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278. Office Hours: VPN Service Acquires Esports Team
Episode 27821st September 2022 • Business of Esports • Paul Dawalibi
00:00:00 00:04:14

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In this episode (278) of Office Hours, with our host William “The Professor” Collis, we discuss eVenture Limited, the owner of the VPN service hide.me, acquiring the Croatian esports org Valiance!

Transcripts

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Hi, everyone, welcome to another episode of office

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hours with the professor. As always, I'm your host, William,

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the professor, call us. And we've got a pretty fun,

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relatively short news story this week to dive right into. So

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let's get going. So the story I picked for this week's office

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hours is comes from esports Insider, and it's about a VPN

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company hide.me, buying an esports team called valiance.

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Now, as always, let's start with just a couple basic facts, we

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need to sort of talk about the story. The first is that

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valiance is a Croatian esports team, relatively regional and

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sort of smaller. The second is that hi.me had sponsored

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valiance before this acquisition. And then the last

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sort of piece here is that high.me seems to feel that, you

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know, gamers are an important or at least interesting customer

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segment that they want to develop. And so as we hear in

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the story, they've purchased this team valiance. So why did I

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want to talk about this? And as always, on office hours, it's

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less this specific story itself, and more sort of the trend this

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could exemplify right? Because we've actually seen other

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examples of basically sponsors, buying esports teams or

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sponsoring companies moving into the space, you know, it's not

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quite analogous, but somewhat similar. And probably the best

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known example is Shopify, creating the Shopify rebellion,

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basically saying, Oh, we're not going to sponsor, we're going to

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have our own esports team, you know, try that out. See how that

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works. You know, the question is, will this be a trend? Will

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we see more basically sponsoring companies just moving into

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owning the marketing asset itself. So to unpack that, we

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probably need to sort of go through the thinking process

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that hi.me had, as they were looking at, you know, buying

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valiance. And I imagine it went something like this, they had

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sponsorship experience with the company, they knew sort of the

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return, they had gotten the cost of the asset, they had a sense

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of what it would take to purchase valiance as a team,

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they did a little bit of cost benefit analysis, and they said,

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hey, the price is right. And probably there was a little

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cherry on the top of that, which is Ooh, owning an esports. Team.

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That sounds fun. And if that's the reasoning that hi.me

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employed, I really hate it. And I think it's kind of dangerous

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for the space for a couple of reasons. The first is that the

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price is right on the asset, you're buying for a reason,

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there's probably something that needs to be fixed, right. And

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then the second piece is, if you're an operating company,

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moving into a business, that is not your core operating

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business, you better have a really good reason for taking on

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this new operating segment. Otherwise, it's just a

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distraction. You know, in general, companies should never

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be moving into an industry or line of business, even when

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that's adjacent unless it is part of core strategic

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direction, just because the price on an asset is reasonable.

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Like it's not enough, these companies aren't venture funds,

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right? They're operating businesses. And so if this is

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the reasoning, I don't particularly like this, however,

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that's not to say that that is the reasoning in this case, I

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don't know what the reasoning is. And it's also not to say

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that there are no instances where companies should own and

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acquire esports teams. In fact, I can think of some very

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interesting ones, as long as it is on strategy for the business

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to be entering the space, it is part of a strategic plush. And

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that's what I hope could be the case in the hi.me story, that

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this is really they've identified this as the target

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demographic, they're going to solely go after they think

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owning assets in the esports space, a team among them is

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going to be a value differentiator for them, you

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know, and this is not just a buy it to try it scenario. But it's

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the start of a significant investment in an owned asset

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strategy to diversify the VPN holding company. Let's hope it's

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that that's I think, a sort of a fun look at this story. So the

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pros and cons. So no, I don't think sponsoring companies

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should just be acquiring teams. That's why I give the story a c

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plus, I don't love this trend. But here's hoping we do see a

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few businesses that are smart about this and see strategic

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opportunities in the space making a big move because there

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is potential for companies that know how to activate and are

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activating on a brand approach and not just sort of on a willy

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nilly discount purchasing spray. So thanks so much for joining me

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with this week's office hours and I look forward very much to

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doing another episode with you next week.

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