EPT
As many of you have read, ESGN shut down last month and recently filed for insolvency.
Relevant links:
ESGN Having Financial Difficulties, Unable to Pay Employees OnGamers.com
ESGN to continue on, confirms studio closing; dedicated to paying owed payments OnGamers.com
ESGN Studio to Close; Contracts Terminated EsportsHeaven
Clauf Declare Insolvency EsportsHeaven
We had a chance to sit down and talk with Dan "Frodan" Chou, former ESGN employee and one of the most recognizable faces in their broadcasts about his time at the doomed company.
![[image loading]](http://www.teamliquid.net/staff/Heyoka/FrontPage/Clauf/ClaufFighting.jpg)
![[image loading]](http://www.teamliquid.net/staff/Heyoka/FrontPage/Clauf/ClaufStudio2.jpg)
![[image loading]](http://www.teamliquid.net/staff/Heyoka/FrontPage/Clauf/ClaufStudioBig2.jpg)
Relevant links:
ESGN Having Financial Difficulties, Unable to Pay Employees OnGamers.com
ESGN to continue on, confirms studio closing; dedicated to paying owed payments OnGamers.com
ESGN Studio to Close; Contracts Terminated EsportsHeaven
Clauf Declare Insolvency EsportsHeaven
We had a chance to sit down and talk with Dan "Frodan" Chou, former ESGN employee and one of the most recognizable faces in their broadcasts about his time at the doomed company.
TL: In short, what went wrong? In your words, why did you think ESGN failed?
Frodan: You could attribute many factors as to why ESGN failed, but the easiest way to summarize it is that an exorbitant amount of money went into inexperienced hands. The company and management had great intentions for the scene, but often got caught eating their own words. phrases like "we want to change the global landscape of eSports" and "we hope to bring the industry into the mainstream media" set both internal and external expectations too high.
The scope of what Clauf/ESGN wanted to do and the need to fulfill those grand announced obligations spiraled into the overspending. it eventually snowballed to the point where the company would run out of the money or the investors would have to continue dumping excess amounts of cash into the project.
The scope of what Clauf/ESGN wanted to do and the need to fulfill those grand announced obligations spiraled into the overspending. it eventually snowballed to the point where the company would run out of the money or the investors would have to continue dumping excess amounts of cash into the project.
TL: Did anyone see the failure as inevitable given the way the company was burning through money?
Frodan: Our media team (as opposed to the business ops team) saw this inevitability as a high probability right from launch. From the beginning, the management took a hard line that when we announce things, they need to happen. Therefore, when we announced our launch date on January 6th, it was mandated that our first broadcast absolutely must air. However, we just moved into the studio less than one month prior in December and most people went home early in the month for holidays.
This meant with less than 2.5 weeks of preparation, we had to air with two hours of refined, highly quality nightly content. For production enthusiasts, this goal is unrealistic considering the studio was not even finished wiring until post new years day. Thus the producers warned that in order to match the schedule, costs would skyrocket in order to accommodate the announcement. They okayed it under the assumption that money would not be an issue In fact, that statement was something we often heard from management, but clearly money was an issue to a point.
This meant with less than 2.5 weeks of preparation, we had to air with two hours of refined, highly quality nightly content. For production enthusiasts, this goal is unrealistic considering the studio was not even finished wiring until post new years day. Thus the producers warned that in order to match the schedule, costs would skyrocket in order to accommodate the announcement. They okayed it under the assumption that money would not be an issue In fact, that statement was something we often heard from management, but clearly money was an issue to a point.
TL: Did you have any influence over how the money was spent? Were there warning signs?
Frodan: I only had influence over money through the projects I proposed. I created the idea of Fight Night under the stipulation that our management wanted content featuring players in the studio playing a King of the Hill series. there were warning signs, of course, but they were well hidden and not revealed to staff until the unfortunate day at the beginning of April when we got emails saying they cannot pay us for March. I thought it was a late April Fools joke at first, but eventually when no answers came, it was clear the first warning sign we received was the last and only sign we'd get.
