G2 Esports, one of the biggest names in competitive gaming, is making a play for broader entertainment fame. The next set-piece is a media shop called 62, staffed by ad industry veterans.Cast a casual eye at the esports world over the last year and it’s easy to see a jamboree of mega-events, massive viewership and increasing mainstream adoption.There was the League of Legends World Championship Finals in London, drawing tens of thousands of IRL fans and a peak of 7 million viewers (261 million people worldwide, apparently, watch esports at least once a month). There was the controversial 2024 Esports World Cup (its $60m prize pot drew hundreds of professional gamers to Riyadh, Saudi Arabia). And not long after, there was the announcement that the International Olympic Committee would mint its first official Olympic Esports games, to be held later this year, also in Saudi Arabia. Want to go deeper? Ask The Drum Behind the scenes, though, the esports industry is deep into a well-publicized slowdown. Following an investment gold rush in the 2010s (Deloitte reported a $4.5bn investment influx in 2018 alone) and a 2020 lockdown-based viewership boom, gamers everywhere have been lamenting an ensuing ‘esports winter’ since at least 2023.Spurred by the wider tech slowdown, layoffs in the gaming industry were so widespread that they have their own Wikipedia page. Esports companies were among the high-profile casualties: major player Faze Clan laid off a fifth of its staff and saw stocks lose 80% of their value; competitor CLG went belly-up then was bought out by a competitor; publications and tournament organizers shuttered; a planned $50m esports arena in Philadelphia quietly pivoted to retail. Some sponsors and advertisers were spooked – BMW announced that it would “end its esport engagement” back in 2023 (though it has continued to do some work in related spaces).As one commentator put it, “There are two main winners in esports: players and publishers,” while, for example, the parent of League of Legends publisher Riot Games raked in $86bn in 2023, many organizations between those two poles have been struggling.Against these headwinds, a handful of organizations are not only surviving but quietly planning for a future where the esports excitement recommences and the money starts flowing again – companies such as G2 Esports, which celebrates its 10th birthday this year. Advertisement Coming of ageWhen The Drum visited G2 at its Berlin HQ earlier this month, the mood was celebratory thanks to that milestone birthday and good results across its 11 esports squads, with 19 trophies in 2024.Performance remains key for these clubs: while players take a chunk of tournament prize pool winnings, good results mean longer tournament runs, more viewers, better exposure for sponsors and more fame. But tournament results are far from everything. At present, for G2, sponsorships make up about 60% of revenue, payments from the publishers that make the games it plays contribute 30% and a final 10% comes from a constellation of direct-to-consumer (D2C) plays: physical merchandise, ‘skins’ and other virtual assets, as well as an app and premium membership tiers.If the battle to maintain growth amid the wider esports slowdown can be summed up in a word, chief commercial officer Sabrina Ratih tells The Drum, it’s ‘diversification’ away from reliance on investment and sponsors, which have long been the lifeblood of the industry. The vision is to equalize those buckets: a third from sponsors, a third from publishers and a third from D2C sales.“We don’t want it to be about League [of Legends, the game in which the club has its most storied history]; we don’t want it to be about Counter-Strike,” Ratih says. “We want it to be about esports being a form of entertainment. We can do that through content, through social and through virtual tournaments… we try to take out the complexity that budget holders currently see when they look at esports. Our job is to make it easy for them and that means we will give you a safe space for your brand to activate.”While it’s tempting to view esports through the lens of traditional sport, in other words, the environment is inherently different. Most conspicuously, nobody owns football or cricket; League of Legends and Counter-Strike are entirely owned by their publishers, Riot Games and Valve. “Dependency will always be there to a certain extent, especially because we lack the big bucket of media rights,” Ratih explains. “We have the necessity to get more creative and build direct-to-consumer avenues and B2B revenue streams. We can’t afford to rely purely on publisher revenues or sponsorship.”Other diversification pushes include renegotiating terms with publishers for a “more sustainable model” for everyone. Despite the impossibility of full broadcast, Premier League-style media rights, there’s also a drive to find “equivalent media rights that you see in traditional sports.” Then there’s global expansion – for European-headquartered G2, that means further development into North America and, especially, China, an enormous gaming market “of which we’ve barely scraped the surface.”Then there’s audience diversification: to, in Ratih’s words, “attract fans that are not regular esports viewers… getting out of the esports shell is not only necessary in order to capture the full revenue potential – it’s also, audience-wise, the place to go”.Ratih is optimistic that a (slightly reformulated) esports industry can make these negotiations, with a few global, multi-game teams emerging from the esports winter (into the esports spring, presumably) with strong global foundations to bear future industry shocks. After all, she says, it’s an industry that still (like so many of its players) retains its youth. “Because we are so young as an industry, we have room to structure agreements and do creative deal-making… there’s no set rules or boundaries that you see a lot in traditional sports because it’s a matured business model. They don’t have the leeway that you have in esports.