Business of Esports TV: Fnatic’s Asia Expansion

(Livestream #133)

In this segment, we discuss Fnatic raising $17M for further expansion into Asia.

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 41:27
Fanatic in the news. Everyone knows eSports team and brand fanatic. And the headline here is eSports brand fanatic raised the 17 million for Asia expansion. Basically, they talked about how the investment will accelerate fanatics growth in the Asia Pacific market with a new strategic partnership that will incorporate the expansion of fanatics base of operations in Japan, and support for its Rainbow Six Siege team, which plans to relocate to the country. And so let me just tell you what I thought was interesting about this, it’s not so much the size of the investment or what they’re doing with the money. It’s the where I thought was very interesting that this was more Japan focused, and not China focused or at least China centric. When you’re talking about expansion into Asia. I don’t know if you guys have thoughts specifically on that or, or on this financing, or how you guys feel about how fanatik fits into the team ecosystem in general from a business standpoint. Anyone have thoughts on this? I mean,

Unknown Speaker 43:20
fanatee, to my understanding fanatic has headquarters in London, right? So they’re already more worldly, I think, than other orgs. Because they’re they’re not the United States. And they understand the importance of the UK, of Europe, of Asia of Latin America and the esports market. All of these places, obviously have a thriving eSports scenes. And I really think the only limitation honestly is outdated infrastructure and lag for the competitors, right, where you have a lot of people saying we just don’t have the resources to compete at the speeds that North America and certain places in Asia have. So for starters, just fanatic being where they are, you know, I think they’re gonna look at things differently than the rest of us. And I think I told you this once before Paul, my very first meeting and eSports with FaZe clan. I asked him you know, I looked Greg soco, the former president in the eye and I just go, how are you guys? None in China right now are in Asia right now. You know, what are the plans there? And, you know, they didn’t have a great answer for me at the time. And that brings me to your question just now, which is, well, this is really Japan, not China. So, you know, I’m, I want to do a little quick off the cuff research right now in the middle of the talk to figure out the numbers behind Japan and see what justifies it. I applaud the move to Asia because it’s in you know, it’s a dominant eSports area, you see people like Genji that are bridging the gap between Western and Eastern eSports. But as for the Japan question, I’m you know, I don’t have that answer for me right now. We can post some, some theories there.

Unknown Speaker 44:45
Yeah. Yeah, I mean, apart from the financials, which I’m not too well versed in for specifically Japan, I do know that, you know, in the past few years, they repeal that gambling law which prevented a lot of Esports tournament from even taking place in the first part. And apart from that, like Japan had already, even with That law in place had been producing powerhouses in multiple different game titles, you know, with those restrictions in place. So now with those gone, we’re seeing them pop off and rainbow succeed, especially Apex legends, they’re dominating twitch on that front. And in valorant, as well, we’re seeing a really, really large interest there. And so just looking at those three titles alone, you can see that it, I think it’s smart to forecast that within the next couple of years, Japan will definitely, definitely be on the up and up in terms of Esports importance. And I think gaming influence overall too, right? Like, whenever we look at Twitter analytics, or like a urine review for gaming, Japan is always, always, always, always at the top of Twitter trends. And I think that’s something that’s not going to change. And it’s only a matter of time until, you know, this sort of globalization happens with what’s going on in gaming in Japan and really hitting this out of the world.

Paul Dawalibi 45:54
Yeah, I mean, we’ve definitely seen a trend that Japan is, you know, eSports is growing there, obviously, there’s good things happening. And we’ve done lots of stories about new things coming out of Japan, and I, and I wonder how much of like, they fanatic just looked at this and said, you know, if we’re looking at the the curve, right, the the growth curve, Japan is still lower down on that curve than China. And so there’s just more opportunity for growth here, right, like, everyone knows, China’s a huge market for eSports everyone, you know, who has a team or something is doing something there. And so Japan maybe just seemed more differentiated as a strategy. Maybe they thought there was more whitespace

