---
title: "Why esports collapsed and who got paid for it"
url: https://modern-mba.com/case/esports
sector: "Media & entertainment"
sector_url: https://modern-mba.com/sector/media-and-entertainment
aired: 2024-09-01
published: 2026-08-25
updated: 2026-08-28
reading_time_minutes: 16
charts: 15
video: https://www.youtube.com/watch?v=Ti5eciur59M
author: "Yishan Lin"
author_url: https://www.linkedin.com/in/yishanlin/
publisher: Modern MBA
license: "© Modern MBA, all rights reserved. Quote and cite with credit and a link; republishing needs written permission."
---

# Why esports collapsed and who got paid for it

Esports did not fail because the audience left. Viewership tripled and stayed. It failed because the money only ever moved in one direction — out of investors and team owners, into publishers who charged up to $30 million for seats in leagues they were free to close, and sideways to talent taking more than 70% of every deal. This case study follows that money through eight teams, four publishers, and two venue operators, and names what happened at each step: extraction, self-dealing, unverifiable résumés, and shell-company exits, in an industry nobody was watching.

## Key figures

- **$20M vs $6M** — Cost of an Overwatch League seat, and what it returned
- **8 of 8** — Listed esports orgs now trading as penny stocks
- **70%** — Of every deal that never reaches the shareholders

## The argument

Esports was not a business that failed. It was a transfer that completed. Activision sold twelve Overwatch League seats at $20 million each — for a game five months old with no record as a spectator sport — then quoted expansion seats at $30 to $60 million a year later. In 2023 it waived the fees teams still owed, paid roughly $114 million to dissolve the league, and walked. Nobody was wrong about this. The people who priced it got exactly what they came for.

One level down, the organizations that bought in were never the media companies they described in their decks. They were payment processors. More than 70% of every brand deal and prize pool went straight through to the streamers and players who generated it, which is why gross margins sat at 25% against 49% at The New York Times. The talent got rich, took equity, and in some cases ended up owning the companies that had been paying them.

What kept it running was that no mainstream outlet ever covered the collapse, so there were no consequences and no memory. The CFO who signed off on FaZe's model became chief executive of the company that rescued FaZe. An org was bought for $23 million from an entity co-owned by its buyer's own backers, then dumped at $10 million. A Norwegian team sold at 18 cents a share to a shell with a Cyprus postal address. Each found a buyer because nobody was checking.

## Charts

### The audience did what it was supposed to

Global esports viewership in millions. Occasional viewers overtaking frequent ones by 2019 is the signature of an audience going mainstream.

|  | Frequent viewers | Occasional viewers |
| --- | --- | --- |
| 2012 | 76M | 58M |
| 2014 | 114M | 90M |
| 2015 | 115M | 120M |
| 2016 | 160M | 121M |
| 2017 | 192M | 143M |
| 2018 | 215M | 165M |
| 2019 | 212M | 215M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-1 · Sources: https://modern-mba.com/case/esports#sources

### And it never left

Change in peak concurrent viewership by title, 2019 against 2023. The biggest games grew while the companies built on them were wiped out.

|  | Percentages |
| --- | --- |
| Street Fighter | 142% |
| Call of Duty | 77% |
| Rocket League | 67% |
| League of Legends | 61% |
| Counter Strike | 27% |
| Apex Legends | 24% |
| Rainbow Six | −26% |
| Dota 2 | −27% |
| Smash Bros | −39% |
| PUBG | −47% |
| Fortnite | −69% |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-2 · Sources: https://modern-mba.com/case/esports#sources

### The bait

Median age of the viewer, 2016. The one genuine asset esports had, and the line that opened every fundraising deck in the sport.

|  | Counts |
| --- | --- |
| Esports | 32 |
| Champions League | 39 |
| Premier League | 42 |
| NHL | 43 |
| NFL | 49 |
| NBA | 53 |
| Wimbledon | 55 |
| MLB | 57 |
| PGA Tour | 64 |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-3 · Sources: https://modern-mba.com/case/esports#sources

### A global audience is a cheap one

General advertising cost per thousand views by country. Esports viewership is global, so the headline audience number was never a revenue forecast.

