In the video gaming world, Ubisoft is currently leading the way in enthusiasm by AAA studios for cryptocurrency. 2021’s biggest buzzword became a pillar of the company and Ubisoft’s ruling family has been touting time and time again is the future of gaming. While Rainbow Six hasn’t seen the inclusion of any NFT-based skins so far, it is probably no surprise that cryptocurrency has taken root in organizations around the world though advertising gambling sites is banned.
At the moment, Bitcoin has lost more than half of its value in 2022 alone while Ethereum is down two-thirds, and NFT sales have dropped by more than 90%. This is a part of a major cryptocurrency crash that a very large portion of the video gaming world will be happy to see. The rise in crypto has caused a rise in GPU prices, led to a massive amount of targeted scams, and done significant environmental damage.
Nevertheless, this poses a pretty big risk to the dozens of esports organizations that latched themselves onto the latest cash cows -- they may start seeing money drying up or projects failing.
While I’m not going to argue if NFTs or cryptocurrency, in general, have any use in gaming to begin with -- that’s a topic that I doubt a SiegeGG article would be able to change any minds about -- here’s a look at which organizations invested into the cryptosphere, what’s happened to these projects as the digital economy goes bust, and which of the organizations are most at risk.
How Crypto is implemented
Firstly, there are a number of ways in which organizations have decided to get involved in cryptocurrency. Some are simply advertising a product, while others are making entire blockchain games. Obviously, a few methods require significantly more investment and organization-backing than others.
Sponsorships
The least intrusive for fans are simple sponsorships, with growing crypto-based companies using a team’s reach to promote their coin or platform.
The most obvious example of this is TSM, which is partnered with the FTX exchange. PBLM, Wolves, NAVI, Empire, Secret, NiP, FaZe, BD, Liquid, MIBR, FURIA, Fnatic, Talon, Knights, and Wildcard also all have or have recently had crypto sponsors.
NFT sales
Another is the sale of branded NFTs. Organizations such as G2 Esports have minted on-brand NFTs to sell to fans the same way they’d sell any other kind of merchandise. ESL, the tournament organizer, has also been releasing NFTs that feature organization-branding and players that participate in certain CS:GO tournaments.
Releasing NFTs alongside ESL include Astralis, NAVI, Liquid, NiP, Fnatic, MIBR, FURIA, Heroic, and oNe, while XSET, G2, V.p, Talon, and Knights all announced their own NFT collections.
NFT memberships
Taking it one step further, some organizations such as Fnatic offer exclusive VIP perks only to those who hold their branded NFTs. Promoted as a membership club, Fnatic’s $600 NFTs offers annual mystery boxes, pro jerseys, access to meet and greet events, and early access to products.
This membership can then be sold like any other NFT to another buyer, with the 90-day average price currently sitting around $170 and one selling a month ago for $75.
Fan tokens
Something that will be very familiar to traditional sports fans is the idea of “fan tokens”, which is effectively a cryptocurrency for a specific team. Like NFT memberships, teams offer owners exclusive perks, except as it acts like a currency and the value dips and rises depending on ongoing results, allowing it to be used as a speculation tool.
In R6 Esports, only one organization has fan tokens, as NAVI launched the $NAVI token in December 2020. After launching at $1, they are currently worth $0.28, while its all-time peak was at $16.73 the day after they benched the Counter-Strike player, Egor "flamie" Vasilyev.
Organization-led Crypto initiatives
Finally, we have esports organizations who are themselves are trying to create something in the crypto world.
While this can come in many forms, the most extreme example is APAC South and NA Challenger League’s Gaimin Gladiators, which is the esport arm of Gaimin. This is a company which is trying to convince users to allow them to mine for crypto on their PCs in the background while they play video games in exchange for their own coin.
Also of note is SANDBOX Gaming, whose parent company, Sandbox Network, runs an NFT pixel-art game, while Rogue’s parent company, ReKTGlobal, is being bought out by Infinite Reality, a company “providing metaverse services”, for $470m.
Scams & “suddenly abandoned projects”
You can’t talk about NFTs without talking about the endless number of scams or abandoned projects that have popped up in the last few years and cost those that bought in a lot of money.
In Siege, however, this is relatively rare and has mainly impacted EU League organizations:
- G2 Esports partnered with Bondly to make branded NFTs. After they failed to deliver G2 is now suing Bondly alleging damages of over $5,250,000.
- Wolves Esports owners, Wolverhampton Wanderers F.C., announced plans to launch a “fan token” with their sleeve sponsor Bitci.com, a Turkish cryptocurrency exchange. Over a year on, this has not happened with Lisbon, Spezia, and McLaren F1 having cancelled their agreements with Bitci as Bloomberg reported that Sporting Lisbon was still waiting for payments.
