Steve Arhancet, co-CEO of Team Liquid, took a measured look at cultural change in Saudi Arabia and whether his esports team should participate in the Esports World Cup.
Both personally and professionally, he had to weigh whether going to the event in Riyadh and participating in the tournament was something he should do as a matter of reputational risk. He considered his decision important, as Team Liquid is a multigenerational esports brand and organization. Years ago, I took a tour of Team Liquid’s headquarters in Los Angeles during the esports boom. A lot has happened since that time, with many ups and downs.
Arhancet said that, as a gay man, he had to grapple with the notion of going to Saudi Arabia, where LGBTQ+ rights are an ongoing issue. His organization values diversity, equity and inclusion, but he said he went into the kingdom with an open mind.
He noted that the Saudi crown prince Mohammed bin Salman Al Saud changed a couple of hundred laws two years ago that affected the welfare of women and youth. It has not yet done so for LGBTQ+ people.
The esports industry needs the money that Saudi Arabia is injecting into it. Savvy Games Group, which is owned by the kingdom’s Public Investment Fund, owns VSPO and ESL FaceIt, which have become major platforms for creators and esports tournaments.
All told, the Esports World Cup awarded $60 million in prizes after eight weeks of competition across 19 different games. Team Liquid came in second place in the Esports World Cup in and walked away with $4 million in prizes.
On the other hand, Saudi Arabia faces many human rights issues and critics have accused it of “sportwashing,” or using sports to give its regime legitimacy.
“Will people doubt us and think everything we’re doing is sportswashing? Sure. But we have to believe in what we see and experience firsthand, believe in nudging and incremental change over time. We want to be part of that,” Arhancet said.
The team went and Arhancet noted that during June and July, his team was able to wear Pride uniforms while they played in Riyadh — a first for the esports team. Team Liquid was also the most watched team over two months at the Esports World Cup, according to Esports Charts. The organization had more than 21 million total hours watched. The most popular match was Falcons.Bren vs. Team Liquid Echo (MLBB) with 986,438 peak viewers.
Arhancet said, “Change doesn’t happen overnight. It happens slowly, over time. It happens in moments that you don’t plan for. One day you wake up and realize that things are different than they used to be. Here we sit on such an amazing opportunity, where gaming of all things, of all the industries that could connect us–gaming is connecting us here in Saudi Arabia.”
At the New Global Sport Conference in Riyadh, Arhancet spoke on a panel on diversity and inclusion.
Here’s an edited transcript of our interview?
Disclosure: The NGSC paid my way to Saudi Arabia and GamesBeat was a media partner for the event.
GamesBeat: I could use a recap of all the things you’ve done lately. How long have you been in esports now?
Steve Arhancet: About 12 or 13 years now. I started my journey when I left the financial planning business in Washington D.C., where I built a practice there. Sold everything and moved out to Los Angeles to move into a gaming house and qualify for the LCS in League of Legends. That was back in 2012.
GamesBeat: How old were you?
Arhancet: Now you’re going to make me do math. I was in my early 30s, something like that?
GamesBeat: That’s pretty old for getting your start in esports.
Arhancet: A bit? I graduated college and followed the traditional route. Went into the workforce and did what I studied in college. I didn’t think I had a future in something I loved, which was gaming. But I ended up changing up that trajectory when I was pretty good at League of Legends.
I was a pro player for about two years. I started my own team in North America. We ended up winning the ESL Pro League, an online tournament held by ESL. This is before Riot started to in-house all their esports. They outsourced it at the time. There was the first tournament in League of Legends through Intel Extreme Masters. We qualified for that and finished ninth at the first world championship, before there was Worlds. Everything blossomed from there. A sponsor identified us. I was able to get a contract with Curse Inc. to do some content for their websites. A business was born.
GamesBeat: After that, did you move into the business side of esports?
Arhancet: I ended up starting my own esports team underneath Curse Esports or Curse Inc. I signed players. First in League of Legends, and then I expanded into Smash with Hungrybox, and a Counter-Strike roster as well. I needed to just run the business. I received revenue through sponsorships and partnerships. I did a deal with Alienware, one of the first sponsors for the team. Just managed the business, bootstrapped it.
