Saturday, September 30th 2023

Guild Esports PLC

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Will Guild Esports bend it like Beckham?


“…strong long-term market drivers seem to be moving in Guild’s favour. With cash of £18m reported in January the company, which has a market cap of £30m, is well funded for future near term growth…”


For attendees at the Guild Esports (LSE:GILD) academy, the working day looks rather intriguing.

Participants might spend a few hours in the world of Fortnite defending a fortress besieged by encircling zombies, before turning to Rocket League to shoot iron balls into opponents’ goal using rocket-powered vehicles. They might wind down in the afternoon with a few hours cat and mouse Valorant shooter combat, drawing on a forbidding armoury of submachine guns, shotguns, machine guns and assault rifles.

But the academy is a serious business proposition at the heart of Guild’s strategy to develop an esports franchise ready to compete in a rapidly growing market now worth more than $1bn. Supported by David Beckham, the academy is modelled on the well-established system pioneered by Premier League football clubs, aiming to ‘provide holistic training to improve a player’s physical, psychological, social and personal skills together with in-game coaching and development’.

Guild joined the LSE main market last October, raising £20m in the process of becoming the first esports team company to list on any of the world’s major exchanges. The company has set first year targets to secure £5m of revenue from sponsorship deals and £1m from merchandise sales, in addition to the considerable prize money on offer: victory in one recent tournament brought in $260,000.

In addition to contributing to the academy Beckham has taken a 5pc stake through his investment company DB Ventures, and committed to a five year contract as Guild’s brand ambassador. With a 125 million social media following Beckham opens access to a vast potential fanbase, and a network of leading corporate advertisers and sponsors.

Guild has also recruited the services of leading graphic designer Fergus Purcell – known for his work on the Palace skatewear label – to develop the company’s brand through merchandise design.

A £1.1 billion market


The growth of the esports market has accelerated through the lockdowns of the past year. The 2021 global esports market report published by industry analysts Newzoo last month forecasts that the global games live-streaming audience will reach 728.8 million in 2021, up 10pc from 2020, and that global esports revenues will grow to nearly $1.1bn in 2021, a year-on-year growth of 14.5pc, up from $947.1m in 2020, with more than three-quarters of that revenue coming from media rights and sponsorship.

The VanEck Vectors Video Gaming & eSports UCITS ETF (LSE:ESPO) was one of the best performing ETFs in Europe over the past 12 months returning 89pc, and now has more than $1bn assets under management, a tenfold increase over the last nine months to February.

During the pandemic, esports, along with the wider gaming world continued to permeate mainstream culture. The virtual environments created by games developers offer vast spaces where huge audiences can gather to view art exhibitions, theatre and films. Last year, for example, rappers Travis Scott and Lil Nas X hosted concerts in the Fortnite and Roblox worlds, and Stormzy launched a new track in the Watch Dogs: Legion game. Gamers even staged their own Black Lives Matter protests in The Sims environment.

Gaming can now be an intensely social experience, with most games offering multi-player options. Last December more than 15 million concurrent players took part in a Fortnite in-game event which was watched by another 3.4 million fans on Amazon and YouTube gaming channels.

Gaming culture is moving beyond the cliche of the isolated teenage boy in basement, with girls organising Minecraft parties, young Syrians escaping their country’s social breakdown through games of FIFA, and older people joining in phone puzzles. Fortnite now has 350 million players, with Newzoo estimating there are now 2.5 billon gamers worldwide.

The demographics are moving in esports’ favour as the average age of a traditional sports fan continues to rise. One report found the that the average age of followers of the premier football and baseball leagues in the US has edged above 50: nearly 80pc of esports fans today are still under 35 years old, with many favouring video games over sports.

Guild’s post-IPO progress


In its first progress report this year Guild reported that in the months from from its IPO to January videos on Guild channels had increased from 0.6m to 9.4m. Esports are widely covered by specialist media via platforms such as Twitch and YouTube, but there is increasing coverage on mainstream media outlets such as BBC Sport, which live streamed a number of Guild’s Rocket League fixtures in January 2021. Subscribed fans increased from 25,000 to 97,000, and subscriptions to the network of Guild teams, influencers and content creators increased from 0.5m to 1.86m.

Guild’s players bring in considerable audiences in addition to Beckham’s influence. A new Fortnite team member signed last month brought his 122,000 Instagram followers on Instagram, 103,000 YouTube subscribers, and 302,000 and 239,000 Twitch and Twitter followers.

Guild signs players to allow it to compete at a high level in its four target games – Fortnite, Valorant, Rocket League, and FIFA – in much the same way as a Premier League football club. The company won first its major trophy a few weeks ago, the Fortnite Champion Series (FNCS) European Grand Final, in which all four members of Guild’s Fortnite roster finished in the top ten. Guild is now at the top of the European Fortnite Power Rankings. The company’s FIFA player is currently ranked third in Europe, and says its Rocket League team is on track to qualify for the World Championship, and its Valiant team aiming for a top-three league position in the coming season.

Guild also moving towards its goal of raising £5m in sponsorship revenues in the first year after flotation. It signed a two-year ‘multi-million-pound’ sponsorship deal with Subway last month, giving the food outlet marketing rights and exposure across Guild’s team jersey as well as social and digital content featuring the company’s pro-players and content creators.

Guild has also signed a £3.6m three-year sponsorship deal with a European fintech company, which will promote its brand and logo on team jerseys and other marketing devices, and a two-year contract with gaming peripherals HyperX, under which its products will be used by the company’s players, content-creators and academy students.

The company has also released its first digital product range through an in-game customisation feature that will allow Rocket League players to personalise the skin of their in-game vehicles with the Guild brand. Direct-to-consumer sales of in-game items are an increasingly important revenue stream in the esports industry, expected to be the fastest growing esports revenue segment with growth forecast to increase from $7.1m in 2020 to $17.2m by 2023.

Guild is also trying to crack the huge sports merchandise market, launching its first range of Guild-branded apparel before Christmas, with a second line of products is planned for a launch in H1 2021. The company’s academy is currently in beta-test and set for a global launch this year, with an interactive tournament platform, fully integrated learning engine and live workshops.

A gilded prospect?


The Guild proposition faces a crucial test this year as lockdowns lift and mainstream sports become accessible to fans and players. But strong long-term market drivers seem to be moving in Guild’s favour. With cash of £18m reported in January the company, which has a market cap of £30m, is well funded for future near term growth.

Guild’s share price has been caught up in the wider sell-off tech shares this year, down from 8p to 5.75p. But if the company can keep up the strong progress it has made over the past year, and the esports market continues to power forward, that price may soon seem something of a bargain.