Unknown Speaker 46:34
Yeah, I also think an important part to look at it and not ignore is the cultural aspect of it just because the Japanese s aesthetic is prevalent throughout eSports and gaming, it is probably the most popular thing just you know, this neon like the Tokyo lighting you know what I mean? Everything from there, so fanatic already with their rebrand. And this past year already looking a little more edgy, a little more future based, they’ve already started putting out streetwear they already have their own merge. It makes sense to go to Japan, you’re going to want to like immerse yourself in the local culture. If you’ve got streetwear shoots from Japan coming out on like, you know, weekly, these drops are being photographed in Shibuya like the most iconic places you can imagine, I think in terms of cultural influence fanatic really could be looking for a resurgence, right, because fanatic back in the day, early 2000s. They were the team, not so much in the past couple of years, you know, Where have they gone? They’ve rebranded now, maybe this new side of the new era fanatic as Japanese, like maybe that’s the new thing that’s going to be coming around. So I think there’s something there.

Paul Dawalibi 47:41
Lindsay, if you buy Jimmy EMMs point, right, then then it proves sort of the whole narrative around eSports teams as media companies more than anything else, right. Like it’s just if they’re worried more about cultural impact and, you know, content in the right places and locales. You know, what I mean? Like, is that, does this confirm it for you, if you if you if you by that point? Oh, yeah.

Lindsay Poss 48:01
But I think it’s been something that we’ve seen more of a trend and now adopting kind of popular culture and Japanese streetwear and all that stuff. And rebranding just proves it even more, for sure.

Unknown Speaker 48:14
Yeah. And to add to that, as someone that that talks with a lot of teams that does a lot of work with a lot of teams, the first thing they bring up to me is not how good their team is in this sport, or that it’s Oh, wait to see it. Wait till you see the content or this that we’re putting out you know, something about their culture and their life. I think that cultural perspective, Jimmy was was right spot on Japan as a cultural hub for so many things fashion inclusive. And now eSports. It’s a great bet.

Paul Dawalibi 48:42
Kim says love the Asia move would love to learn about why Japan? Well, there you go. Kimmy just heard it. Let me just touch on the financing here for a second. They raised $17 million. They had previously previously raised a bunch of money. I think their total financing now is up to 35 million, something like that. 3030 plus million, no, sorry, 53 million to date. 53 million to date. So this latest round 17 million. I had a question regarding if you guys remember, the fanatics last financing round was sort of very broadly publicized, because they crowdfunded In other words, they opened it up so that anyone could I think it was like $100 or something you could invest on these crowdfunding sites to own a piece of fanatic however that whatever those crowdfunding sites structured it right and and it seemed, at least to me like fanatic was going to go down this path of crowdfunding forever like I I, I didn’t see why they wouldn’t write their crowdfunding was successful people got excited about it, it got a lot of press. Why do you think this round was not crowdfunded? Like why do a very traditional round with you know a large investor essentially after You’ve done this sort of crowdfunded round. Does it make it seem like the crowdfunded round was more just like a PR stunt?

Unknown Speaker 50:08
Maybe PR, maybe a combination of smart money and dumb money, right? And people that know that this is there’s a lot of hype here and want to get involved. But don’t know more beyond that, you know, some parallels to crypto, perhaps.

Paul Dawalibi 50:25
I mean, what, why not do another crowdfunding? Jimmy? Jimmy B?

Unknown Speaker 50:28
Yeah, I mean, it does sound more like the original crowdfunding, which was more of a PR stunt, right? And was more to capture. A lot of these teams are just trying to capture the quick buck, right? They don’t want to answer all the questions that more astute investor would would throw at them, they just want money to do what they want to do. This round seems more strategic, right, a specific dollar amount for a specific purpose in a specific market. It seems much more tailored, like they finally caught, you know, caught some breathing room or got their heads above water and said, Okay, now, what do we want to do with this?

Paul Dawalibi 51:02
I mean, let me put my tinfoil hat on, let me just press a bit, right. Like, it means either, I could read into this right. And I could say, it means either, they believed that they couldn’t crowdfund again, that maybe the hype has died down, right? Or, or they believe that crowdfunding. Like, like, people weren’t gonna get excited about their story, or that some, like, now, individual investors were offering somehow better terms or like, you know what I mean, because a crowdfunding campaign, arguably, is probably the cheapest, quote unquote, money you could get right, as a company. That I just, I’m not sure about the implications of this. And maybe I’m reading too much into it. But like, could it mean that maybe there wasn’t a market for them to crowdfund the $17 million round this time?

