July 30, 2020

Narek Sirakanyan talks about cybersports and investments in the industry

How would you feel, if your child chose to do cyber sports discipline, would you support this?

My son loves Fortnite. He prefers the mode in which you need to kill as many other players as possible and always tries to improve his previous results. I mean, he wants to play not just the game itself, he wants to break his past records, to become better. It's like golf, where you play against yourself and always try to improve your performance. Children also tend to enjoy this, they often compete with themselves. I believe that cyber sports develop this skill, encouraging you to achieve better results, to aim higher.

Can these skills help in business, in management, in life?

They definitely have influence on all those areas. Because in life, no matter what stage your project has achieved, you can't stop there, you need to try to bring it to a new level, improve it in all ways possible, and strive for new heights.

— Is there a potential for introducing cyber sports into educational institutions? If such a program had been introduced 10 years ago, would there be a technological boom in Russia and the CIS countries now?

I think this was discussed 10 years ago, but the project wasn't implemented. I agree with my colleagues that e-sports should be introduced as extra-curricular activities, that children shouldn't be made to play these games. They should be able to make their own choices and get a chance to continually improve their results. Their parents will see the development of motor skills and leadership, they will appreciate that thanks to e-sports, children develop as individuals and aim for better results. Then it will be possible to introduce e-sports in schools as well. However, at this stage, I think cyber sports should become part of existing programs - for example, management or marketing if we talk about the introduction of e-sports in high school, in colleges, in universities. What is more, there is a serious lack of expertise in the field among today's specialists.

There should also be a psychology course for e-athletes, many psychologists do not see the difference between sports and e-sports, but there is one. Some people think that all sports have the same base, but this is not the case. As a result, often sport psychologists give recommendations to cybersportsmen without any knowledge of playing computer games.

— What is the potential of cyber sports? Will there be a boom, maybe in 5 years time? Will universities and private educational institutions start introducing such courses?

Cybersport is developing really fast: in Russia alone it has recently grown by 30-40%, worldwide it is growing by 20% per year. This business will double every 4-5 years. When growth rates are good, they motivate, they attract more people. One more year or two like this with more and more e-sports conferences, and the "boom" will happen by itself. But I think this is the concern of the next decade.

— Cyber sports as an industry: is it profitable? Is it profitable to invest in it?

When an industry grows so fast, it attracts attention. Such growth figures allow you to stay profitable even if you make certain mistakes. But if you do a lot of things right - within the framework of your project or business - you can outperform it, that is, grow by 40% when the growth within the entire industry is 20%.

The market is more open today. Before, there were 3-4 package offers for investors, now we have a much wider choice: there is sponsorship, there are advertising opportunities from the game developers, there are rights to media broadcasting, there are sales of all kinds of tickets for offline events, there is merchandise, and much more. More options appear every year.

Let me give you an example - Cyber Legacy. Communication with sponsors should educate them. We need to offer them such integrations so that they understand how to convert their viewers and fans into customers. Not all industries understand how to work with this audience, how to make them involved.

Suppose you have a large bank as a sponsor, what can it offer the viewers and fans of the team? Can it issue cards, open accounts? But the main target audience of e-sports are teenagers, 14-15 years old, and, according to the laws of the Russian Federation, it is impossible to give a credit card to a citizen under 18 years old. There are a lot of such aspects. Cyber sports teams are improving their interaction with investors: they come up with new products for industries that haven't previously been interested in e-sports.

Such approach to partners converts viewers and players into customers, makes companies stay in e-sports for a long time and attracts the attention of competitors. All these processes are accelerating investment trends. The growth will continue, which means every e-sports company will be able to increase its revenue.

— What is the best way for investing and doing business in e-sports?

Everyone chooses their niche. Today the streaming direction is gaining momentum, but there are companies that work only with sponsors, and there are lots of other options.

— Are the analysts calculating the most profitable vector for investment?

Yes, we analyze trends, but the most important task is to get as many subscribers to our channels as possible. This means that you still need to have a certain foundation,which will allow you to work further. Once you've created it, you will be able to assess what you have achieved, who it is most suitable for, twho it can be sold to, what next move to make.

— What are the main points of cyber sports investments development?

At the moment, there are not enough stories with entry and exit points. There are only a few deals that we have focused on. In e-sports, multipliers are impressive - 10-12 times to turnover (not to ebitda or to net income, as companies usually estimate). Such strong performance by private companies attracts serious attention, but there aren't many examples yet.

There must be a lot of prior cases that can be used by analysts when they evaluate a company. More cases with the same business model need to appear in order to compare their multipliers correctly. This takes time. All M&A consultants will refer to this.

This is very important for the development of the investment in the field. I believe that there will be funds with a pool of companies willing to invest in e-sports and attract their sponsorship packages. At the moment, this will affect the performance of cyber sports investments within the fund. Let's say there is a fund with 50 different investments - an e-sports team can attract brands as sponsors, for example, for a million dollars. And now the assessment of this club will be $ 10 million with a multiplier of 10-12 times. This is provided that the coverage and subscriber numbers will also grow.

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