“I think it’s also fair to cut our industry a bit of slack, because we are so young still. To compare us always to traditional sports I find a bit unfair… if we want to build this industry for the long term, yes, we have to compete with revenue buckets that you see in Formula One and football, but it’s fair to give ourselves the time to get there.” Advertisement Media, media, media houseIt’s against this backdrop that G2 has unveiled its latest diversification play: launching its own media and creative agency, 62 (pronounced, for parity with its parent brand, “six-two”). The shop will be stewarded by Mathieu Lacrouts, a veteran of media giants Monks and his own dedicated gaming agency, Hurrah.The agency will operate within G2 and build from its existing 30-strong marketing team. Its goal, Lacrouts says, is to become the world’s “leading gaming agency” and continue the diversification from there “to become one of the most renowned entertainment agencies.” Services will include creative advertising, paid media services and production.This situation of gaming within the broader entertainment space is significant. Despite the juggernaut of game-playing and esports viewership, he says, media planners and buyers have struggled to find a long-term home for gaming buys – and platforms have been slow to build the functionality that will allow gaming to flourish on its own terms. As a result, despite impressive growth from gaming shops such as NewGen and Freaks 4U – and major ad networks creating their own offerings – the industry is still looking for its “superstar gaming agency.”“We just don’t have enough people in the marketing department yet who have experienced gaming and esports,” Lacrouts explains. “There are not enough gamers in key decision positions… Most brands have explored so far. That’s it. They’ve done R&D.” There are some exceptions – Coke, for example, made its big ‘Real Magic’ play in 2021 to mixed results – but gaming is struggling to shake off this one-off approach. “They don’t necessarily have the renewal budget for the next year… [And] agencies are looking for the award-winning campaign most of the time. So when you’re briefing an agency to do something in gaming, it’s just a one-off campaign”.The remedy? A big part of it, Lacrouts argues, lies in working with media owners to provide a more harmonious environment for the kind of targeted, tailored advertising media that other audiences already enjoy. “I’ve never received a brief from a brand to do tailored, paid media planning towards different sets of gaming audiences,” he says. Worse, that kind of targeting has been possible since Meta started allowing targeting of “esports enthusiasts” in 2017, but esports relies keenly on one channel in particular: Twitch.“The paid media results on Twitch suck,” Lacrouts says. “They’re just not that good for awareness. But people want conversion, so they never consider using gaming for performance marketing, and so the industry never sees this part of the budget”. The issue is three-fold, he says. First, on Twitch, ads can only target a game or a Twitch category – but not audience groups or channels. Second, the minimum buy is $10,000. Third, there’s no option to buy locally as you would, say, during the breaks in a World Cup match. In other words, “Twitch sells the masses… There are many brands out there that would love to invest in Twitch, just like they do on Meta, But it’s all made to sell big-bulk paid media. No brand who could target gamers as part of a global audience is going to go through the effort.“If Twitch understands that they need to offer more targeting options and more freedom of targeting, then we’re going to see much more investment…. If people start investing on Twitch, then, they will do more than one-off media on Twitch because they can. It’s easy.”Dreaming bigLacrouts isn’t the only advertising veteran at G2; chief executive Alban Dechelotte is a strategist by training, with a decade at Havas under his belt (he ended up as managing director for Germany), as well as CV entries for the aforementioned Coke and Riot Games.Dechelotte has big dreams for his industry and his club. A former international Rugby player, he long dreamed, he tells The Drum, of being an exec at a rugby or a football club. Now, he sees G2 gearing up for a future where it could one day own a football team. “We are the Real Madrid of esports already in terms of competition, accomplishment and brand. We’re not going to just sit on the dream and wait. We’re building the next dream for G2 – to become the G2 of sports. The future of G2 is to be a club involved in esports, sports and what I call the ‘augmented sports’ – where the worlds of virtual and physical merge with technologies such as VR and AR. How far are we away from Tron? I think a few years. G2 will be this new-generation club that bridges the gap between communities and games.”The bridge between that world and this one will be the next few years – years in which Dechelotte says to expect further consolidation while a few esports organizations grow into truly global powerhouses and others continue to fall.But as it continues to invest in growth across entertainment, sport and media, Dechelotte says, G2 consolidates an enviable position for that coming world. In this Tron- or Ready Player One-like future, game-playing and competition will be virtualized, global and distributed online – and it will require the skillsets that have been germinating in esports for the last couple of decades. “We’re already, through the things we sell in-game, generating more money with virtual goods than physical goods. I definitely think that we’re better set up for this next world, not just because we are able to engage globally and locally much more often than any traditional sports, but because we are already used to connecting virtually… Some people say ‘social native’ for my generation. I think we are ‘virtual native’ with this one.” Suggested newsletters for you Daily Briefing Daily Catch up on the most important stories of the day, curated by our editorial team. Weekly Marketing Friday Stay up to date with a curated digest of the most important marketing stories and expert insights from our global team. The Drum Insider Once a month Learn how to pitch to our editors and get published on The Drum.

