Team Secret CEO, John Yao, sat down with Esports Heaven for an interview where he talks on a variety of topics such as the core issue of most esports orgs bleeding money, impact of Covid on esports especially the investors/sponsors, his work relationship with Puppey, risks of venturing into new game titles, debacle that OWL is, and more.
To start, a lot of esports organizations are bleeding money or barely making even. The return on investment seems poor for all but a select few. I’d like to get your thoughts on this. What position are you or have you been in, if you can disclose? Is there a way to climb to that “established” set of organizations? How much is luck involved?
I’m happy to talk about this because it’s a point of pride for me, and for us at Secret. We are fortunate to be one of the few profitable esports organizations, and not only that -- we have not taken on any debt, and we have not raised any capital for the purposes of running operations.
It is critical to have an experienced business leader run the company, either from the CEO position, or the COO position, in my opinion. Esports organizations are at the end of the day, a business, and running a business that loses money year after year is not sustainable for anyone.
It’s not so much luck, but rather a consequence of the business decisions that you make -- what do you invest in (regions, games, players, etc.), when do you invest (wait until you’re financially stable, or take a gamble on something), how do you invest (buy teams, buy players, make content, build office infrastructure, etc.), and why do you invest (is it for near term ROI or longer term goals, etc.).
All those questions need to be thoughtfully answered, and the moves that you make have to be very deliberate, in order to succeed. The industry is quite new and growing very rapidly, so there are a lot of people who don’t have the requisite business experience going through a bit of a learning curve here, which is why you see many organizations come and go.
One of the most commonly misinterpreted things in esports is roles in organizations. For instance, people mix up coaches, analysts, and managers all the time. I think people also have trouble understanding what a CEO actually does. Please elaborate the role of a CEO in an esports organization, and if it differs at all from “mainstream” companies.
CEO of an esports organization is similar to that of mainstream companies -- set the vision for what kind of company you want to be, what kind of goals you want to achieve, and lead the team to execute that vision.
What are some of the risks associated with entering a new game title? What’s the logic behind getting into one in the first place?
There’s always risks associated with getting into new titles, but we use a very specific set of criteria when determining if we want to get in, and when we want to get in.
We take into account the publisher very heavily (for example, any game that Riot releases is already held very high in our minds, because the esports ecosystem for League of Legends is so well done, so naturally we expect a lot of those strengths to carry over into any new esports ecosystem that they want to develop).
We also take into account region very heavily (is it a global game, or just centered in 2-3 countries, and what’s the best region for growth for that specific title).
Do you think if a “new esport” pops up, orgs are going to be less inclined to jump in after what has happened to Overwatch?
To me, Overwatch orgs leaving I don’t think will change very much about the industry. Most of those companies in my opinion are companies that saw the allure of esports, without truly understanding it, dumped a lot of money into OWL because of a great sales pitch by people who also didn’t have a great understanding of esports, and are now kindred spirits in despair.
It’s a great lesson that the model they are pursuing doesn’t work, and it paves the way for the successful esports organizations to shine brighter. OWL may be big money and big investment, but all the big native esports brands (Liquid, Fnatic, TSM, G2, etc.) declined to enter OWL, so that should tell you something right?
I’d like to know a bit more about your background and education. What was your trajectory to get where you are now? How do you apply it to your org?
Well I worked for about 12 years in strategy consulting, leading and advising executives at some of the world’s largest Fortune 100 companies. I decided esports was a tremendous opportunity to apply my experience and skillset in building my own company. It’s very relevant to everything we do here, and I apply that experience every day.
Let’s talk a little bit about branding and marketing. We recently interviewed Midormeepo and learned a lot about being a social media manager. First of all, how did that relationship come to be? How closely do you communicate and work with your branding resources?
Haha Midormeepo is great -- we talked on and off, and he was interested in working for us for some time, until we decided to give it a try. We have not regretted it for a single second, and I think he’s one of the best social media managers in the business. He’s part of our identity now, and we work closely every single day.
Let’s talk about...AFK beer. This is definitely one of the most unique products released from an esports organization. I want to know how the idea for this brewed, especially when so much of the esports demographic is young and potentially doesn’t drink. Did this come to be from happenstance, or did the org sit down one day and think, “you know what? We need branded beer!”
It came about when we attended many of these tournaments, and the food + beverage programs there were just utter shit. I mean, when you go to a basketball game or football game there are just so many more options, but when you go to an esports tournament it’s kind of an afterthought… not really at a mature point I feel.
We created AFK to be 5.9% ABV so that fans can enjoy the beer during tournaments, and continue enjoying AFK through a Bo3 or Bo5 series without getting totally drunk. 5.9% was the perfect alcohol concentration to get hyped, but not overdone.
Puppey is the founder of Team Secret. What is your relationship with him, and do you still communicate with him over business related matters since he’s also a professional player on the team?
I talk to Puppey all the time and we are great partners. The greatest strength of Puppey is his natural ability to recognize the strengths and weaknesses of the people, whether its players on his team, or people in the company.
He understands that he’s the master of captaining a DOTA2 team, and that I have a lot of ability in running a company, so we don’t really conflict with each other very much.
I’m very hands off when it comes to the DOTA2 team, more so than any other team where I am much more involved in the day-to-day, and he doesn’t get too involved on the business side unless I ask him to engage. It works very well for us.
We can’t do a business-related interview in 2020 without asking this - how has COVID-19 affected business for you?
COVID-19 is a strange time. On one hand, esports viewership and growth has really exploded, as for a long time the only sport available to watch was esports.
On the other hand, the businesses that put money into esports -- investors, partners, sponsors, event organizers, etc. -- are all hurting, and thus we do see a slowdown as a result.
I do think, however, that we will be at the forefront of recovery. COVID-19 has brought esports even further into the mainstream consciousness, and that will not go away even when COVID goes away.
Before we close-out, I’d like to end on a fun hypothetical: suppose everything crashed and burned or was reset so that your organization completely disappeared from the cosmos and you had to start from absolute scratch—I’m talking “left in a field, little resources”. Where do you start to build your business back up, if at all?
I would do everything the same as when we started building Secret as a business. I would find the best player in the world (Puppey), in a Top 3 esports title (DOTA2), partner with him, and start building the brand from there. You need strong business discipline to build a successful company, but you need a superstar to build a successful brand -- you pair those two things together and you have a great foundation for the future.