|  | US dollars |
| --- | --- |
| USA | $36 |
| Canada | $32 |
| UK | $23 |
| Norway | $22 |
| Germany | $20 |
| Mexico | $10 |
| Korea | $8 |
| Poland | $8 |
| India | $2 |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-4 · Sources: https://modern-mba.com/case/esports#sources

### The number every deck was underwritten by

Annual payout from domestic media rights. This is the comparison esports made about itself for a decade, to investors who accepted it.

|  | US dollars |
| --- | --- |
| NFL | $10B |
| NBA | $6.9B |
| Premier League | $2.1B |
| MLB | $1.7B |
| Olympics | $1.3B |
| College Football | $1.3B |
| NASCAR | $1.3B |
| NCAA Basketball | $1.1B |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-5 · Sources: https://modern-mba.com/case/esports#sources

### What it was actually worth

Annual payouts from the three largest media rights deals ever signed in the sport. The biggest is half a percent of what the NFL collects.

|  | US dollars |
| --- | --- |
| Activision 2020–2023 | $53M |
| Overwatch League 2018–2020 | $45M |
| LPL 2020–2023 | $38M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-6 · Sources: https://modern-mba.com/case/esports#sources

### So they sold seats instead

Price of a permanent league seat. Overwatch cost twice a League of Legends slot on a game five months old, then rose 50% after one season.

|  | US dollars |
| --- | --- |
| Overwatch 2019 expansion | $30M |
| Call of Duty 2019 | $25M |
| Overwatch 2017 inaugural | $20M |
| LCS | $13M |
| CS Premier | $13M |
| LPL | $12M |
| LEC | $9M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-7 · Sources: https://modern-mba.com/case/esports#sources

### The trade, start to finish

What Activision collected for the twelve inaugural Overwatch League seats, against what it paid nineteen teams to dissolve the league in 2023.

|  | US dollars |
| --- | --- |
| Collected from 12 seats, 2017 | $240M |
| Paid out to close it 19 teams, 2023 | −$114M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-8 · Sources: https://modern-mba.com/case/esports#sources

### The publisher never needed any of it

Activision Blizzard revenue split, in billions. Microtransactions overtook game sales around 2015 and the Overwatch League stayed under 1% of the total.

|  | Game sales | Microtransactions |
| --- | --- | --- |
| 2010 | $3B | $1B |
| 2012 | $4B | $1B |
| 2014 | $3B | $2B |
| 2016 | $2B | $4B |
| 2018 | $2B | $5B |
| 2020 | $2B | $6B |
| 2022 | $2B | $6B |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-9 · Sources: https://modern-mba.com/case/esports#sources

### What the buyers were told they were worth

Reported valuations of the leading organizations in 2019, at the top of the market. Six of the nine are American, where the venture capital was.

|  | US dollars |
| --- | --- |
| Cloud9 | $400M |
| TSM | $400M |
| Team Liquid | $320M |
| FaZe | $240M |
| Immortals | $210M |
| Gen.G | $185M |
| Fnatic | $175M |
| Team Envy | $170M |
| G2 | $165M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-10 · Sources: https://modern-mba.com/case/esports#sources

### Everyone who listed, wiped out

Change in share price and market capitalization since flotation. Not one listed esports organization has held its listing price.

|  | Percentages |
| --- | --- |
| K1CK | −70% |
| Mad Lions | −85% |
| Luminosity | −93% |
| Astralis | −130% |
| Complexity | −140% |
| Heroic | −164% |
| Guild | −188% |
| FaZe | −191% |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-11 · Sources: https://modern-mba.com/case/esports#sources

### An agency with a logo

Gross margin against the media companies these organizations benchmarked themselves on. Over 70% of every deal passes through to the talent.

|  | Percentages |
| --- | --- |
| New York Times | 49% |
| BuzzFeed | 44% |
| Fox | 35% |
| GameSquare | 25% |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-12 · Sources: https://modern-mba.com/case/esports#sources

### FaZe lost more in its best year than its worst

Revenue against operating income since flotation, in millions. Cost of revenue rose in step with the top line, which is not how a media company works.

|  | Revenue | Operating loss |
| --- | --- | --- |
| 2021 | $52M | −$31M |
| 2022 | $70M | −$49M |
| 2023 | $45M | −$47M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-13 · Sources: https://modern-mba.com/case/esports#sources

