Baseball, the NBA's Miami Heat, and the Golden State Warriors. Meanwhile, athletes like Tom Brady and Steph Curry served as investors and brand ambassadors. On Decrypt's gm podcast in January, Bankman-Fried assessed the effect of its esports decisions.
Interestingly enough, there have been a few high-profile instances of executives in the esports industry moving into key positions in the cryptocurrency industry as well. Prior to leading YouTube Gaming, which broadcasts esports competitions, Ryan Wyatt worked for Major League Gaming (MLG). He is currently the CEO of Polygon Studios. Before co-founding RTFKT Studios, the NFT firm that Nike eventually acquired, Benoit Pagotto served as team Fnatic's brand and marketing director.
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There are so many Esports entrepreneurs that require funding, and crypto corporations want the esports audience. A lot Esports teams have long been known to lose money in the short term in the hopes of eventually being compensated as the business expands and draws more attention. Along the process, countless leagues and teams have disintegrated and aged.
The difficulties of sponsoring a team have grown even more apparent as more esports teams go public, notably the David Beckham-backed Guild Esports. Well for instance, Guild had to reduce workers after reporting a roughly $6 million deficit for the most recent half-year period. After losing $7.9 million in 2020, the team Astralis reported a net loss of $5.2 million for 2021.
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FaZe Clan, which became publicly traded on the NASDAQ in July after a $725 million SPAC merger, reported a $36.9 million loss for 2021 on the basis of $52.9 million in revenue. Now on the other hand, according to Hitmarker, the only team to reveal positive financial information for the year was the Danish esports team Copenhagen Flames, which celebrated earning a $6,351 profit for 2021.
Chris Hana, former CEO of the esports business journal The Esports Observer and vice president of business development for Kolex, proposed that NFTs capitalize on the same kind of need for digital status symbols as CS:GO skins do. Other similarities that he notices include the fact that esports have seen a comparable backlash to crypto, which is currently facing it.
The booming industry is expanding on Web3 despite skepticism. In January, well-known team G2 Esports revealed a Solana-based NFT collection that acts as a key to a closed "Samurai Army" fan base.
Now that CS:GO has been altered to use the Lightning Network to award players with Bitcoin rewards. A growing number of NFT game developers are holding their own tournaments with significant prize pools in the near future.
Now, the Esports and Cryptocurrency nexus is going full circle.
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