Why investor Guinevere Capital picks iconic rugby ground for esports’ home
ESPORTS: Excel Esports, the UK-based professional competitive-gaming team, recently made London’s iconic Twickenham Stadium its official residence, a move that is key to the strategy of the squad’s majority owner Guinevere Capital.
MediaTainment Finance met David Harris (pictured, above), Guinevere Capital’s Australia-based founder/Managing Director, at the stadium to learn why his private-equity firm chose to bet on esports, and on Twickenham, which hosts the England rugby union games, one of the world’s oldest traditional sports.
Harris, the former general manager at Australia’s National Rugby League and an ex-TV producer, admits he originally wanted to fund major traditional-sport teams in football, rugby or basketball when Guinevere Capital first opened shop in 2016.
But the more he looked into the speedy growth of the still relatively young esports sector, the more it appeared to be a no brainer.
“I soon came to the conclusion it was silly to fight the tide against traditional sports when you could surf the wave of esports,” Harris says.
“The majority of revenues for traditional sports come from TV deals. And advertising revenues are plummeting and subscriptions revenues are also plummeting,” he declares.
“I think esports is on the crest of a wave that is transitioning from the traditional broadcast media into a new environment, particularly digital. Also, we had that first mover advantage in Australia and that has proven to be a shrewd move.”
Today, his assets include ambitious top-flight teams like Excel Esports; Australian squads LG Dire Wolves, Supa-Stellar and Sydney Drop Bears; plus the gaming media platform The Next Gamer.
Guinevere Capital also controls the dedicated training facilities known as the Esports High Performance Centre, which is located inside Australia’s historic Sydney Cricket Ground.
And now, the portfolio includes XLHQ, Excel’s training operations at Twickenham Stadium. The business is equally being extended to Berlin, a thriving hub in the international esports scene.
Harris uses his extensive experience in the affluent legacy-sports industry as the benchmark against which to develop his interests in the still growing, albeit at an exponential rate, esports.
For the uninitiated
Esports is one of the world’s truly digital-first media-and-entertainment activities, boosted by young video gamers’ hunger to use high-speed Internet platforms to not only play each other in any part of the world, but to also watch each other play.
What began as an underground pursuit evolved into a loss-leading business for video-games publishers. They used esports to market and boost sales of their physical console titles.
As millions of mostly Millennial and Gen Z fans tuned into streaming platforms like Twitch to see their favourite players in action, so too did paying subscribers and sponsors. Esports was making money.
At the professional level, it has metamorphosed into a standalone business in the past decade. Experts predict it will be generating billions from ticket sales at live tournaments, subscriptions to competitions streamed online, and sponsors’ support.
Harris, however, advises caution as several industry observers get carried away by the hype that inevitably accompanies the rapid rise of any new money-making leisure activity.
“Esports still has its challenges. It has an amazing reach but still hasn’t cracked the model to fully commercialise the fan base. Traditional sports monetises $15 to $40 per fan across some of the big American sports whereas you are monetising $2 to $3 per fan in esports,” Harris observes.
“Everyone who has heard of esports gets excited about it but they still do not understand it. A lot of entrants are piling in at the moment and there is a lot of interest and, just like whenever there is a boom, some will get it right and some will get it wrong. We feel we’ve got the model right.”
The Guinevere game
Harris’ approach is to work closely with the publishers of the games that Guinevere Capital-backed esports teams specialise in. These include the multiplayer online game League of Legends (LoL) created by US behemoth publisher Riot Games, a subsidiary of Tencent Holdings, the Chinese tech and entertainment multinational listed on the Stock Exchange of Hong Kong.
Guinevere Capital also collaborates with the NASDAQ-listed Activision Blizzard, which publishes the phenomenally popular title Overwatch.
The plan is yielding results. Excel Esports has clinched a place among the exclusive 10 franchise teams participating in the European edition of Riot Games’ League of Legends Championship Series (LEC).
Another strategy is to set up its esports teams’ training grounds in the vicinity of high-end professional sports communities, like the top-tier rugby teams that play at the 82,000-capacity Twickenham site, Europe’s fourth largest sports stadium (pictured, below). “We are strong believers in bringing together the traditional sports and esports worlds,” he explains.
“Part of the reason is the narrative required to be taken seriously by sponsors. It helps if they see something they can relate to. An environment like this also inspires our players to be more professional. And we tap into some of the expertise here, such as the trainers.”
Kieran Holmes-Darby (pictured, below), Excel Esports’ managing director, also explains why having dedicated training facilities is vital.
“Our players do not specialise in any other games, apart from League of Legends. We field a ten-person squad, of which five compete every week in the LEC and five compete in the UK ERL (European Regional Leagues), so two teams of five effectively,” he says.
“We used to have a gaming house model but with our new XLHQ, we are able to separate working and living spaces, which produces a much better environment for player and staff development.”
Doing the right regulatory thing
As an investor, Harris’ other major concerns are the regulations that could impact esports’ long-term prospects. He supports self-regulation, where the industry creates the required standards and takes responsibility for how it grows its revenues and develops its culture.
“Things like gambling, integrity, drug abuse, all these performance-enhancing drugs are not major issues in esports at the moment. But we don’t want wait until there is a scandal to have a policy or react to it,” states Harris, who is on the board of the Esports Games Association Australia
“We do engage with governments to try and work out where it does fit in comparisons with sports, live entertainment, and or media.”
In the meantime, everyone should keep a close eye on developments that could help or hurt the still-to-mature esports business, especially when he believes profitability is possible in four to five years for investors.
“Everyone thinks esports is going to be bigger than it actually is in the short term, but underestimates how big it is going to be in the long term. We’re seeing such rapid growth at the moment and it doesn’t look like it is going to plateau any time soon. It really would be silly to jump off soon.”