Unknown Speaker 51:54
Guys, I like your thought on on that they couldn’t do it again, right, that maybe it just wasn’t going to happen. What I what I think also, though, is that when you go to a specific VC or group, you know, there’s there’s strategic implications involved, right? Yeah, you have that guy, not just for their money, but for other doors that they can open, other companies that they’ve invested in, that they can plug you into? So I do like the thought, or I do follow, I do follow the thought that maybe they wouldn’t be able to generate the same type of hype. But I think more so you know, if they’re, if they’re really trying to make a strategic play here and do something specific in this region, that perhaps where the money’s come coming from also has other other abilities. Right, that other doors introductions, additional funding, if things go well, don’t go anywhere else, come back to us, and we’ll double down on our investment. Right. Certain securities, I think that are not represented in just this this $1 amount.

Unknown Speaker 52:49
Yeah, I thought sorry. Go ahead. I’m sorry. I also think that they just right had plans and they wanted to execute, and maybe couldn’t wait for the, whatever the amount of the crowdfunding was, right. They were like, We need to go like, let’s execute now.

Paul Dawalibi 53:02
Yeah. Ramsey asked a good question. Any news on the investors maybe have ties to Japan? Yeah. Sorry. Ramsey. I didn’t mention that. The made the majority investor, maybe I should totally relevant to the question I asked was Meru, Benny, which is a like huge Japanese conglomerate. So like, it does beg the there is an interesting sort of side question there, which is, are they going to Japan? Because again, they have conviction around the Japanese market? Or are they going to Japan because that’s where the investor who was willing to write a huge check wants them to go, right? This is it’s a chicken like, which one’s the chicken or the egg here, right?

Lindsay Poss 53:38
Probably a mix of both two, particularly for going through a rebrand This is a good opportunity to really go full tilt with a rebrand. So

Paul Dawalibi 53:49
yeah, I just I wish I was, you know, I knew sort of the inside story here, which is did fanatic go out and seek a huge Japanese investor because they saying we believe in the future of Esports in Japan, right, which would be an interesting take in and of itself, right? That would from an industry perspective, or or did some Japanese investor come to them and say, Hey, you know, we want you to do more eSports in Japan so here’s a bunch of money like

Unknown Speaker 54:16
like what came first I there are signs to prove the former were as in right the Rainbow Six Siege League, they had team Empire coming out of Japan year after year. And Ubisoft, you know, a couple of years into the league taking place did this thing where they actually sold in game stickers so that the contribution for the stickers and the terms would go towards the prize pool and towards the teams that you were, you know, buying the in game item for an empire got a lot of support from Japan and a lot of support in general on their cosmetics. So there was financial success, you know, in a bit in like a web right through the Rainbow Six Siege league. So it’s not a huge indicator, but you have that you have Apex legends, like people kind of underestimate I think Apex on Twitch like the big streamer for Apex on Twitch is Japanese by and far. By almost nearly 100,000 hours watched like, it’s it’s kind of ridiculous and we don’t see them happy streaming because it’s at 789 am right like I would wake up at an ungodly hours and just hop on Twitch. And there they are, without a doubt four or five, six rows of Japanese streamers dominating apex. I don’t know I genuinely believe this company to this conglomerate probably sees the future success of Esports in the in the nation as well. And I think fanatic as a whole just has a brand already in Japan as being this old school European. Cool, right? This is the Primo This is the cream of the crop of Esports from back in the day. So maybe maybe to Lindsey’s point to like maybe they’re going for the full rebrand, and just going full charge ahead. So who knows,

Paul Dawalibi 55:49
I would love to believe that they just have such conviction around Japan because that’s because that that’s a that’s like a whole interesting discussion, right? And then and then if they’re right, that’s a whole other interesting discussion, right? Like if we see Japanese eSports really take off in a major way. And you go wow, these guys were smart. They saw it right. Like they they saw the signs. I guess time will tell.