The Most Valuable Esports Companies 2022

The top ten are now worth an average of $353 million, up 46% from 2020, but most are rapidly diversifying their businesses as they face down the industry’s challenges.

When FaZe Clan, the esports and entertainment company with a rock-star image and a cavalcade of celebrity partners, revealed in October that it planned to go public through a SPAC merger, the announcement came with a bold claim: that FaZe was already worth $650 million and would reach $1 billion with the money it raised in the deal.

That stratospheric valuation—comparable to MLB’s Miami Marlins or the NHL’s Detroit Red Wings—blew past the $305 million that Forbes had estimated FaZe Clan was worth just ten months earlier. It was also a signal that the esports industry had resumed its ascent after a couple of years in which team values had largely flatlined. Indeed, in Forbes’ new ranking of the most valuable esports companies, the top ten are worth an average of $353 million, up 46% from the last edition of the list, in December 2020.

Once again, TSM, owned by Andy Dinh, leads the way, rising 32% to $540 million. The No. 2 company, 100 Thieves, which counts Drake, music mogul Scooter Braun and billionaire Dan Gilbert among its owners, has soared 142%, to $460 million.

Those numbers don’t tell the whole story, however. The fanfare around the sky-high valuation FaZe assigned itself in the fall masked some fundamental concerns about its business—issues that became more acute when, in an amended SEC filing last week, it revised its forecasts downward. Skeptics point to the company’s $36.9 million net loss for 2021, among other things, and Forbes now values FaZe at $400 million, No. 4 in the ranking.

The eye-watering valuations for the rest of the top ten similarly belie the reality of the industry right now: Esports is a tough business, and in some ways getting tougher, and the rise in these companies’ valuations is largely being driven not by their esports teams but by their other divisions.

“Monetization remains the principal challenge for literally every esports team,” says Bobby Sharma, a private-equity investor and the managing partner at advisory firm Electronic Sports Group. “At this stage, most are trying to find their way around the maze, with some stuck on a hamster wheel. If there’s one thing clear, it’s nobody has found their way out.”

THE TOP TEN

The ten most valuable esports companies are worth a combined $3.5 billion, up 46% from the last edition of this list, in December 2020. TSM is once again No. 1, but no team has appreciated more than No. 2 100 Thieves.

Esports clearly has massive potential. A report last month by gaming data firm Newzoo found that the global esports audience was on track to reach 532 million this year, including 261 million “esports enthusiasts” who watch esports content more than once a month. As one point of comparison, this year’s Super Bowl drew an average of 112 million viewers, according to NBCUniversal.

Still, that kind of aggregation doesn’t reflect the opportunity in any one esport—a fan of League of Legends doesn’t necessarily care about Call of Duty, the same way an NFL fan doesn’t necessarily watch the NBA. Teams not only have to pick the right games to compete in but also have to hope those titles stay relevant. For instance, Overwatch’s viewership numbers are plummeting, just a few years after companies shelled out $20 million for the initial franchise slots in the Overwatch League; esports insiders believe they would sell for a fraction of that price now.

Teams face a number of other challenges from all directions. Media rights revenue hasn’t caught up with those viewership numbers, in no small part because of a lack of competition, with Twitch and YouTube still the only platforms all that interested in esports content. On top of that, talent is getting considerably more expensive, with players of the up-and-coming game Valorant able to demand as much as $30,000 a month, according to industry insiders.

Teams are also constrained in how they can make their money because they don’t own the intellectual property of the games they compete in—they can’t, for example, sell a special gun in Call of Duty without the consent of the game’s publisher, Activision Blizzard. That’s a key difference with traditional sports, where no one owns the idea of, say, baseball. And while team sponsorships can be lucrative, other revenue streams often have low margins. A single tournament can yield hundreds of thousands of dollars in prize money, but almost all of it goes to the players. Most of the ad revenue from a streamer’s videos is returned to the streamer.

“There’s a broad-based agreement that esports as a standalone doesn’t work as a business,” one team executive says bluntly.