Ratih is optimistic that a (slightly reformulated) esports industry can make these negotiations, with a few global, multi-game teams emerging from the esports winter (into the esports spring, presumably) with strong global foundations to bear future industry shocks. After all, she says, it’s an industry that still (like so many of its players) retains its […]

Ratih is optimistic that a (slightly reformulated) esports industry can make these negotiations, with a few global, multi-game teams emerging from the esports winter (into the esports spring, presumably) with strong global foundations to bear future industry shocks. After all, she says, it’s an industry that still (like so many of its players) retains its youth. “Because we are so young as an industry, we have room to structure agreements and do creative deal-making… there’s no set rules or boundaries that you see a lot in traditional sports because it’s a matured business model. They don’t have the leeway that you have in esports.Performance remains key for these clubs: while players take a chunk of tournament prize pool winnings, good results mean longer tournament runs, more viewers, better exposure for sponsors and more fame. But tournament results are far from everything. At present, for G2, sponsorships make up about 60% of revenue, payments from the publishers that make the games it plays contribute 30% and a final 10% comes from a constellation of direct-to-consumer (D2C) plays: physical merchandise, ‘skins’ and other virtual assets, as well as an app and premium membership tiers.

As one commentator put it, “There are two main winners in esports: players and publishers,” while, for example, the parent of League of Legends publisher Riot Games raked in bn in 2023, many organizations between those two poles have been struggling.

Learn how to pitch to our editors and get published on The Drum.

Cast a casual eye at the esports world over the last year and it’s easy to see a jamboree of mega-events, massive viewership and increasing mainstream adoption.Behind the scenes, though, the esports industry is deep into a well-publicized slowdown. Following an investment gold rush in the 2010s (Deloitte reported a .5bn investment influx in 2018 alone) and a 2020 lockdown-based viewership boom, gamers everywhere have been lamenting an ensuing ‘esports winter’ since at least 2023.The agency will operate within G2 and build from its existing 30-strong marketing team. Its goal, Lacrouts says, is to become the world’s “leading gaming agency” and continue the diversification from there “to become one of the most renowned entertainment agencies.” Services will include creative advertising, paid media services and production.The bridge between that world and this one will be the next few years – years in which Dechelotte says to expect further consolidation while a few esports organizations grow into truly global powerhouses and others continue to fall.