### Six years of the same loss, filed out of sight

Counter Logic Gaming's annual net losses, inferred from minority shareholder reports while Madison Square Garden held 65% and booked it beside the Knicks.

|  | US dollars |
| --- | --- |
| 2018 | −$18M |
| 2019 | −$20M |
| 2020 | −$7M |
| 2021 | −$6M |
| 2022 | −$6M |
| 2023 | −$6M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-14 · Sources: https://modern-mba.com/case/esports#sources

### Winning the entire sport is not enough

If Heroic had won every Counter-Strike tournament held in 2023. The whole sport's prize money, after the player split, still leaves a $318,292 shortfall.

|  | US dollars |
| --- | --- |
| Total prize pool 2023 | $20.5M |
| Org's share at 25% | $5.1M |
| Operating expenses | −$5.4M |
| Operating profit | −$0.3M |

Source: Modern MBA, “Why esports collapsed and who got paid for it”, aired September 2024. Chart: https://modern-mba.com/case/esports#chart-15 · Sources: https://modern-mba.com/case/esports#sources


## Takeaways

1. Start with what is not true: the fans did not leave. Global viewership went from **134 million in 2012 to 427 million in 2019**, and between 2019 and 2023 peak concurrents **rose 61% for League of Legends, 67% for Rocket League, and 27% for Counter-Strike**. The audience held. The companies still vaporized. That makes this a story about who was selling, not about who was watching.
2. The audience was also never worth what the deck implied. Advertisers pay roughly **$36 per thousand views** in the United States but **$8** in Korea and Poland and **$2** in India, and esports viewership is global by construction — so a headline audience figure was close to meaningless as a revenue forecast, and everyone quoting it knew the split.
3. Every business plan in the sport was underwritten by one number nobody ever got near. The **NFL** collects **$10 billion** a year in domestic media rights and the **NBA** **$6.9 billion**. The three largest deals ever signed in esports were **$53 million**, **$45 million**, and **$38 million** a year. The biggest was half a percent of the thing it was benchmarked against.
4. So the leagues stopped waiting for broadcast money and sold entry instead. **Activision** charged **$20 million** for each of the twelve inaugural **Overwatch League** seats — **$240 million** for a game that had been on sale five months and had never been tested as a spectator sport — and **$25 million** for the **Call of Duty League**, twice what **Riot** charged. A year later, on the strength of a single season, expansion seats were quoted at **$30 to $60 million**. Nothing had been proven; more buyers had simply arrived. That is the pricing logic of an auction, not a franchise.
5. Then the publisher paid the buyers to leave. By 2021 teams reportedly still owed around **$400 million** in unpaid franchise fees across the two leagues. In 2023 **Activision** waived what was outstanding and offered **$6 million** per team to dissolve the **Overwatch League** — about **$114 million** across nineteen teams, and enough, with the waiver, to make voting the league out of existence worth **$12 to $13.5 million** to an owner. The league died because ending it paid better than running it.
6. None of it ever mattered to the publisher. The **Overwatch League** was under **1%** of **Activision Blizzard’s** consolidated revenue, while microtransactions overtook game sales around 2015 and reached roughly **$6 billion** a year. Esports was a marketing line item that happened to collect nine figures in entry fees on the way through.
7. The closed league was sold on a guaranteed revenue share, and the share never arrived. **Counter Logic Gaming’s** cut of the League Championship Series did not grow across six years of **Madison Square Garden** ownership — which is the entire premise a **$13 million** entry fee was sold on.
8. The organizations were not media companies and their own accounts say so. **GameSquare’s** gross margin is **25%** against **49%** at **The New York Times**, **44%** at **BuzzFeed**, and **35%** at **Fox**, because more than **70%** of every brand deal and prize pool passes straight through to contracted streamers and players. A company that keeps a quarter of its revenue is an agency with a logo.
9. **FaZe** is the clearest single set of numbers. Revenue of **$52 million**, **$70 million**, and **$45 million** across 2021 to 2023 against operating losses of **$31 million**, **$49 million**, and **$47 million** — it lost more in its best revenue year than in its worst. Shares went from about **$20** to **18 cents** in under two years.
10. Winning does not fix any of it. Had **Heroic** won every Counter-Strike tournament held in 2023, the entire prize pool of **$20.5 million** would have returned about **$5.1 million** after the standard player split, against **$5.4 million** of operating costs — leaving the org **$318,292** down having won the whole sport.
11. Losses were hidden where nobody would look. **Madison Square Garden** bought **65%** of **Counter Logic Gaming** in 2017 and consolidated it alongside the Knicks and Rangers; extrapolating from minority-shareholder filings, **CLG lost roughly $6 million a year for six straight years** before being shut down and its only real asset sold to **NRG**, who paid in equity.
12. Every organization that listed has been wiped out. Eight listed orgs now quote between **6 cents** and **$1.14**, against 2019 valuations of **$400 million** for **Cloud9** and **TSM** and **$320 million** for **Team Liquid**. **Astralis** delisted itself in 2023 to stop spending half a million dollars a year on compliance.
13. The same people keep getting the next job, and they buy from each other. **GameSquare** rescued **FaZe** under a chief executive who had been **FaZe’s** own chief financial officer — the man who approved the spending and endorsed the model that took it from IPO to penny stock. It had already bought **Complexity** for **$23 million** from an org co-owned by Dallas Cowboys owner Jerry Jones and land investor John Goff, the two men bankrolling **GameSquare**, then dumped it in 2024 at **$10 million** with **8%** paid in cash.
14. Even the buildings lost money. **Allied Esports** spent **$9 million** on an arena at the Luxor in Las Vegas, then burned three chief executives in three years, each hired to find a buyer in Saudi Arabia or China because no appetite was left in North America. None appeared. It is now pivoting to Chinese mobile gambling apps and months from delisting.
15. The résumés do not survive a search. Former **FaZe** chief executive Lee Trink says he ran a Hollywood talent agency called Dare Mighty Entertainment for eight years; it has no website, no social presence, and was registered to the same Los Angeles house later used to register **FaZe**. **NIP Group** is led by Mario Ho, who claims a childhood as a math prodigy and the youngest finance degree at MIT — neither verifiable in any published record — and posted a photograph of the MIT Green Building running Tetris as his own stunt, five years after it had been done and become a campus fixture.
16. The buyers of last resort are shells, and the money has no visible source. **Heroic** was sold at **18 cents** a share to a company registered through a Norwegian law firm with a postal address in Cyprus and links to a sanctioned Russian gambling operator. **TGS**, months from bankruptcy at **5 Canadian cents** a share, was bought for **$18 million** — three times its market value — by a two-person Illinois company whose own S-1 shows **$1,000** in the bank against **$400,000** of debt.