That recognition has sent teams scrambling to expand into broader gaming culture and beyond, treating esports more like a customer acquisition funnel as they seek to justify their lofty valuations and continue to scale. Organizations like FaZe Clan and NRG are focusing on content, with original shows in addition to their armies of streamers, while 100 Thieves is building a lifestyle company around its apparel. TSM and Gen.G have launched training apps while companies like ReKTGlobal and LOUD run successful marketing agencies.

Looking ahead, companies see a huge opportunity to monetize their fan bases through emerging technologies like blockchain, NFTs and the metaverse. The first step is signing partnerships with cryptocurrency platforms like FTX and Crypto.com, as TSM and Fnatic have done, but the real payoffs could come later. Using NFTs to sell the in-game digital items known as skins would allow teams to collect a fee if the item was resold, the way that Dapper Labs collects a percentage of any trade of its NBA Top Shot NFTs on the secondary market. There are also ideas emerging around so-called play-to-earn games, which reward users with NFTs or cryptocoins.

In an even more distant future, the establishment of a metaverse linking multiple popular games together could steal some power from publishers, allowing teams to sell items or avatars that could transfer from game to game and mitigating the IP issues they are currently navigating.

But while money is pouring into the metaverse—Fortnite publisher Epic Games announced last month that it had raised $1 billion in funding to support its metaverse initiative—those days are a long ways off, and game makers are in no rush to cede control. The worry now is that esports companies might be swept up into a metaverse bubble.

One other development that could help or hurt teams is Microsoft’s pending acquisition of Activision, one of gaming’s biggest publishers. The deal could pump new resources into Activision’s esports leagues—or esports could become an afterthought in Microsoft’s massive budget.

In the meantime, though, new sponsors have found their way to teams as the pandemic has supercharged online viewership numbers, with esports’ young male audience long considered a desirable but hard-to-reach demographic among advertisers. And unlike, say, Major League Soccer—which has sold teams at similarly high multiples—esports has a colossal audience; the industry just has to find a way to monetize those eyeballs.

“I think we’re going to see a variety of successful models emerge, bespoke to specific team assets and strengths,” says Electronic Sports Group’s Sharma. “But fundamentally I believe some will become great and sustainable businesses.”

Here are the ten most valuable esports companies.

[#1]

TSM // $540 million

Change From 2020: 32%

2021 Estimated Revenue: $56 million

Premier Games: League of Legends, Valorant

Other Games: Apex Legends, Battlegrounds Mobile India, chess, Dota 2, Fortnite, Free Fire, League of Legends: Wild Rift, Magic: The Gathering, Rainbow Six Siege, Super Smash Bros. Ultimate, Teamfight Tactics

Principal Owner: Andy Dinh

Business Focus: Tech

TSM has the richest sponsorship deal in esports, a ten-year, $210 million naming rights agreement with crypto exchange FTX, but its real selling point is its tech businesses: Blitz, an app that trains users in popular video games, and Dyno, which offers a moderation bot for Discord servers. Some around the industry express wariness about the Los Angeles-based company’s leadership, however, with CEO Andy Dinh accused late last year of bullying. “Upon learning of allegations against Mr. Dinh, TSM immediately hired an independent investigator to begin a thorough internal investigation,” the team said in a statement this week, echoing an earlier announcement in January. “Andy recused himself from any oversight of the scope, nature and conclusions of the investigation. Those results are pending. Until finalized, we can’t comment on specifics.”

[#2]

100 Thieves // $460 million

Change From 2020: 142%

2021 Estimated Revenue: $38 million

Premier Games: Call of Duty: Vanguard, League of Legends, Valorant

Other Games: Apex Legends

Principal Owners: Matthew Haag, Drake, Scooter Braun, Dan Gilbert, Rachell Hofstetter, Jack Dunlop

Business Focus: Lifestyle

No team in Forbes’ ranking has appreciated more than 100 Thieves, which was fifth on the 2020 list at $190 million. The Los Angeles-based company, which is developing a lifestyle brand at the intersection of apparel, entertainment and esports, in December announced a $60 million funding round at a $460 million valuation. That was two months after the company made its first acquisition, buying gaming keyboard brand Higround.