Business of Esports TV: Unlucky Luckbox

(Livestream #131)

In this segment, we discuss Luckbox’s loss in both revenue and their CEO.

The Business Of Esports brings you news, debates, and all the information you need to know about the gaming sector, the world’s fastest-growing market. With Paul “The Profit” Dawalibi leading the charge, and a variety of special guests, BoE TV is the only place to find insider information on the esports industry!

Check out the full livestream here:

Paul Dawalibi 53:20
But the headline got my attention, which is eSports bookies luck box post 5.4 million Canadian annual loss amid CEO departure. And and so the story here is about real luck group, the parent company of Esports betting company lockbox, they reported this loss 5.5 million for 2020. Their nice sports bookie allows fans to bet on all major eSports tournaments. And what’s interesting is basically the CEO stepped down. Just before right, I think just before they announced,

Jeff Cohen 56:16
Yeah, I think so.

Paul Dawalibi 56:18
No, just days after posting their annual performance, sorry. So so they announced the departure of the CEO Quentin Martin, just days after. This is one of the stories, you know, it’s sort of fun sometimes to have business stories where we can put tinfoil hats on and, and sort of come up with conspiracy theories why the CEO would just pick up and leave. According to this article, I think it said that he voluntarily stepped down. Whatever that means.

Jeff Cohen 56:51
How much did they do in revenue? Curious?

Paul Dawalibi 56:55
revenue of 75,000. Canadian

Jeff Cohen 56:59
for the year? Even if it’s a quarter, that’s pretty low. Yeah, I mean, we talked about the other day when I mean, it’s a very interesting. It’s very interesting article, rather interesting.

Paul Dawalibi 57:15
$1,000 in 2019 4000, Canadian dollars,

Jeff Cohen 57:20
that’s like, business of Esports, you know, t shirt revenue?

Paul Dawalibi 57:24
That’s true.

Jeff Cohen 57:26
Yeah, I don’t really want to speculate cuz I don’t know the answer. It’s it’s a pretty interesting story. I mean, you’ve seen a couple of high profile departures. I mean, one, you know, significant bigger, I mean, Matt King from the CEO of fanduel, you know, left this week, and I think that that’s a pretty big job that’s open now, particularly with fanduel, potentially listing, doing a dual listing here in the US, that that will be a seat, that’s, you know, who knows, maybe Quintin Martin’s going to be the CEO fanduel. That’d be pretty cool. But yeah, I don’t know Quinn, and I don’t know anything about the story. So I want to speculate too much. But like, every time I’ve heard him on panels, he sounds good. You know, I think they’ve built a pretty good company. Sounds like they’ve got a good, a pretty strong, you know, stud that’s replacing him. So I think they’ll, you know, they’ll, they’ll be, they’ll do well, but it is surprising to see, you know, who someone who is kind of they’re the face of the company, and obviously the CEO depart with with no real backstory.

Paul Dawalibi 58:27
I mean, they, they say, at least in reporting the results that the calendar of Esports events was impacted in 2020. Right, which is true, right? You had just fewer events to bet on. But again, that none of this sort of like the loss, they lost it, just to be clear, they lost 5.5 million in 2020. But they lost 20 million in 2019. Right? So it’s like, it’s one of these things where it’s not like you can even say he clearly did a horrible job, right? Like, there’s definite improvement in the business revenues up costs go down, right, like

Jeff Cohen 59:05
they and they just want your money. I mean, so the answer may be is the people who they raise money from part of it, you know, they wanted a different leader, or, you know, they wanted someone someone else, but they just raised 20 million bucks. So it’s not like they’re struggling. They’re, you know, doing relatively well. Yeah.

Paul Dawalibi 59:25
So So Chris has a question, your better question. Did we saturate eSports betting already?

