Is it worth it: How much value is FTX really getting out of its $210M TSM deal?

Source: TSM

 

TSM’s groundbreaking $210M deal with FTX made headlines last week, for very good reason: the sponsorship was both far longer and more lucrative than almost anything we’ve seen before in esports. However, as the days have passed, a few stories have emerged that suggest FTX’s $21M-a-year naming rights investment might be an overspending, based on what FTX is getting back.

 

The first real blow for the publicity folks at TSM was the news that Riot has barred FTX from appearing in the name and jerseys of TSM’s VALORANT and League of Legends teams — arguably TSM’s hottest properties. While obviously a huge blow to the deal,  at the time TSM stated they were aware of this limitation beforehand, meaning that FTX was too and presumably had no problem with it.

 

You probably could have bought every single player in Smash, Apex, and PUBG for what FTX will pay this year alone for its TSM deal.

 

Now, it looks as though another publisher — Rainbow Six Siege developer Ubisoft — might have followed suit in denying the FTX naming of TSM. TSM has one of the world’s best R6 teams, with star man Jason “Beaulo” Doty arguably the most marketable face in NA. In their first game in the NA League Stage 2, TSM played Disrupt Gaming and as the broadcast began, talent simply referred to them as “TSM”. Granted, presenters forgetting the entirety of sponsors or org names is nothing new, and when the game started, TSMFTX was attached on all player nicknames, although not on the team name on the official broadcast overlay. 

 

One tech pause later, the game resumed with FTX removed from the nickname tags, leading to some speculation on Twitter. That only deepened when TSM coach Owen “Pojoman” Mitura tweeted out that “admins” were “denying our org name”, which would fit with what we saw on the official stream overlay and after the tech pause. It was later confirmed by Hunter Cooke of Dot Esports that the team is currently in negotiations with Ubisoft, which would confirm TSM did not clear the deal prior to signing.

Source: TSM

You like Smash, FTX?

While it doesn’t have access to two of TSM’s biggest brands that compete in multi-million dollar tournaments, it’s not right to say that FTX got nothing for its investment. TSM boasts one of the best NA rosters in Apex Legends, led by the biggest streamer in that game, ImperialHal. They field teams in PUBG and Fortnite too, as well as Magic: The Gathering, World of Warcraft, and chess...

 

That’s not to forget TSM's Smash division, which sports not one but two of the bigger names in that scene with William “Leffen” Hjelte and Gavin “Tweek” Dempsey. The problem here is that you probably could have bought every single player in Smash, Apex, and PUBG for what FTX will pay this year alone for its TSM deal... and had a good $20M left over to get Fortnite’s finest.

 

In fact, we’d guess that if you remove TSM’s League of Legends and VALORANT rosters, you’d be able to sign all the remaining talent for just a single year’s worth of the deal, which really makes you question how paying for ten years at $21M/year was ever considered a good investment. That’s before you get to the fact that the ever-generous Forbes only valued the entire org at $410M in their recent charts, meaning the naming rights deal alone was worth over 50% of TSM’s entire value — a ratio that is unheard of in sport (for comparison, Man Utd’s recent kit deal is worth $235M against $3B evaluation of the team), or esports for that matter. 

Source: TSM

How can this work then?

Before we go further, it should be reminded that TSM’s negotiation with Ubisoft can still go back in their favor, so there is still a glimmer of hope, although a “no” would turn the light at the end of the tunnel into an oncoming train for TSM. Crypto is working hard as an industry to earn legitimacy, and there is a chance Ubisoft will soften its stance given the adult nature of its game.

 

We know that Riot doesn’t currently allow cryptocurrency deals or “or any other unregulated financial instruments or markets” though, but again a degree of finagling may be possible if FTX is willing to invest the time, and effort. Crypto is a growing sector that is increasingly difficult to write off, and the amount of money in that sector could well see opinions shift if enough palms are oiled at Tencent.

 

Esports orgs have been a favorite investment for VC types for some time now, with very few really realizing what sort of returns they could get from a growing industry.

 

For now, though, TSM appears to have taken FTX to the cleaners without being able to deliver on the value of the deal, and whichever way they spin it, it looks bad for both parties. If FTX were aware of all this prior to signing, you have to wonder about the decision-making to vastly overpay for such a small amount of exposure. Equally, for TSM to oversell in such an extreme manner paints the org in an unprofessional light, even before we get to the possibilities that they may end up losing the deal if they cannot provide the exposure required or requested.

 

On top of that, the reality is that esports orgs have been a favorite investment for VC types for some time now, with very few really realizing what sort of returns they could get from a growing industry. Deals like this, which are so widely publicized only to launch into a blizzard of asterisks, only reflect badly on the industry at large, and TSM too.

 

If that does not happen, the NA market is extremely competitive when it comes to investment with the likes of Cloud9, 100T, and others all established, and direct competition for dollars is as intense as anywhere in the esports world. The next company with a hundred million to drop might want to work with a partner that can actually deliver, as opposed to an org that will sell you naming rights without actually knowing if they can change their name in the games that really matter.

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