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On September 07 2017 13:03 cLutZ wrote:Show nested quote +On September 07 2017 12:29 Kaneh wrote:The fact is that all the teams needed Riot to franchise, or not, and be clear on the amount of money they would be getting from league-wide ads. IMO the valuations are still very high, but the good thing for NA teams is they can cut back on salary once they get their franchise approved and become a "talent seeking" team that looks for gems, then once they hit on a few can sign a few big names and compete for championships for a few years. The real killer right now is being a team like TL who has big money and no results. nope. The money they get from riot is a tiny consideration compared to the stability franchising brings to a brand. Its not some bubble. The value is in the brand. Its why the houston rockets were sold for 2.2 billion. Do you think the players, staff, and all that are worth 2.2 billion? hell no. its the brand that's worth that much. Its why they pay ridiculous salaries. Its the exact same shit in league. The brands are going to grow, which is why VCs are all getting into this. Its the next sports league and they want in. EU teams missed the memo tho, they thought winning prize money and getting paltry handouts from riot was how you made profit. Instead of building a brand to sell to advertisers. Now riot EU has to forcibly help these terrible orgs make money. I'm glad you brought up the NBA, because it makes your point more laughable than otherwise. The Rockets sold for that much for a few reasons: 1. 4th Biggest Market in the NBA; 2. NBA has national TV deals that ensure significant league-wide revenues for years to come, and live sports is seen as a bulletproof industry atm (whether this is true is up for smarter people than the smartest VC investors); 3. The NBA CBA ensures no team can lose money unless they are realllllllllllllly stupid; and 4. Sports franchises are basically pieces of art for billionaires. The Houston Rockets are basically a Picasso that also gives off a dividend. These features do not apply to most Esports franchises. #4 is probably the biggest part of the Houston valuation, and its not applicable. The "brand value" in a traditional Coke or Chevy sense is only a tiny portion of an NBA teams valuation (merch and team ads are almost negligible). Saying, "the value is the brand" is silly, NBA/NFL/MLB teams went decades being valued as standard investments where people would buy them for 10x multiples of yearly earnings. Its only very recently that sports franchise valuations have exploded and it is because of TV revenues (both national and local tv deals went way up 2000-Present) and because the # of billionaires who want to buy an expensive toy has gone up. Don't think the "billionaires toy" theory is correct? Look at Manchester City and Paris Saint-Germain. Those teams lose money, but the owners just want to win titles. They are literally buying trophies. The Manchester United owners (same as the Tampa Bay Buccaneers owners) are losing ground in the EPL/Champions league because they insist on breaking even/turning a profit ala their US sports franchises, but its nearly impossible to win titles while turning a profit in the modern era (Good work Leicester, you truly amaze me).
Valuation is not directly tied to revenue. That's 80s finacial thinking.
Reading up on your man city and PSG examples. PSG was bought for 80 million in 2012. Its now worth almost 500mil. Same with manchester city, 200mil in 2008 is now 2 billion. They spent money yes, but they got way more in terms of brand value and worth. Forbes doesn't just value things randomly or treat it like a rich man's toy. These things have actual value to advertisers and other revenue streams.
so no, its not billionaire's toys. Its billionaire's investments, and they are making a ton of money off these investments by turning low value brands into worldwide brands.
The paradigm shift is essentially: Popularity is an actual product. This is what they are buying and investing in. It seems ridiculous, but there is actual demonstrable value to being popular and well-known.
If people had to buy a tshirt, and one had the TSM logo and one had some random other logo they didn't recognise, guess which one is getting bought, even if you didn't directly advertise the tshirt?
Put another way, how much money would pepsi pay to switch names with coke. literally nothing else changes but the names. That's the invisible value of branding.
And these esports teams, they're very, very, popular with some very hard to reach demographics.