- Virtus.pro announced a partnership with Lympo to make collectable NFT cards with ex-players on them -- this was never released and neither party has mentioned it since the announcement. They then partnered with Uniqly to create a range of V.p NFT shirts. This did launch, with them selling 13 out of 100 shirts.
- Team Secret partnered with DMScript, which seemingly ran an exit scam. Very shortly after the partnership, the project went cold and they deleted all of their accounts leading its token to drop 99.67% of its value to $0.000106.
- XSET announced a Halloween NFT collection with MonsterMashNFT, only for the NFTs to never come out. The account has tweeted just twice since November 1st as fans allege a “rug-pull”.
This means eight out of 10 EUL organizations -- MNM and BDS being the exceptions -- have a crypto connection, and four of eight were caught up in some kind of suddenly-failed project.
Luckily, scams have not been as rampant as in other sectors with the victims usually being the organizations themselves, rather than fans losing out.
The main reason for this is that the vast majority of these partnerships have simply been sponsorships. Rather than putting their weight behind thinly-backed NFT projects that are likely to hurt the fans that bought in, for example, the big money comes from these established crypto names leveraging esports organizations for increased legitimacy and eyeballs on their brand.
The risks
This leads to the heart of the issue. The very reason that we’ve seen relatively few scams compared to other crypto scenes is also why a lot of organizations may be in trouble, as these sponsorships have led to a lot of money flowing in from this now suddenly struggling sector.
If an NFT launch fails, it probably hasn’t lost an organization too much money, but if your primary sponsor goes bankrupt, then that’s likely your biggest income stream gone.
This obviously isn’t just an issue in esports, A total of 19 out of the 20 Premier League Football clubs have had at least one cryptocurrency sponsor, Red Bull Racing signed a deal with Bybit reportedly worth $150m over three years. Additionally, FTX has made deals with the Major League Baseball league and the Miami Heat basketball team which, alongside the TSM deal, is worth over $350m. A massive percentage of sports teams across the world now have a financial relationship with a crypto partner, some of which are already being hit hard in 2022.
No matter how well crypto markets fare over the next few years, regulations are coming from both governments and sporting bodies, which will further decrease the amount that these crypto sponsors have to splash around and could threaten sponsorships further.
This has already happened for Bitci.com, which was mentioned earlier as a Wolves FC partner. The cryptocurrency group is being sued by numerous European football teams, including the Spanish National Team and the LaLiga club, Cadiz CF, who are reportedly owed around €5m between them.
Numerous other clubs have also cancelled their partnerships with Bitci due to a lack of payment, as Bitci reportedly paused issuing all fan tokens and requested payment delays after the Turkish government enacted regulation on cryptocurrency at the beginning of this year that stopped crypto being used as payments.
These teams, among others, relied on this money which isn’t coming. In an industry such as esports where teams struggle to bring any money in at all, that could be a death sentence.
The last time we saw an exodus of major sponsors was during the beginning of the COVID lockdowns as companies hoped to save money ahead of a possible recession, and as live events were no longer taking place limiting engagement opportunities. Multiple Siege organizations fell victim to this, with Team Reciprocity and Chaos Esports Club effectively shutting down operations while a number of other organizations credited loss of revenue due to the pandemic as a reason for exiting the scene.
Now, with the crypto world seeing a financial crash of its own, it's possible a number of organizations will see these struggles once again. It obviously depends on how long the crash lasts and to what degree it recovers. If the money truly has departed from these crypto projects, then we’ll have 20+ teams looking for alternatives.
So was it worth it?
It’s worth saying that with how weak esports finances are for almost every organization, it is understandably hard for a lot of these companies to turn away big-money sponsorship opportunities when the jobs of players and staff are on the line.
This gets worse when considering how many traditional sports teams are openly accepting crypto partnerships and with (at least in R6 esports) gambling sponsors being restricted.
The rise of crypto coincided perfectly with the COVID-caused financial collapse leading to so many of these sponsorships being taken up. They needed the money. Obviously, this is not the case for all organizations, but is likely true for many. Promoting crypto is sometimes a PR disaster that severely hurts an organization's brand and was likely taken as a short-term fix. Now, the consequences of those decisions could be hitting them a few years down the line.
Either way, this downturn could definitely strain a lot of teams in the coming months -- let’s just hope not too many organizations are completely reliant on this very fickle income stream.
Disclaimer: SiegeGG is owned by Gfinity, a tournament organizer that competes with ESL.