Jeff Cohen 59:30
I hope not. I mean, I

Paul Dawalibi 59:33
hope that but being facetious. Honestly, I

Jeff Cohen 59:37
think it’s the early innings. You know, I think there’s a number of different companies go a same way we see in traditional sports. I mean, that the there’s a number of different companies going after what is a pretty large and rapidly growing Tam. So

Paul Dawalibi 59:49
and I would say we’re literally in the first inning, right, like just the lack of options. I mean to bed we

Jeff Cohen 59:55
were arguably in the second or third inning of traditional sports betting Here in the US eSports the game probably hasn’t even started yet. Realistically, I don’t think

Paul Dawalibi 1:00:07
so. Yeah, nowhere close. It’s gonna be massive in the US like, there’s no question in the same way sports betting is going to be massive in the US. It’s cracking the US regulatory environment. That is the crux of all of this Really? I think I don’t know, Jeff, if you have a different view on that.

Jeff Cohen 1:00:22
No, I definitely. I definitely agree. I mean, Christine’s question here is a funny one, I guess it’s a little bit Can

Paul Dawalibi 1:00:28
you explain how a betting company loses money, too much spending on infrastructure and not enough betting?

Jeff Cohen 1:00:33
Well, the, I mean, Krishna, I don’t know where you live. But if you if you’re anywhere new in the US, or like New Jersey, or Illinois, or one of these states, that’s open, I mean, you pretty much can’t watch it to the TV or a sporting event without seeing an advertisement for for one of these companies. So it’s it’s really spending on sales and marketing. And they’re growing out their platform. And then also, they’re giving away a bunch of bonus money to keep people engaged. It’s it’s basically Same way with, you know, mobile gaming, the customer acquisition costs are really high. But you’re, you’re doing the math that the lifetime value of the customer is, you know, over the long term higher than that customer acquisition cost. So in the short term, you can be losing a lot of money as you’re acquiring new customers. But over time, though, you know, once once you get scale and keep those customers, your margins go way up. Also, as they’re building out into different states, they’re different states are on different stages of that growth curve. So like DraftKings, for example, has said they’re profitable in New Jersey, because they’ve been in New Jersey for like, I think, three years at this point, two or three years. So that state you know, if that state was a company, just DraftKings, New Jersey, it would be even positive. But because they’re adding on all these other states, where they’re they’re clearly spending and they’re early in that curve. Their overall, you know, businesses losing money.

Paul Dawalibi 1:01:59
Yeah, and Chris mentions this fanduel and DraftKings. customer acquisition is crazy. Yeah. But But Chris, they’ve done the math, right? Like, the reality is, once you acquire one of these customers, and they’re on your betting platform, like, gamblers are good customers. And they’re, you know, people have become pretty good at sort of modeling out the lifetime value of of those customers. But you’re right, the and to Jeff’s point, the customer acquisition cost is Where, where, you know, the big expenses, which is also by the way, why you see a lot of betting whether it’s sports or eSports, buying content, and content businesses because they realize contents a path to customer acquisition, and often a much cheaper path to customer acquisition by acquiring customers through content. So yeah, what podcast

Jeff Cohen 1:02:54
Jeff did, and Dan leba tarde podcast got bought for 50 million 50 million 30 million over three years by DraftKings and they’ve done a bunch of acquisitions. I mean, they bought Vegas sports Information Network for 100 million. I saw an article I mean, they hired a head of media. So there’s some speculation they’re kind of creating a little bit of a media business to go direct to consumer, which is which is interesting. But yeah, there’s another eSports betting company that bought a media company last week rivalries big and has a big presence. And I know they tout their media and their social media and stuff like that. I’m trying to think which one you’re talking about. He bet maybe I don’t know.

Paul Dawalibi 1:03:39
No. Come on. Seriously.

Unknown Speaker 1:03:43
I’m not saying

Jeff Cohen 1:03:47
don’t make your own announcements.

Paul Dawalibi 1:03:50
trying trying to just slip it in there very cool and casual I don’t know you’re

Unknown Speaker 1:03:54
not actually even think of it.

Paul Dawalibi 1:03:56
Thank you for not playing along.

Jeff Cohen 1:04:02
Yeah, eSports center make your own announcement

Paul Dawalibi 1:04:04
eSports Entertainment Group also getting into the content and media game in a big way guys, so if you didn’t see that announcement, just just search for it. eSports Entertainment Group.