## Common questions

### Why did esports fail?

Not for lack of an audience. Global viewership tripled between 2012 and 2019 and the biggest titles kept growing after that. It failed because the revenue that audience was supposed to unlock never existed, and because the money that did exist moved in one direction. The largest media rights deal in the history of the sport was worth $53 million a year against the NFL's $10 billion. In the absence of broadcast money, publishers monetized the teams instead — charging $20 to $30 million for league seats — and the teams passed more than 70% of what they earned through to talent. Value flowed up to publishers and sideways to creators. Shareholders were last in the queue and got nothing.

### Is esports a scam?

Mostly it is something harder to prosecute and worse to be caught in. The Overwatch League fee structure was entirely legal: Activision sold $240 million of seats in a five-month-old game, raised the price the following year, waived the unpaid balance in 2023, and paid about $114 million to shut the league down. Nobody was defrauded; everybody was priced. Around that core there is a layer that is genuinely opaque — shell-company acquirers with Cyprus postal addresses, an $18 million purchase of a near-bankrupt arena by a two-person firm with $1,000 in the bank, executive résumés that return nothing on a search. Those transactions have never been explained. The absence of an explanation is the story.

### Who actually made money in esports?

Three groups. Publishers, who collected entry fees for leagues they had no obligation to keep open and never depended on esports for revenue in the first place. Talent, who took more than 70% of every brand deal and prize pool, then in several cases took equity in the organizations paying them. And early holders who sold, most cleanly Astralis, whose only profitable year in its existence came from selling its LEC slot for $19 million. Nobody made money operating a team. Every publicly listed organization is a penny stock.