TL: At some point did you look around and say, "whoa, this is just way too much spending?"
Frodan: Probably the first time we shot Fight Night and I realized how little of the studio we actually used. To give perspective, the entire Fight Night series and news cast was performed on our temporary mobile set that we planned on shipping to events to do news desk coverage. This was while we built our premium studio set that could do all kinds of incredible things like augmented reality. Honestly, it was too lavish and overkill times infinity. We got a decent product that has a giant ceiling of potential with our mobile kit alone -- where would we even store the mobile kit? Would that just be sitting in a closet until we need it? Those questions got answered with bigger statements. "We will take over our neighboring studio and use that as a second studio to simultaneously live broadcast." This was around late January of 2014.
TL: Do you feel that the viewer numbers were a success or not? Where was the revenue supposed to come from?
Frodan: I felt like the initial numbers were a massive success at least for the Hearthstone portion. One day, the normally calm and cool Korean CEO came in and hugged me out of nowhere because he saw that Hearthstone Fight Night Season 3 hit 40,000+ live concurrent viewers. This ended up being a huge blessing, but an even bigger curse. Due to our numbers early on, it set an unrealistic precedent of how successful a program should be. This was exacerbated by the fact that we were one of the few hearthstone content creators and thus would eventually fall when others started up.
Consequently, the management felt pressured to follow up those numbers even though they knew they would never achieve them with SC2, Street Fighter and LoL programming. As such, we started becoming viewership-based in our evaluations which eventually meant that news wouldn't be the focus of our content anymore, but competition instead.
Consequently, the management felt pressured to follow up those numbers even though they knew they would never achieve them with SC2, Street Fighter and LoL programming. As such, we started becoming viewership-based in our evaluations which eventually meant that news wouldn't be the focus of our content anymore, but competition instead.
TL: Well, even 40,000 concurrent viewers can't pay for that studio. Did you feel that the advertising money from broadcasts could cover costs? How many viewers would you have to get to realistically make it viable?
Frodan: 40,000 couldn't pay for it, but that wasn't the goal, at least in the beginning. Instead, it was the demonstration of our production capability. Advertising was definitely a revenue plan, but that was a long term pitch. However, this is where management started showing their inexperience. There were multiple opportunities to earn revenue through other means that our producers offered, but pride was often in the way of accepting it. For example, there was a blue-chip company client that we had contacts through our senior producer that asked us to do a commercial for them, but we turned it down. I was told that this was solely because the upper management felt like they did not want to go in that direction. When I heard this, I was disappointed beyond belief.
Overall, our numbers were a tangible way to show off to the investors. It was never a threshold where we said, "if we hit 50,000 tonight, we break even on this program." It was more about showing the demonstration of our product and what we spent months preparing for.
Overall, our numbers were a tangible way to show off to the investors. It was never a threshold where we said, "if we hit 50,000 tonight, we break even on this program." It was more about showing the demonstration of our product and what we spent months preparing for.
TL: There is a lot of talk in the community about money laundering, Sapinda scams, and executives intentionally trying to fail. Do you think there's any substance to these rumors?
Frodan: I really believe Sapinda wanted to make a genuine investment into esports. I met with the investors and they truly believe it to be what Forbes/Wall Street Journal etc pin it up to be. They're huge fans of some of the players that were in our studio. Their children watched our content and even asked for a picture/autograph with me. You can say I'm drinking the "Kool Aid" but it felt like they wanted to get involved in a booming industry just like Sapinda does in others. Where i think it went all wrong is that Sapinda is used to dominating spaces. Management promised the world but gave them a wheel and two showgirls. The numbers looked good at the start, but when they inevitably couldn't stabilize combined with the high amounts of negative press, its easy to see why they'd rather cut their investment.