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Agree with a lot of your things in theory, but I don't see how they apply to LCS teams yet. The teams have yet to show the ability to break even and/or turn a modest profit while being mid-table, which I think is a huge component of the exploding valuations for sports franchises (one thing about the post-2007 economy is there are not very many reliable places to put money for billionaires). When it comes to brand value, I see a lot of potential for some of the brands long term, but LCS is not a proven growth industry (I think the best evidence we have is that viewers have plateaued), so why is the investment coming now? I still think a large part of the current Houston/PSG/City valuations is vanity (the Clippers were the first American team I recall just breaking the bank and Ballmer would have gotten just as much return so far if he parked his money in T-Bills, the only way to cash out is to sell the team to another guy looking for a trophy), which I don't know how even a team like TSM would get a guy like Larry Ellison some sweet dinner party talk.
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due to the low-interest rate environment you do see a lot of investors going into more risky things in order to enhance their returns. however, there are plenty of great places for billionaires to park their money and watch it grow. a random scrub like me can buy into indexes and get a pretty reliable high single digit return year after year. a billionaire can put his money into all sorts of things like a VC/PE fund or something and get like 20-30% a year.
sports franchise valuations going up is likely a vanity thing. what better way to flaunt your wealth than owing a team who's name is on TV and seen by tens of millions weekly? the influx of foreign dollars has further inflated value.
LCS needs more scale for individual, non-top teams to be profitable. personally, i don't think the market has hit it's peak. without outside money and influence it's probably not going to grow much more; but with it it can. the investor's idea isn't to put a chunk of money in a business that won't grow, it's to put it in a business, so the business can grow and then their slice of it becomes bigger. It's no guarantee that League will succeed, but the influx of money and influence is definitely a critical factor to the possibility of it doing so.
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GrandInquisitor
New York City13113 Posts
On September 10 2017 02:00 ticklishmusic wrote:
due to the low-interest rate environment you do see a lot of investors going into more risky things in order to enhance their returns. however, there are plenty of great places for billionaires to park their money and watch it grow. a random scrub like me can buy into indexes and get a pretty reliable high single digit return year after year. a billionaire can put his money into all sorts of things like a VC/PE fund or something and get like 20-30% a year.
This thread is full of misconceptions about finance, and the claim that billionaires can safely earn 20-30% per year, so investing in sports teams must therefore be just a pet project, probably tops the list. 30% rate of growth would quadruple a billionaire's money in five years. By your logic people should be borrowing on margin at 5x prevailing interest rates to invest into these VC/PE funds.
Look, I don't doubt that vanity is part of why people own sports teams. But there are major tax reasons to own sports teams. This is a decent overview of a few such tricks. Indeed, there are some sports teams that are specifically valuable because they generate certain kinds of paper losses, to be used to offset other income.
Most of those reasons apply (obviously to a much lower degree) to esports teams, but I doubt that that's the main reason teams are getting into esports. The numbers just aren't big enough. For now esports is almost certainly more just a cheap investment that has high upside in the long run. If you're getting into esports as a short-term income-generating asset you are missing the point.
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Looking at some numbers, returns over the last 10 years for VC funds have only been 8.7% (and I believe this is just the 20 best performers), and with all the extra risk you're taking on compared to the market at large, it doesn't seem particularly worth it for the chance of an extra 3%. And from historical numbers, they haven't really been outperforming the market since the 1990's.
The fact VC funds have 2% fees straight up and then have additional fees on top of that makes me believe it is more about filling the pockets of the investment managers and less about maintaining high returns. Then you throw in the risk of legitimate scammers on top of the "legitimate" VC funds, and I would stay far away if I were rich. You'd probably be better off throwing your money in the market at random than a VC fund. Private equity doesn't seem any better, except they used to get better returns in the past.
