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Sam Mathews and Anne Mathews founded Fnatic as one of the pioneering esports organizations in 2004. Over 14 years, its teams have competed in over 25 games, and its League of Legends squad recently placed second in the world championships, making it the most successful Western esports team in that game. That final match was viewed by more than 200 million people, including 50,000 who watched in a big stadium.
Besides League of Legends, the organization has 10 other teams competing in games such as Counter-Strike, Dota 2, and Heroes of the Storm. And the company has taken its expertise in esports and used it to design its own Fnatic Gear brand of gaming hardware accessories, from headphones to keyboards and mice.
That makes it a standout in esports, a market that’s booming now and is expected to reach $1.7 billion in revenues and 250 million enthusiast viewers by 2021, according to market researcher Newzoo. Fnatic raised $7 million in 2017 from investors that included Boston Celtics ownership organization Raptor Group, MIT Media Lab director Joi Ito, Fractal Design chief executive Hannes Wallin, and Hersh Interactive Group.
Fnatic teams have claimed $8 million in prizes and multiple international championships including the inaugural League of Legends World Championship, seven EU LCS Championships and three separate CS:GO Majors. Based in London, Fnatic has 80 employees and 45 players.
Fnatic also published a book with Penguin Random House named How To Be a Professional Gamer, and it created BUNKR, the world’s first esports concept store, in the heart of London’s popular Shoreditch neighborhood.
Here’s an edited transcript of our interview.
GamesBeat: How much have you grown over the years?
Sam Mathews: We have 11 teams and won $8 million in prizes over the years. We have 80 people on staff and around 125 with our team members. We’re a global team with branches in Southeast Asia, London, Berlin, Los Angeles, and Australia. In 2015, we did an acquisition and moved into esports equipment. We are in hundreds of Best Buy Stores with our Gear brand.
We also do our own research and development for esports hardware, we have a large content and marketing team, and 10 million followers on different channels of social media. We produce a lot of content every day. We employ a lot of people, including a chef for one of the teams. It’s very much like a big traditional sports team. Forbes said our value was $120 million.
GamesBeat: Are esports teams making money yet?
Mathews: As a whole, definitely not. They are investing. In the last two years, a bunch of investors have come in. But everybody has bought into the fact this is one of the major forms of entertainment. Video games aren’t going away. Everyone is growing revenue quickly, at 50 percent rates or sometimes higher.
We were profitable for seven or eight years. We moved into a startup mode three years ago, moved into hardware, and are working to build and scale the business. We’ve raised around $9 million to date. We may do another round next year.
A lot of what we’re doing is developing the whole platform, that marketing capability, and PR to some extent. Mostly it’s content writers, video editors, a lot of the content team, and the events team as well. We do about 30 or 40 events a year.
All of that marketing capability is supporting Gear, but it’s also going into our partnerships team. If you think about what’s happened in the last two years, every brand is suddenly waking up to esports. Today alone we announced a partnership with EE, the English network. We’re going to be doing a Clash Royale tournament with them.
We’re upping our capabilities, and at the same time, player salaries are rising. The facilities we’re building and the innovation–we’re also buying into franchise slots. It’s not a secret that the European LCS is franchising. That’s an 8 million euro buy-in. There’s also money going into buying these long-term–like the NFL or NBA or whatever, you have to buy a franchise spot. Obviously it’s a lot less than those, but it’s still a permanent ride.
GamesBeat: Are you doing the Overwatch League as well?
Mathews: We haven’t gone into the Overwatch League yet. We’ve explored it on numerous occasions. It’s very interesting. We keep a keen eye on it. The number one reason we didn’t go in originally was just because it’s not with the Fnatic brand. As I said, we’re very focused on trying to represent this audience. To do that we have to be Fnatic, not some other new name. We weren’t set up to do that then. But we’re considering it in the future as another part of our operations.
GamesBeat: I know the buy-in is starting to get a lot higher.
Mathews: Exactly. The buy-in gets higher and therefore we need to see more transparency on the revenues. I do know they’ve done pretty well from a revenue perspective. I don’t know if that’s enough to justify the buy-in, but it’s significant progress. Everybody is happy with the progress so far.
GamesBeat: The money listed here is just the winnings, I guess?
Mathews: Right. There’s already been articles. I don’t have any official numbers. I don’t have access to their financials. There are lots of rumors, but there’s also the fact that–there’s the Twitch deal, which was something like a $90 million deal over two years, and then they’ve announced partnerships with Toyota and HP and some other big brands. Rumors are in the $100-150 million range as far as revenue, based on the deals they’ve managed to pull in.
GamesBeat: If you had, say, $12 million in winnings, what part of the revenue is that for the team? I imagine there’s a lot of other revenue, whether it’s merchandise or advertising.
Mathews: Just to give an idea, prize money’s contribution to our revenues is less than 10 percent. We keep a portion of that and give it to the players. It’s a miniscule part of our business. The main revenues are coming from league participation. You get money for playing in different games, whether that’s from broadcasting rights or anything else. You get revenue shares in some games. Sponsorships are the second major way we get revenues, and then third is products.
Products are things like apparel. We do quite a lot of things like clothing and other merchandise. And then our hardware, which is the fastest-growing segment right now. We launched in 2015, and we’re now in Best Buy and Korea and different places. We think that esports equipment is going to be here for a long time, and we think it’s not being done the way players want, and that ultimately the community wants. There’s too much fluff. We want to focus on the core of what people want, and that’s why Best Buy came to us.