The streamer who spent $1M on an esports team says esports is a terrible business: ‘Everyone is losing a lot of money’

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Jeremy Wang, better known to the internet as streamer and esports team owner Disguised Toast, has shared some incisive thoughts on why "the esports industry is one of the worst things you can get into." And it's not because his team sucks, although it does: It's because in spite of all the millions of dollars that have been poured into it, there's no money to be made.

Disguised Toast announced in January that he'd spent $500,000 to found a Valorant pro team called DSG. It did not go well: By May, the team was on an 0-7 run and Disguised Toast was having serious second thoughts. Despite that experience, he purchased a League of Legends pro team in May, intending to compete in the North American Challengers League. But that venture also got off to an inauspicious start, as Riot unexpectedly gutted the NACL and LCS pros threatened to go on strike.

That potential walkout happened when LCS teams were allowed by Riot to drop their second-tier challenger league rosters: Nearly all of the organizations in the LCS did so as a cost-saving measure, which put dozens of players and coaches out of work. It was an ugly moment for the LCS but it also happened just weeks after Activision acknowledged in an SEC filing that the Overwatch League and Call of Duty League are facing challenges "which are negatively impacting the operations and, potentially, the longevity of the leagues under the current business model," and that those challenges may ultimately prove intractable.

Collectively, the seemingly-sudden troubles in two of the biggest esports leagues in operation pointed toward serious sustainability problems for pro esports in general. Both Activision and Riot quickly expressed their committed to the long-term future of their pro leagues, as you'd expect, but Disguised Toast presented a much blunter and bleaker take on the situation.

"Last week, my accountant messages me and says, 'Toast, we need to talk'," the streamer said in his latest video. "He told me that I'm actually on track to spend a million dollars this year, double what I was expecting. He sent over this spreadsheet with all these red numbers, and I noted in the revenue section it was blocked out. I asked him, 'Why'd you block it out?' He said 'Well, it's not blocked out, there's just nothing there. You're not making any money'.

"If you look at any esports org in North America, all of them are either broke or going broke. And I do mean all of them. Some orgs will try and put on a front and say, 'Hey, we're still good, we look good, everything's cool here.' Trust me when I say, everyone is losing a lot of money. A lot of people are being fired, no org is safe right now."

We do have to trust Wang on that front: We don’t have access to anyone’s books and, as he said, no esports org is acknowledging being dangerously in the red. Even FaZe Clan, which is currently at risk of being delisted from the Nasdaq because its stock price has crashed to under $1 per share, is more publicly focused on the profiles of the creators it partners with than its long-term viability in esports.

But significant long-term trouble does seem to be brewing. Major sponsorships have largely dried up, Disguised Toast said, because the failure of esports to penetrate mainstream audiences has made the expense unattractive; he talked about approaching an energy drink company already active in esports about a sponsorship, only to be told that the company was getting out of the space entirely as soon as its contractual obligations were met.

"Brands are scared of esports because they invested millions and millions into it, and they never got any significant return," Disguised Toast said.

Disguised Toast's plan for now is to take the altruistic approach: He's going to experiment with Patreon and there will be some perks for backers, but generally speaking the pitch is going to be, if you really like the team, support the team. “If there are thousands of viewers willing to spend five bucks a month on millionaire streamers, just for a little badge in their chat,” he said, "maybe there are some fans out there that are willing to throw in five bucks a month to keep a team going—a team they like, a team they support."

Along with the less-than-sunny analysis of the business of esports, Disguised Toast also provided an update on the DSG Valorant team, which has been disbanded following an 0-11 run over its last 11 games. "We did so bad that we got kicked out of the Challenger League and we would have to re-qualify next year," he said. "Obviously there are going to be drastic changes made. It's gonna be a little spicy."