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On September 10 2017 07:21 GrandInquisitor wrote:Show nested quote +On September 10 2017 02:00 ticklishmusic wrote:
due to the low-interest rate environment you do see a lot of investors going into more risky things in order to enhance their returns. however, there are plenty of great places for billionaires to park their money and watch it grow. a random scrub like me can buy into indexes and get a pretty reliable high single digit return year after year. a billionaire can put his money into all sorts of things like a VC/PE fund or something and get like 20-30% a year. This thread is full of misconceptions about finance, and the claim that billionaires can safely earn 20-30% per year, so investing in sports teams must therefore be just a pet project, probably tops the list. 30% rate of growth would quadruple a billionaire's money in five years. By your logic people should be borrowing on margin at 5x prevailing interest rates to invest into these VC/PE funds. Look, I don't doubt that vanity is part of why people own sports teams. But there are major tax reasons to own sports teams. This is a decent overview of a few such tricks. Indeed, there are some sports teams that are specifically valuable because they generate certain kinds of paper losses, to be used to offset other income. Most of those reasons apply (obviously to a much lower degree) to esports teams, but I doubt that that's the main reason teams are getting into esports. The numbers just aren't big enough. For now esports is almost certainly more just a cheap investment that has high upside in the long run. If you're getting into esports as a short-term income-generating asset you are missing the point.
I work in VC and made an oversimplification. The IRR of the top quartile of funds is easily that high. Of course you have the firm taking its cut and if it's a fund of funds then the other managers are taking cuts too. While PE/VC are more risky due to illiquidity, the quality of information and other factors however, from a risk/return perspective it is far better than what a retail investor can get. However like anyone else a rich guy is going to diversify his portfolio, the same way (most) people don't dump their retirement fund into Facebook.
An esports team is a VC investment. Throw a few million at a team. If it gets big, then it covers the investment and perhaps a dozen like it. If it doesn't then oh well it's just a few million and they'll make it up and ten some somewhere else. For most people it's a tiny, tiny investment among many.
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Where's the thread for Worlds? Group drawings are tomorrow morning at 5AM PST!
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On September 12 2017 06:14 Gahlo wrote:
Where's the thread for Worlds? Group drawings are tomorrow morning at 5AM PST!
Will be coming out today!
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I don't think TSM could've gotten a more favorable groups draw. Group A should give SKT a tough time too with EDG and AHQ. Immortals kinda lucked out too with drawing Longzhu and Gigabyte Marines. G2 got kinda fucked by getting Samsung and RNG. TSM got FW and Misfits; if they don't get out of groups I will laugh my ass off because they should be able to get first (though I'd still favor FW).
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On September 13 2017 05:52 geript wrote:
I don't think TSM could've gotten a more favorable groups draw. Group A should give SKT a tough time too with EDG and AHQ. Immortals kinda lucked out too with drawing Longzhu and Gigabyte Marines. G2 got kinda fucked by getting Samsung and RNG. TSM got FW and Misfits; if they don't get out of groups I will laugh my ass off because they should be able to get first (though I'd still favor FW).
You know unless there's an upset in the play-in stage that WE is guaranteed to be in group D too, right?
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On September 13 2017 05:58 Gahlo wrote:Show nested quote +On September 13 2017 05:52 geript wrote:
I don't think TSM could've gotten a more favorable groups draw. Group A should give SKT a tough time too with EDG and AHQ. Immortals kinda lucked out too with drawing Longzhu and Gigabyte Marines. G2 got kinda fucked by getting Samsung and RNG. TSM got FW and Misfits; if they don't get out of groups I will laugh my ass off because they should be able to get first (though I'd still favor FW). You know unless there's an upset in the play-in stage that WE is guaranteed to be in group D too, right?
There's still no reason for TSM to not be able to beat those two. They can beat WE too. Immortals got a favorable draw as well, but I'd still rather have TSM's draw where they should be able to beat any of the three other teams. I'm not a TSM fan; I actually lean closer to Thoorin's and Monte's view of them, but there's still no reason for them to not get out of groups with this favorable a draw.