Eventually, the investors asked for a reevaluation of business plans because it was clear that Azubu/ESGN were bleeding high amounts of cash. This is where our final pitch was made to do leagues for Hearthstone and CS:GO. But with no money, there could be no league. This is what I spent the last two months there doing before I was let go.
Eventually, the investors asked for a reevaluation of business plans because it was clear that Azubu/ESGN were bleeding high amounts of cash. This is where our final pitch was made to do leagues for Hearthstone and CS:GO. But with no money, there could be no league. This is what I spent the last two months there doing before I was let go.
TL: Was there anything that went right?
Frodan: ESGN did a few things right. For one, I believe the hearthstone scene wouldn't be the same without it. We helped build many of the foundational stories of teams and players that people latched onto similar to the beginning days of GSL for SC2. Street Fighter really never got anything like what Fight Night brought to their scene before. The SC2 players thanked us after filming saying they have not had that much fun playing at an event in years. We also had a wonderful team. Although most members knew nothing of esports, I thought we kicked butt being able to reach the deadlines set upon us. We managed to squeeze out a TV quality commercial campaign on a budget that would be considered legendary by industry professionals. We put out a daily news show for 2.5 months with a small team with no news experience whatsoever. I'm sad our time was cut short, but I will sorely miss working with everyone.
TL: A lot of the reports include information about no employment contracts, bad employee morale, etc. Is there any explanation for why there weren't safeguards in place to protect employees?
Frodan: The contract situations are mostly true from what I read. This is largely due to the incompetence of the hired HR department combined with the overspending problem. After our 2-hour-per-night launch which we somehow got on air despite having thousands of technical issues, we were then asked to create 4 hours nightly by mid year and 6 hours by summer. While we wanted to do easy content such as restreaming Gamefy's LoL content with English commentary over it, those agreements were still far away from finalizing. They were asking us to generate original content at a pace that was unrealistic. We had to put out 20 episodes of "TV Quality" broadcasts in under 2 weeks. This meant we had to get lots of hands so we started hiring en-masse.
Management was opposed to hiring experienced people, so we brought in many PAs and contractors outside of esports to help. However, because of the speed we were asked to create, our media team was forced to ask people on their good will to begin working before a contract could be signed. This left a loophole for management to terminate employees before being forced to sign a contract. In Germany, after three months of employment, you have to place employees on payroll which also means signing a contract of some sort. This led to a revolving door of employees who probably never got paid, although I haven't followed up some of them.
Management was opposed to hiring experienced people, so we brought in many PAs and contractors outside of esports to help. However, because of the speed we were asked to create, our media team was forced to ask people on their good will to begin working before a contract could be signed. This left a loophole for management to terminate employees before being forced to sign a contract. In Germany, after three months of employment, you have to place employees on payroll which also means signing a contract of some sort. This led to a revolving door of employees who probably never got paid, although I haven't followed up some of them.
TL: You said they were "opposed to hiring experienced people." What does that even mean? Would you say management exploited ESPORTS volunteers then?
Frodan: I would say 80% of our media team had no experience with esports whatsoever. They often first heard about the industry in their interviews. Thus we often had amateur mistakes that were plain oversights because our employees simply don't know whats expected in a Street Fighter or StarCraft broadcast. As for business operations, they had a healthier mix of 75/25 ratio of people who were experienced. However, most people there had minimal experience as well.
I wouldn't say they exploited esports volunteers. They exploited freelancers looking for work, which doesn't change the degree of how terrible the situation is.
I wouldn't say they exploited esports volunteers. They exploited freelancers looking for work, which doesn't change the degree of how terrible the situation is.
TL: Just how inexperienced were these people? How did they get so many people to work for them without a contract? What happens to those that moved to Germany for ESGN?
Frodan: At first, in order to convince esports people to join, ESGN would be required to pay larger salaries. So to compensate, we had a couple PAs hired instead who had to learn from an experienced person and replicate it since they would work on virtually minimum wage and they were hungry for work. Teams were often divided up by one person having to explain what Twitch.tv is, who are the big streamers, how the game looks/broadcasted, what's a Reddit, etc.