Unknown Speaker 1:04:15
All right.

Paul Dawalibi 1:04:21
You know, I’m gonna blame like,

Unknown Speaker 1:04:24
I’m like,

Unknown Speaker 1:04:24
working. I’m

Paul Dawalibi 1:04:25
gonna blame the shot. I’m gonna blame the vaccine. Chris says it’s just timing. Yes, agreed. We’re just early Christian, very informative. Jeff, thanks for the juice.

Jeff Cohen 1:04:36
A lot of very important I feel like I’m really doing well tonight.

Paul Dawalibi 1:04:38
You are doing one tonight. Chris says barstool scared them all. Yeah. Because contents just such an obvious way to drive betting and drive. customer acquisition for betting. They just go hand in hand so perfectly. It’s again why you’re seeing all these betting companies and Including eSports Entertainment Group buying media and content businesses. Cam says bedding scene is definitely something I need to learn more about Kim. It’s a it’s a space to watch. I don’t say it. Like, I’m not I’m not being I’m not exaggerating, I think it’s gonna be one of the biggest drivers of revenue in the esports space by far. So definitely a space to pay attention to. All right, um, what do you want to talk about? Jeff, we can do a story about EA Sports games do more EA. We can talk about a blockchain gaming platform called forte valued at a billion dollars. We can talk about how ninja makes money. Digital tabletop gaming platforms. We have time for about maybe one or two more stories. You overactive media. Remember the $500 million stadium guys? Yeah. The $500 million stadium was not enough. Now. They have a gaming studio.

Jeff Cohen 1:06:01
Got out of game you see if you have a $5 million set in whatever stadium? Why not?

Paul Dawalibi 1:06:07
It’s not enough. Right.

Jeff Cohen 1:06:08
Ignoring public? What’s their deal? Are they getting?

Paul Dawalibi 1:06:12
It’s a good question. You would think that’s in the plans. You would think they might have to if they’re gonna actually going to build a $500 million stadium. It’s just what do they have in their business to go public with? They have two eSports teams. That’s it. Well, three,

Jeff Cohen 1:06:26
and a stadium and an unfinished stadium?

Paul Dawalibi 1:06:28
I mean, blueprint nine exit. They have pictures. I doubt they even have blueprints.

Jeff Cohen 1:06:34
Or they have a lease agreement or something. Oh, no, I

Paul Dawalibi 1:06:36
doubt it. I seriously doubt it. I’m pretty sure it’s just pictures at this point.

Jeff Cohen 1:06:42
It’s pretty good. Not bad.

Paul Dawalibi 1:06:44
Yeah. Are you impressed?

Jeff Cohen 1:06:46
I’m in pictures don’t cost a lot. They haven’t spent a lot of money yet. It’s good.

Paul Dawalibi 1:06:52
So what do you feel about them doing a studio? Red bowl studio thing? With a big reveal splashy reveal on top of the stadium? Do you not feel this is a bit like overkill.

Jeff Cohen 1:07:06
I mean, the stadium is not gonna be built for a long time. So they want to create content. They’re gonna need a studio. I don’t think this is that big of a news. Right. I think it’s like surprising that they didn’t have one already. To some extent, you know?

Paul Dawalibi 1:07:20
Okay. Like, it’s like building the team house. After you announced the $500 million stadium. It’s like, it seems like a step backwards. Right. You just sold me on this, like, massive, huge project. Crazy. You know, it’s gonna be the biggest thing in gaming. And then now we have this rinky dink little like studio with Redbull. You don’t feel like that’s a bit of a step back. Hopefully

Jeff Cohen 1:07:48
didn’t describe it that way. That would be bad.

Paul Dawalibi 1:07:52
As a rinky dink

Jeff Cohen 1:07:55
I see your point. I just think it’s it’s more like the timing the stadium’s not gonna be done for years like they need someplace to create their content now. So I don’t know. Maybe that’s too logical way to look at it.