In June of 2021, FTX paid $210 million for the naming rights to North American esports organization TSM. The agreement was set for 10 years at $21 million per year. At the time, the deal was widely reported to be the largest in competitive gaming history.
FTX Bankruptcy Fallout
Subsequently, recent turmoil in the cryptocurrency markets created a negative effect on FTX and its subsidiary companies. Investors quickly attempted to withdraw funds that they had deposited with the crypto exchange. FTX was not able to meet the demand for withdrawals and suspended activity. Finally, on Friday, November 11, 2022, the company announced that it would be filing for bankruptcy.
In the esports world, all eyes turned to TSM due to the prior naming rights agreement with FTX. The esports organization was quick to respond with the following Tweet on Saturday, November 12, 2022:
“Along with the rest of the world, TSM has been closely following the situation surrounding FTX. We have no insight into the matter other than what has been reported publicly. We are currently consulting legal counsel to determine the best next steps to protect our team, staff, fans, and players. To be clear, TSM is built on a solid foundation. We are stable and profitable, and we continue to forecast profitability for this year, next year, and beyond. We look forward to a great year in 2023.”
TSM Next Steps
Undoubtedly, the repercussions of losing such a massive sponsorship partner would create a significant impact on any company. However, based on TSM’s statements during the time of the original transaction, it seems that most of the funds were earmarked for rapid growth. Therefore, it seems likely that TSM will have to reevaluate expansion plans. In the meantime, it will need to maintain focus on current operations and on its traditional revenue streams.
FTX Effects on Esports and Gaming
Another key point is that the FTX bankruptcy may have some wider effects in the esports and gaming sector. For example, in August 2021, the North American League of Legends Championship Series (LCS) named FTX as its official cryptocurrency exchange partner. The terms of the FTX LCS transaction were not disclosed.
However, League of Legends developer, Riot Games, should be well-positioned to handle any aftereffects from the FTX situation. According to Statista, the worldwide revenue for League of Legends in 2022 was $1.75 Billion. Riot’s total global revenues far surpass the revenues from a single naming rights transaction.
In the Latin American esports market, Brazilian team Furia announced a $3.2 for a one-year deal with FTX in April of 2022. Last week Furia announced that, due to the recent FTX bankruptcy, it would also be canceling its deal.
Although the esports and gaming sector does have exposure to FTX, the effects are confined to a few select transactions. The wider implications of the FTX bankruptcy for esports and gaming may be in the development of new games. A general loss of confidence in cryptocurrencies could slow the development of new games that rely on blockchain technology.