Later I met Victor Goossens, who had founded Team Liquid maybe 13 years prior. I introduced myself and told him, “Hey, would you entertain a merger of our esports teams? Retain your brand, but become co-CEOs.” He thought I was a little crazy, but I persuaded him with charisma, charm, and my assets in League of Legends. We became co-CEOs and started running Team Liquid together. That was 2014.
A few years later we needed $10 million to get into the LCS, to get in the first year of franchising. We needed to seek investors. We went to the market – institutional, private equity, sports team owners and the like – and we ended up really falling for Ted Leonsis and Peter Guber, who respectively have ownership and run the Wizards and the Capitals, and then the Dodgers and the Golden State Warriors. They became our first investors. We went into partnership.
They’ve believed in the vision of Team Liquid becoming a multigenerational esports team. They’ve backed us. We’ve been able to grow the organization to be the largest esports team in the world by nearly all metrics.
GamesBeat: I remember Mike Milanov giving me a tour of the headquarters years ago.
Arhancet: That’s right. Alienware helped pioneer breaking off from the gaming house model, where players would live and work in the gaming houses, over to actually having a facility. Alienware supported that. They funded the whole build for an esports training facility. That was born.
GamesBeat: It felt like that was definitely the time of an esports boom. Maybe you could say it was the first boom.
Arhancet: The first esports boom, in a way, was around StarCraft. Going online and playing multiplayer games. But it was pretty underground. There was no monetization or commercialization against that audience. Just a bunch of nerds playing video games against each other. The Koreans dominating. Most developers didn’t see esports as a main driver for recurring playtime and extending the user’s life within their games.
When Riot came out and gave DOTA a run for its money, they bet on this idea that esports was a phenomenal marketing engine to protect the downside of your game slowly dying over time. Every game goes through a product life cycle. That was the first boom, maybe, when Riot believed in this connection between esports marketing and game extension.
GamesBeat: How tough was it to navigate around boom, bust, boom-ish again and so on?
Arhancet: In 2016, 2017 there was what I’d consider a gold rush to esports. It was audience engagement. Those metrics were through the roof. Everyone knew there were more gamers, more people watching video games. Gaming was becoming more accessible. People were buying computers and headsets. Kids were doing Fortnite dances in their classrooms. That was a huge comparison to the stigma associated with the basement-dwelling gamer. It became more accepted and mainstream. It became ubiquitous.
Then a lot of the reports about the game industry and total revenue superseding a combination of other entertainment, music and film combined–these were staggering numbers. The investor community said, “Hey, we have to take notice of this space.” At the same time, when all that capital came into play, expectations were sold on what was going to happen with that capital. It got invested into teams and agencies and games and tools and software. It would match traditional sports!
Folks forgot that it took a long time for football to become a thing, or baseball or basketball. They went through decades of failure. There were competing leagues at times. There was a fight over how this sport would be commercialized. Many investors, after five to seven years, said that this wasn’t producing the returns they wanted in the time frame they expected. That was coupled with other market factors. The economy tumbled a bit post-COVID. A lot of companies had layoffs. That created an environment where there was a kind of bust in esports, just like what had happened in the dot-coms or what may happen in AI.
A lot of companies were swimming naked. They ceased to exist. They didn’t build revenue. They didn’t have future revenues. They didn’t have good management. Maybe they didn’t have strong brands. Whatever the reason, they went out of business. The key thing here, though, is that the audience didn’t disappear. The audience is still there and still growing. It’s up and to the right. The commercialization and the monetization against that audience is being figured out. Team Liquid is doing a phenomenal job with that. But it hasn’t unlocked in the same way as it has in basketball and football and baseball.
My thing is, it will. It’s just a matter of time. When it will happen and how it will happen, that will be unveiled. Team Liquid is going to be one of the companies that sits atop its space to be in a prime position to seize that opportunity when it presents itself.
GamesBeat: How important is this Saudi injection of capital to the whole esports industry? I’m not sure of the right word for it. Would you call it a lifeline? An endorsement of the industry? How do you see this as far as what it can do?
Arhancet: One of the best things about what’s happening here at the Esports World Cup, it’s primarily driven through the interest of this region of the world in gaming and esports, at the highest level. All the way up to the Crown Prince, MBS. He’s a gamer. He plays League of Legends. He loves it. His country, Saudi Arabia, has a population where nearly 70% of the population is under the age of 29. That interest has developed in a way where one of the largest, biggest prize money tournaments has been put on.