### Why did teams pay $20 million to join the Overwatch League?

Because the pitch was that a closed league would concentrate viewership on a fixed set of teams and distribute a guaranteed revenue share, exactly as the NFL and NBA do. Twelve teams paid $20 million each in 2017 for a game that had been on sale five months, and expansion seats were quoted at $30 to $60 million the following year on the strength of a single season. The seats were booked as long-lived assets and written down slowly, so the losses persisted long after the leagues contracted. Counter Logic Gaming's accounts show the promised revenue share never grew.

### Do esports teams make money?

Effectively none of them, and winning does not change it. If Heroic had won every Counter-Strike tournament held in 2023, the whole sport's prize money after the player split would have left it $318,292 in the red against its operating costs. FaZe lost $31 million, $49 million, and $47 million across three years. Counter Logic Gaming lost roughly $6 million a year for six years inside Madison Square Garden. Astralis lost money on every team and every division it ever ran. The one profitable year in that set came from selling a league slot.

### What happened to FaZe Clan?

It went public in 2022 and fell from about $20 to 18 cents in under two years. Esports was less than 15% of revenue; sponsorship was the majority; and cost of revenue stayed above 70% because most brand and tournament income passed through to independent content creators who represented FaZe exclusively but were never employees. In 2023 it was sold to GameSquare in an equity deal, and GameSquare's shares are now worth about as little. The chief executive who ran the rescue was FaZe's former chief financial officer.

### Who is running esports now?

After the publishers, venture funds, and traditional sports owners left, what remains is Saudi state money, online casinos, crypto exchanges, and shell companies. Heroic's buyer was registered through a Norwegian law firm with a Cyprus postal address. The Vancouver arena operator TGS was bought at three times its market value by a two-person Illinois firm with $1,000 in the bank. NIP Group listed on the NASDAQ in 2024 proposing to run education, talent management, venue rental, event production, and content simultaneously — every model that has already failed, at once.

### Why did nobody report on the esports collapse?

Because the trade press depended on the industry for access and advertising, and general business media never treated esports as large enough to warrant a desk. The result is that the collapse produced no accountability and no institutional memory, so the same operators recycle. Executives blamed for one failure are hired to fix the next. Orgs are sold between entities with overlapping ownership. Acquirers with no disclosed source of funds buy distressed assets above market and are never asked why.

### Is esports dying?

The audience is not. Between 2019 and 2023 peak viewership rose 61% for League of Legends, 67% for Rocket League, and 27% for Counter-Strike, while Fortnite fell 69% and PUBG 47% — consolidation onto fewer titles rather than decline. What died is the investment thesis and the corporate layer built on it. Competitive gaming existed before any of this money arrived and continues without it. The claim that was never true is that the watching is worth a billion dollars to somebody other than the person selling the seats.

## Discussion

- The case argues esports was not a business that failed but a transfer that completed. What distinguishes those two things from the outside, and how long does it usually take to tell?
- Activision sold twelve Overwatch League seats at $20 million each for a game five months old with no record as a spectator sport, then quoted expansion seats at $30 to $60 million. What were the buyers actually purchasing?
- More than 70% of every brand deal and prize pool passed straight through to the players who generated it, leaving 25% gross margins. Those organizations described themselves as media companies. What were they?
- Nobody was wrong, in the sense that the people who priced it got exactly what they came for. Does that make it a fraud, a bubble, or a functioning market? Defend your answer.
- You want to build a durable esports business today. What do you have to own that these organizations did not?

## Sources

Financial figures from company filings, S-1s, and investor reports for FaZe Holdings, GameSquare, Enthusiast Gaming, Astralis Group, Guild Esports, Heroic, NIP Group, Allied Esports, and Madison Square Garden Sports; franchise fees and termination payments from Activision Blizzard disclosures and contemporaneous ESPN and Sports Business Journal reporting; viewership from Newzoo and Esports Charts. Findings on shell-company acquirers and executive résumés are this episode’s own research into company registrations and public records

---

From [Modern MBA](https://modern-mba.com/). Read this case in full at [https://modern-mba.com/case/esports](https://modern-mba.com/case/esports), or watch the episode at https://www.youtube.com/watch?v=Ti5eciur59M.