It seems as if no time like the present is the mantra for those looking to start a new esports organization. Stuffed stadiums, sponsors that already get it and a host of young players all vying for a professional career in gaming that can actually allow them to live well.
I think the space has always been very judgemental of new brands entering the top echelon of the biggest titles. But if you’re treating your players fairly, making sensible spending decisions and can show you’re in it for the long-run, the scrutiny you’ll get will only make you more motivated to do a great job. I’ll steer clear of the ‘forming an org in 1,2,3’ because everyone’s journey will be different.
But here’s a head-start on the business side. Even brands that have been around since the beginning suffer from incredibly poor basic organization. Not everyone but I’m telling you there are a few playing catch-up even after yeaaars in the space. Bottom line is, don’t be disheartened if you don’t know something. Just find a way that works for you.
So, inventory.
Simply put, it’s just a list of items of value that belong to your brand. It’s easiest from the get-go to split these up into digital and physical inventory.
For digital stuff we’re talking everything on your social media channels, website and any other owned or partnered properties. Physical is team wear, other merchandise, live event attendance (this later blossoms to its own category). Mind you these are just examples and an incredibly simple way to look at the structure top-down.
But starting to list out your inventory in these categories will help you get an idea of what you have, what you’d like to have and ultimately what you think each is worth. Perceived value of these items is just so arbitrary for most organizations that are newly formed but industry benchmarks, sponsor discussions and some research will help a lot.
This may possibly be a guarded secret most established teams have but…
Right now there is no universally accepted method of valuing inventory. How much does a far-reaching influencer tweet really cost?
What is the value of a name on a jersey?
I’ve talked to orgs that have used a host of different calculations to assess this value, like average eyeballs p/live event (average live stream impressions) x a pre-formulated index value for different finishes (1st-4th, 8th-12th, etc). This becomes the total value of the jersey which may then be divvied up between front/back jersey exposure or broken down per available space on the jersey.
Others cost up the spend on the particular player or team and add a margin (I’ve seen a lot of reasonable and unreasonable margins!). So if it costs you $10,000 in salaries + $2,500 in travel + $3,000 misc to field a 5 man team, your total cost is $15,500. If you’re then looking to profit on this particular squad by 30%, your target becomes $20,150. Now you can decide what spot is valued at what price with the aim of filling 100% of the jersey to net you the 30% margin target. This way your squad is theoretically 30% profitable. Some choose to then make a team its own profit centre- which heavily influences and aids in controlling team-related spend. You don’t spend what you don’t have because there’s a profit directive for each squad/esport title now.
Neither of the methods above are ideal. On the other hand, neither are bad. It really does boil down to what business objective you have laid out for yourself. Many football teams today aren’t profitable. Teams like Manchester United have a 395 million pound debt. Does that mean they aren’t incredibly popular and tremendously successful? Be willing to look at things through a less conventional lens to determine what objectives you have for your brand as compared to those you have for your teams.
First steps
It’s not the most fun thing in the world but sit down and lay out your digital and physical inventory. Mapping things out this way will help your sponsors understand what areas of value your brand brings them and gives them an opportunity to pick and choose the channels that they best prefer. Once you’ve mapped things out, have a go at deciding on a pricing formula for your new organization and always keep in mind that this is going to change over time. Be willing to adapt, explore new methods and truly identify what value you bring to those who are backing your brand. The more value, the easier it is to negotiate fair upward pricing over time.
You’ll only get more if you continually re-evaluate your inventory and your pricing model.
Keep in mind the above was just a guideline for new org’s. Saying that, if you’re starting a new org and need help with the business side I’ve got a handful of hours every week that I’d happily volunteer to help those new in the space! Poke me on twitter. And yes, for free.