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On September 13 2017 07:39 geript wrote:Show nested quote +On September 13 2017 05:58 Gahlo wrote:On September 13 2017 05:52 geript wrote:
I don't think TSM could've gotten a more favorable groups draw. Group A should give SKT a tough time too with EDG and AHQ. Immortals kinda lucked out too with drawing Longzhu and Gigabyte Marines. G2 got kinda fucked by getting Samsung and RNG. TSM got FW and Misfits; if they don't get out of groups I will laugh my ass off because they should be able to get first (though I'd still favor FW). You know unless there's an upset in the play-in stage that WE is guaranteed to be in group D too, right? There's still no reason for TSM to not be able to beat those two. They can beat WE too. Immortals got a favorable draw as well, but I'd still rather have TSM's draw where they should be able to beat any of the three other teams. I'm not a TSM fan; I actually lean closer to Thoorin's and Monte's view of them, but there's still no reason for them to not get out of groups with this favorable a draw.
Definitely agree with you there. There's no excuse unless something drastic happens.
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On September 13 2017 05:58 Gahlo wrote:Show nested quote +On September 13 2017 05:52 geript wrote:
I don't think TSM could've gotten a more favorable groups draw. Group A should give SKT a tough time too with EDG and AHQ. Immortals kinda lucked out too with drawing Longzhu and Gigabyte Marines. G2 got kinda fucked by getting Samsung and RNG. TSM got FW and Misfits; if they don't get out of groups I will laugh my ass off because they should be able to get first (though I'd still favor FW). You know unless there's an upset in the play-in stage that WE is guaranteed to be in group D too, right?
The only way WE is guaranteed to go into group D is if WE, C9, Fnatic AND Hong Kong Attitude all make it into the group stage:
+ Show Spoiler [explanation] +WE can go into groups B or D,
C9 can go into groups A or C,
Fnatic can go into groups A or B, and
HKA can go into groups B or C
If WE goes into group B, HKA then has to go into group C, C9 then has to go into group A, Fnatic has nowhere to go -> invalid draw, WE must go into group D
Considering how regions like Brazil and SEA have been playing spoiler in Worlds lately, I think the scenario where at least one of these teams fails to advance to the group stage is far more likely than the scenario where all 4 of them advance.
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On September 17 2017 13:04 Zato-1 wrote:Show nested quote +On September 13 2017 05:58 Gahlo wrote:On September 13 2017 05:52 geript wrote:
I don't think TSM could've gotten a more favorable groups draw. Group A should give SKT a tough time too with EDG and AHQ. Immortals kinda lucked out too with drawing Longzhu and Gigabyte Marines. G2 got kinda fucked by getting Samsung and RNG. TSM got FW and Misfits; if they don't get out of groups I will laugh my ass off because they should be able to get first (though I'd still favor FW). You know unless there's an upset in the play-in stage that WE is guaranteed to be in group D too, right? The only way WE is guaranteed to go into group D is if WE, C9, Fnatic AND Hong Kong Attitude all make it into the group stage: + Show Spoiler [explanation] +WE can go into groups B or D,
C9 can go into groups A or C,
Fnatic can go into groups A or B, and
HKA can go into groups B or C
If WE goes into group B, HKA then has to go into group C, C9 then has to go into group A, Fnatic has nowhere to go -> invalid draw, WE must go into group D Considering how regions like Brazil and SEA have been playing spoiler in Worlds lately, I think the scenario where at least one of these teams fails to advance to the group stage is far more likely than the scenario where all 4 of them advance.
That's why I said "unless there's an upset".
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GrandInquisitor
New York City13113 Posts
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Lol. On one hand, they are correct about everything they said. On the other, H2K sucks, and 6.5 mil is a lot.
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Can h2k just quit already nobody likes them anyway.
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On September 29 2017 06:59 cLutZ wrote:
Lol. On one hand, they are correct about everything they said. On the other, H2K sucks, and 6.5 mil is a lot.
I believe that 6.5 is supposed to be split between teams.
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http://www.lolesports.com/en_US/articles/na-lcs-format-update-2018
Riot going back to the old format. Guess they embracing the fact that NA will always be shitlords and just meme potential 
edit: Freak missed your post. .Bo1 is just garbage fire honestly. They should use the old OGN format. The double round robin Bo3 was too much but double round robin Bo1 is practically zero actual league experience for teams while taking forever to finish.
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EPT