That being said, as Team Liquid we don’t see this as a lifeline for esports. We managed to profitability during the “esports winter,” prior to EWC. Now that we’ve locked second place and we’ll be awarded $4 million in club championship revenue, all of that is profit. It’s excess for us this year. We’re not seeking to just pad our cash reserves, of course. We’re thinking about how we take that capital and inject it into the business to segment ourselves in being so defensible as this multigenerational esports brand.
We know that the gamers who are my age – I’m 43 years old – are having kids. They’re having their second kid. They’re raising them in households where they root for esports teams. Those kids are growing up fans of esports teams. We’re playing a long game. We’re thinking about how to expand into Japan, into India, into Saudi Arabia. We’re still in growth mode and investment model. I don’t see it as a lifeline. The investors that were primarily in Europe and North America, a lot of them got in thinking they were going to realize returns in a shorter time frame than the actual horizon in esports and gaming.
GamesBeat: How do you view the speed with which the Saudis are moving? It seems unprecedented how fast they want change to happen here. Not only cultural change, but building businesses and industries that are going to diversify the country away from oil and build a more modern economy. It seems like they really want to make this go faster than organic growth.
Arhancet: It’s clear that this region of the world is changing. It’s a combination of a number of different factors. One, it’s a strategy that was presented by the Crown Prince, Vision 2030. That was to diversify his country’s overall revenue away from oil. There’s a financial motivation to get into sports and entertainment and other verticals. Two, they have done a lot to move along the cultural timeline. Just two years ago MBS changed more than 200 laws in the country. That led to changes for women and youth. That allowed for more recognition internationally.
Even for us as Team Liquid, we’re an organization that values diversity, equity, inclusion. We want to continue being who we are, even if we come to Saudi Arabia. That’s been challenging for us. We had to navigate the conflicts associated with receiving money directly from the Kingdom. We went into research mode. Let’s not take things at face value from the media. Let’s dig in and have first-hand experience, talking to folks on the ground, talking to NGOs that service the region. We talked to Amnesty International and Out Leadership to get an opinion about their perspective. Is it better to boycott, or is it better to be part of change, if you think change is possible?
We came out of all that research with the latter conclusion. We want to be part of the conversation. If we aren’t, then we lose our voice. Team Liquid’s voice is one of the most important voices in esports to not lose in this. We have to figure out a way to respect – we’re guests in this country – to respect the local culture and customs, while still nudging where we can. A great example, in Pride month every year we wear Pride jerseys, with the logo embedded within the Team Liquid crest. We have a Pride flag at the bottom of the jersey. We were permitted to wear those while we competed in Saudi Arabia during EWC, both in June and July. That might have been the first time that’s happened.
We get to be who we are. We get to be Team Liquid in a region of the world where we thought we wouldn’t be able to. Maybe there are queer Saudis who saw that and realized that there’s a tournament happening in Riyadh where Pride icons are being broadcast online. Maybe there’s a future that’s different from the one they thought was always going to be. I felt the same thing. Being gay in the United States and thinking I could never get married, and then one day realizing that the law of the land had changed. That meant a lot to me at that moment.
Will we change things overnight? No. Will people doubt us and think everything we’re doing is sportswashing? Sure. But we have to believe in what we see and experience firsthand, believe in nudging and incremental change over time. We want to be part of that.
GamesBeat: It’s a very measured way of looking at it.
Arhancet: That’s right. Change doesn’t happen overnight. It happens slowly, over time. It happens in moments that you don’t plan for. One day you wake up and realize that things are different than they used to be. Here we sit on such an amazing opportunity, where gaming of all things, of all the industries that could connect us–gaming is connecting us here in Saudi Arabia.
My love for League of Legends, MBS’s love for League of Legends, the players’ love for League of Legends all around the world in so many different countries, all coming together here to share something that we all love. With such diverse backgrounds and cultures, we’re speaking the language of League of Legends. That’s pretty powerful. It’s changing the way that maybe folks will live in the future.
Disclosure: The NGSC paid my way to Saudi Arabia and GamesBeat was a media partner for the event.
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