As for what happens to the people who moved to Germany, that's a bit exaggerated honestly. Other than the former NASL hires, there were very few people who moved their life overseas. Management, Torte de Lini and two graphics designers is all I can remember. Everyone else was within Germany or they already lived in Berlin but hail from another nation. But I mean, I did move my life over.
As for what happens to the people who moved to Germany, that's a bit exaggerated honestly. Other than the former NASL hires, there were very few people who moved their life overseas. Management, Torte de Lini and two graphics designers is all I can remember. Everyone else was within Germany or they already lived in Berlin but hail from another nation. But I mean, I did move my life over.
TL: Have you remained in contact with those people? What are they doing now? Was it just sort of "everyone for themselves" once the news broke?
Frodan: There are 40+ of us in a private Facebook support group that help each other with unemployment benefits and filing papers. The local Germans have been super helpful and we all meet each other from time to time at random music festivals/gatherings that are common during Berlin's summer. Until now, most employees affected were freelancers so they looked for other jobs. The other group that includes me were waiting for a response from ESGN about whether they would get paid. We got notice on the 30th that they were going to declare insolvency. A few people have decided to go their own ways, but no one really cared or noticed.
TL: At what point did you think to yourself, "Frodan do not like. Frodan gots to go." Did you start making preparations to leave? Did you warn people or protect yourself? Dig a tunnel like Andy Dufresne?
Frodan: Hahaha well sadly I didn't bring a poster of Rita Hayworth for my office space, but I did try to find an exit path somewhere in May. Initially, I held out on believing things could turn around for a month due to loyalty ties. After all, management took a chance on me when I was relatively unproven and I have benefited much from this entire ordeal despite having gotten myself involved in quite the conundrum. I primarily felt bad for other legit esports people that were victimized by this such as Susie Kim (lilsusie), but I didn't know how to warn her because our company kept warning us of NDA agreements.
TL: What was your final communication with management like? Do you harbor any feelings toward them or toward anyone?
Frodan: After the 2nd "restructure", it became very clear that management had no direction or idea of what to do to save the company. Two weeks later, they randomly surprised the rest of the staff with termination notices. I had plenty I wanted to say to management on my last day, but I decided it was best to thank them for at least believing in me without evidence that I would be a successful front man. Despite the circumstances, management always went out of their way to tell me they thought I was doing a superb job and they picked the perfect guy for it.
That said, I can't help but feel that the entire fiasco was in large part due to the management. Poor planning, inexperience, procrastination, and mis-communication only begin to describe the tip of the iceberg of issues. The executives involved really do like the industry and believe in its inevitable success among the next generation. However, it's clear that most of them had no experience in production whatsoever. Compound this with the fact that we talked too much and did too little to back it up. I think people who say that ESGN/Clauf is a lesson in humility (and obviously fiscal responsibility) are spot on.
That said, I can't help but feel that the entire fiasco was in large part due to the management. Poor planning, inexperience, procrastination, and mis-communication only begin to describe the tip of the iceberg of issues. The executives involved really do like the industry and believe in its inevitable success among the next generation. However, it's clear that most of them had no experience in production whatsoever. Compound this with the fact that we talked too much and did too little to back it up. I think people who say that ESGN/Clauf is a lesson in humility (and obviously fiscal responsibility) are spot on.
TL: Do you regret signing on? If you could do it all over again what would you have done?
Frodan: No, I don't regret signing on. Ironically enough, I saw all the signs with this back at NASL of inevitable collapse. If you want a funny tidbit, MrBitter was offered the job before me, but he wisely declined for a myriad of practical reasons. I knew Gretorp was going to leave eventually as well. With the other NASL crew signed on to go, I felt like the team which could produce great esports content was gone and I felt this was a once in a lifetime opportunity to learn and experience life abroad. I had never been to Europe prior to the first time I landed here in Berlin.
