Meg Whitman-Backed Immortals Gaming Restructures Business
Immortals Gaming Club, the professional video game organization backed by Meg Whitman and AEG, is restructuring its business as it seeks a more efficient and fiscally sustainable esports enterprise.
IGC is separating its brands into four distinct business units: the group’s Overwatch League franchise (the Los Angeles Valiant), a matchmaking platform (Gamers Club), a pro team based in Brazil (MIBR) and Immortals (which includes its main League of Legends franchise). Each individual unit is cash-flow positive, according to the company, which expects to enter 2022 with more revenue booked than it earned in all of 2021.
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Professional video gaming has struggled in the COVID-19 pandemic, which arrived on the heels of a three-year stretch that saw massive investment in the space and a rush to create franchised leagues with structures akin to the NFL or NBA. Now a few of the industry’s more prominent organizations are beginning to rethink their long-term business strategy.
“We realized that it wasn’t going to be efficient for us to build this conglomerated portfolio that intended to be all things to all people and all publishers at all times,” said Ari Segal, who has been elevated to co-managing director of IGC as part of the changes. “And when you’ve made the decision that you’re not going to be the Everything Store of esports teams, then you can sharpen your pencil about what makes sense. And that, along with the business model necessity, caused us to take this more brand-specific approach.”
Whitman, a longtime tech executive who helmed eBay and Hewlett-Packard, led IGC’s recent $26 million funding round and is the group’s largest shareholder. Other investors include entertainment and venue giant AEG, film studio Lionsgate, the family of financier Michael Milken, and Steve Kaplan, co-founder of Oaktree Capital and part owner of the NBA’s Memphis Grizzlies.
The Los Angeles-based IGC wants to bring a more fiscally responsible and sustainable model to an industry that still sees a lot of money thrown around, said Steve Cohen, IGC board member and chief strategy officer at AEG.
“Then you’re not just burning cash in the hope of a big home run, or the underlying value accretion, you’re actually a business unto itself, that feeds itself,” Cohen said in an interview. “That lets you pick your eyes up and look at new opportunities, because your risk profile is going down. You’re no longer making crazy bets.”
IGC was previously set up in what Segal called a “matrixed model,” where big areas of business like sales or marketing are run by an executive who does so across every brand. IGC’s separation of those units, which includes installing executives at the top of each vertical, is driven by three main goals, Segal explained.
First, given the cultural specifics of individual esports titles and organizations, the matrixed model meant no high-level executive was thinking solely about Immortals or about MIBR, which have different fan bases in different parts of the world. This reorganization installs someone at each unit who is thinking specifically about sales, marketing and community opportunities specific to their brand.
Second, many big esports orgs are run by founders, who hold wide-reaching powers over the whole organization. Creating top executive positions at each brand, Segal said, gave IGC a chance to recruit more executive-level talent. Recently hired Jordan Sherman, who’s worked at Gen.G, the Los Angeles Clippers and Major League Baseball, has been named CEO of Immortals; Roberta Coelho, co-creator of Game XP, was hired as CEO of MIBR.
“We saw a labor market arbitrage opportunity,” Segal said.
Third, pro esports is full of what Segal called “channel conflict.” Some game publishers have restrictions on a single group controlling multiple teams—MIBR, for example, can’t compete in Brazil’s top League of Legends circuit because Immortals competes in the North American one. This change could free the company up to explore new opportunities that otherwise weren’t possible.
“Creating these business units that are individually liquid, and can be individually capitalized, allows us to be completely flexible,” he said. “And if the market opportunity warranted being truly and completely independent, we’ve now set the entire holding company up so we have maximum optionality.”
That may also hold true for selling. Last year multiple reports said that IGC was shopping Valiant, its Overwatch League team. The group has already unloaded its Call of Duty League team, and the OpTic Gaming brand that it was using, plus the Houston-based Overwatch League franchise. Segal declined to comment on any potential sale or acquisition discussions.
Immortals is among the most valuable esports orgs in the world, though the COVID-19 pandemic’s halting of live events and tightening advertising budgets impacted the group’s business fairly drastically. IGC’s valuation was more than halved last year from its 2019 figure of roughly $260 million, according to Forbes’ annual rankings. Revenue dropped 23%, the magazine said.
Segal declined to provide any financial specifics but said the company was open to mergers and acquisitions in both directions. He indicated IGC is happy with its recent exits and its purchases, including the 2018 deals for MIBR and Gamers Club.
“We will relentlessly pursue value maximization for all of our stakeholders,” Segal said. “Which means that every single thing that we own is always for sale, and everything that’s available in the market is always something we’d look at acquiring. Anyone who tells you otherwise is not doing right by their shareholders.”
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