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Dechelotte has big dreams for his industry and his club. A former international Rugby player, he long dreamed, he tells The Drum, of being an exec at a rugby or a football club. Now, he sees G2 gearing up for a future where it could one day own a football team. “We are the Real Madrid of esports already in terms of competition, accomplishment and brand. We’re not going to just sit on the dream and wait. We’re building the next dream for G2 – to become the G2 of sports. The future of G2 is to be a club involved in esports, sports and what I call the ‘augmented sports’ – where the worlds of virtual and physical merge with technologies such as VR and AR. How far are we away from Tron? I think a few years. G2 will be this new-generation club that bridges the gap between communities and games.”There was the League of Legends World Championship Finals in London, drawing tens of thousands of IRL fans and a peak of 7 million viewers (261 million people worldwide, apparently, watch esports at least once a month). There was the controversial 2024 Esports World Cup (its m prize pot drew hundreds of professional gamers to Riyadh, Saudi Arabia). And not long after, there was the announcement that the International Olympic Committee would mint its first official Olympic Esports games, to be held later this year, also in Saudi Arabia.While it’s tempting to view esports through the lens of traditional sport, in other words, the environment is inherently different. Most conspicuously, nobody owns football or cricket; League of Legends and Counter-Strike are entirely owned by their publishers, Riot Games and Valve. “Dependency will always be there to a certain extent, especially because we lack the big bucket of media rights,” Ratih explains. “We have the necessity to get more creative and build direct-to-consumer avenues and B2B revenue streams. We can’t afford to rely purely on publisher revenues or sponsorship.”“If Twitch understands that they need to offer more targeting options and more freedom of targeting, then we’re going to see much more investment…. If people start investing on Twitch, then, they will do more than one-off media on Twitch because they can. It’s easy.”Then there’s audience diversification: to, in Ratih’s words, “attract fans that are not regular esports viewers… getting out of the esports shell is not only necessary in order to capture the full revenue potential – it’s also, audience-wise, the place to go”.AdvertisementLacrouts isn’t the only advertising veteran at G2; chief executive Alban Dechelotte is a strategist by training, with a decade at Havas under his belt (he ended up as managing director for Germany), as well as CV entries for the aforementioned Coke and Riot Games.

Dreaming big

“We just don’t have enough people in the marketing department yet who have experienced gaming and esports,” Lacrouts explains. “There are not enough gamers in key decision positions… Most brands have explored so far. That’s it. They’ve done R&D.” There are some exceptions – Coke, for example, made its big ‘Real Magic’ play in 2021 to mixed results – but gaming is struggling to shake off this one-off approach. “They don’t necessarily have the renewal budget for the next year… [And] agencies are looking for the award-winning campaign most of the time. So when you’re briefing an agency to do something in gaming, it’s just a one-off campaign”.Other diversification pushes include renegotiating terms with publishers for a “more sustainable model” for everyone. Despite the impossibility of full broadcast, Premier League-style media rights, there’s also a drive to find “equivalent media rights that you see in traditional sports.” Then there’s global expansion – for European-headquartered G2, that means further development into North America and, especially, China, an enormous gaming market “of which we’ve barely scraped the surface.”Spurred by the wider tech slowdown, layoffs in the gaming industry were so widespread that they have their own Wikipedia page. Esports companies were among the high-profile casualties: major player Faze Clan laid off a fifth of its staff and saw stocks lose 80% of their value; competitor CLG went belly-up then was bought out by a competitor; publications and tournament organizers shuttered; a planned m esports arena in Philadelphia quietly pivoted to retail. Some sponsors and advertisers were spooked – BMW announced that it would “end its esport engagement” back in 2023 (though it has continued to do some work in related spaces).

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“The paid media results on Twitch suck,” Lacrouts says. “They’re just not that good for awareness. But people want conversion, so they never consider using gaming for performance marketing, and so the industry never sees this part of the budget”. The issue is three-fold, he says. First, on Twitch, ads can only target a game or a Twitch category – but not audience groups or channels. Second, the minimum buy is ,000. Third, there’s no option to buy locally as you would, say, during the breaks in a World Cup match. In other words, “Twitch sells the masses… There are many brands out there that would love to invest in Twitch, just like they do on Meta, But it’s all made to sell big-bulk paid media. No brand who could target gamers as part of a global audience is going to go through the effort.

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G2 Esports, one of the biggest names in competitive gaming, is making a play for broader entertainment fame. The next set-piece is a media shop called 62, staffed by ad industry veterans.

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“I think it’s also fair to cut our industry a bit of slack, because we are so young still. To compare us always to traditional sports I find a bit unfair… if we want to build this industry for the long term, yes, we have to compete with revenue buckets that you see in Formula One and football, but it’s fair to give ourselves the time to get there.”