If I had to do it again, I'd do it with people who know how to succeed in this industry. Quite frankly, there were several unqualified people with too much influence in the company. I'd force management to listen to our producers and Morgan Stone better. In the end, the media team was too respectful for what management asked of us. They also hid the financial information that "money is not an issue" from us for too long. Regardless of the investors pulling out, the fact is ESGN still received a truckload of money that they wasted on many frivolous items.
If I had to do it again, I'd do it with people who know how to succeed in this industry. Quite frankly, there were several unqualified people with too much influence in the company. I'd force management to listen to our producers and Morgan Stone better. In the end, the media team was too respectful for what management asked of us. They also hid the financial information that "money is not an issue" from us for too long. Regardless of the investors pulling out, the fact is ESGN still received a truckload of money that they wasted on many frivolous items.
TL: What were your thoughts on the extravagant launch party? Did you how much money they spent on that or overall?
Frodan: The launch party was business op's "contribution" towards the broadcast launch on January 6th. I don't know how much they spent, but i know it was far too much. There were things brought to the party that we didn't even use. Our media team (who were exhausted beyond belief because we only took Christmas day off, not even new years to make our broadcast possible) got ushered in a limo bus. Did you know they make those??? A limo bus made by Benz for 6-7 people.
TL: Did you eventually receive some of what was promised to you?
Frodan: It might be a misconception that ESGN decided to pay certain people and not others. The fact is they simply ran out of money. Anything owed after that point hasn't been paid. They owe me three months of salary and more if I press charges in a lawsuit, but I don't think its worth fighting especially now that the company has declared insolvency. However, the German laws dictate that employees might not even get paid their full amount owed because ESGN has to pay their bills first. I don't think this will be an issue considering the publicized Fight Night payments were around 1/10th of the debt owed to other parties. The vast majority of payment owed are to ex-staff.
TL: Did you feel the salaries were exorbitant?
Frodan: We simply took on way too many salaries to be sustainable. At our peak, we had nearly 40 employees in the media team alone working on two projects in order to meet deadlines.
TL: Did any of these employees kind of just sit at their desks wondering what they were doing? How can you even have remotely enough work for 5 media people let alone 40?
Frodan: That's a good question. We had two teams: News and Fight Night. Fight Night had an audio engineer and 6-7 editors who would handle graphics, video, animation, and QC of fight night. News had 2 editors + 6 man research team. We had 2 talents with me and Jay Atkins. Our live team was a group of 5-6. Morgan and his crew were a batch of 4 with a line producer and production coordinator. Then we also had a Fight Night coordination team who handled contracts, logistics, set design, schedules, budgets, and other boring stuff. Then we had a camera operator and general PAs who would do runs. Finally, there was another team that would come in to do Fight Night filming on the weekends since we couldn't overwork the crew.
Again, Fight Night wasn't meant to be sustainable. It was meant to be a project that grabbed attention to the network so that news could anchor it. Eventually we wanted to weave in other programming and have news tie in with live updates and interviews on competitions happening. This was why we warned putting out hours of original content would require a ton of resources if you want it early and good.
Again, Fight Night wasn't meant to be sustainable. It was meant to be a project that grabbed attention to the network so that news could anchor it. Eventually we wanted to weave in other programming and have news tie in with live updates and interviews on competitions happening. This was why we warned putting out hours of original content would require a ton of resources if you want it early and good.
TL: Did the practices of the management become sort of internal jokes at any point? What were those last few weeks like in the office?
Frodan: Oh sure, there were memes and memos being passed around of stuff like this or this. Many people were calling in sick and management presumably thought they were playing hooky so they demanded doctors notes. The crew thought of creative ways around it for a while. Someone took an instagram selfie at the lake as a doctor's note.
It's pretty sad, but the adversities drew us closer. The team hung out way more in the last month than we have in the previous 6-7 combined. Also by this time, a few executives surprisingly sided with the employees and started helping some employees financially who were going through extremely desperate times.
It's pretty sad, but the adversities drew us closer. The team hung out way more in the last month than we have in the previous 6-7 combined. Also by this time, a few executives surprisingly sided with the employees and started helping some employees financially who were going through extremely desperate times.
TL: What would be your advice to new ESPORTS volunteers or people trying to get started in the industry to not have this happen to them?
Frodan: For volunteers, really any experience can be valuable. Of course, relocating to a different country might be excessive for an internship, but I'm talking about the local LANs, websites, or even streamers that ask for help -- go ahead and sign up. I don't see why volunteering would be a bad thing. Knowing more people can be as valuable as money in this industry.
For job takers, startups live and die by their leadership. Team members and company vision will always change for whatever reason, but you have to have good faith that the man/woman in charge is someone who you can fully trust to make the right decisions. I was right to place my trust in Morgan Stone, but unfortunately he didn't call any shots despite being promised he would be able to. I hope that future big projects like these go into the deserving hands of experienced esports veterans who won't squander it.
For job takers, startups live and die by their leadership. Team members and company vision will always change for whatever reason, but you have to have good faith that the man/woman in charge is someone who you can fully trust to make the right decisions. I was right to place my trust in Morgan Stone, but unfortunately he didn't call any shots despite being promised he would be able to. I hope that future big projects like these go into the deserving hands of experienced esports veterans who won't squander it.
TL: Do you feel that Azubu and other Sapinda backed organizations will have similar fates? Or do you feel the management is different in each of those cases?
Frodan: I only met the new Azubu organization once even though they have several meetings with ESGN in Germany. I don't have a fair assessment of the management. However, the rumors of overspending are also prevalent in their case as well. I don't know if its 100% true, but if that is the case, I wouldn't put stock in their organization if they went public anytime soon.
GEM has a group of solid people and its quite unfortunate they unfairly get dragged into the mess of their investor sister companies. I don't know much about the status of financial affairs, but they have a working business model that makes sense given their goals and vision. I hope they continue even if they have to break off from Sapinda as it appears that investment group no longer desires to remain in the industry, at least in their current capacity.
GEM has a group of solid people and its quite unfortunate they unfairly get dragged into the mess of their investor sister companies. I don't know much about the status of financial affairs, but they have a working business model that makes sense given their goals and vision. I hope they continue even if they have to break off from Sapinda as it appears that investment group no longer desires to remain in the industry, at least in their current capacity.
TL: How about you personally? Will you land on your feet? What are you going to do now?
Frodan: I will be okay! Luckily, i decided to start saving even before I first moved to Berlin because I thought I wanted to maybe invest in some property. My involvement in the Hearthstone community has also been a huge blessing as the community has been very receptive and caring. I will most likely transition into freelancing until I find a stable job somewhere. So if anyone is interested, hit me up!
I'm not swimming in caster money, but I am not in danger of getting evicted unlike some of my fellow ex-colleagues. I am more worried about them as a few might be homeless in a month or two. That's mainly the group's concern at the moment -- helping these people get their papers in so they can get their money without being forced to leave the country.
I'm not swimming in caster money, but I am not in danger of getting evicted unlike some of my fellow ex-colleagues. I am more worried about them as a few might be homeless in a month or two. That's mainly the group's concern at the moment -- helping these people get their papers in so they can get their money without being forced to leave the country.
TL: Thanks for doing this. Any last shoutouts and callouts?
Frodan: Thank you to everyone who has been supportive along the way! My family and girlfriend has always been there encouraging me and I love them all dearly. A big thank you to Morgan Stone who has guided me since day one. MrBitter has also been there for me throughout the entire process as a industry peer and true friend. Thanks to you guys for doing this interview and correcting my plethora of grammar mistakes. Huge thank you to my former ESGN colleagues, especially my German translating friends!! My deepest gratitude to SC2 and Hearthstone community for being supportive via social media and Skype. And finally, a big shoutout to the best team in Hearthstone, Tempo Storm! 
