Philadelphia-Based tournament and venue operator Nerd Street Gamers issued a statement Thursday on social media attempting to explain why it hasn’t paid out prize money and promised reimbursement of expenses to contracted staff and competitors. The statement written by CEO John Fazio is likely the result of backlash related to an announcement made this week by Nerd Street about a new Valorant tournament.
In his statement, Fazio said that Nerd Street grew too fast and as a result it has been forced to scale back by shutting down underperforming Localhost venues, cut staff, tighten budgets, and cut discretionary spending. He also claims that, “Since September we’ve paid out over 70% of the total payables due.”
He attributes some of the company’s current struggles to the pandemic, which forced Nerd Street to shut down its Localhost centers and shift into providing tournaments online for an extended period of time. Last year in particular, Fazio notes, the company relied too much on sponsors like FTX to fund prizing for its tournaments—most notably, its Riot-sanctioned Valorant tournaments—but the crypto exchange’s crash created a financial challenge for the company.
You can read Fazio’s full statement below:
First and foremost, let me start by saying that I am sorry. Since our founding, we have championed sustainability and timely talent/prize payments within our community, and we have failed to meet our own standards. We are committed to resolving this issue, getting everyone paid, and returning to our sustainable roots so that we can continue producing high quality tournaments across the country. I should have made this statement sooner, but I was too optimistic we’d be caught up on a shorter timeline. This statement’s intent is not to make excuses, but to provide transparency on the situation and on our path forward.
Nerd Street was created with one purpose – to provide a physical home for gamers that would cultivate opportunities for skill development, friendships, scholarships, and careers. We made our name producing sustainable grassroots LAN events across the country.
Then, when the pandemic hit and we shut down all of our venues, we transitioned to providing an online competitive offering and ramped up our content production. Backed by big sponsors like FTX, we scaled up our spending on staffing, prize pots, and talent thinking that we were investing in growing the competitive pipeline. Unfortunately, that meant we became reliant on those brands and lost the sustainability we had built the company around.
Simply put, we grew too fast.
At the same time that a certain key sponsor left the industry, we ran into contract issues with an external partner that had a ripple effect across all of our events and significantly delayed payments. Now, we can only resolve those outstanding payments as fast as we can generate the revenue to do so.
We’re doing everything we can to maximize what we pay down. Since September we’ve paid out over 70% of the total payables due. Every dollar after expenses are covered is going towards outstanding payments.
In order to maximize our ability to pay down what we owe, we have cut back significantly on staff, shut down our underperforming venues, pulled back on all discretionary spending, and tightened our budgets across the board.
With a leaner team and tightly managed spending, we’re returning to our roots. From now on, we will only be producing events that have sustainable scaling prize pots and talent without the need for sponsors. We will continue to produce larger scale events on behalf of our clients and partners, but our own Nerd Street events will go back to being focused on our grassroots communities.
Future tournament payments will be on time because we’re not reliant on anyone else. These events are sustainable because the entry fees cover prize pots & talent without sponsors. Every dollar of profit after that goes towards the outstanding talent and prize payments from prior events. This is why we’ve been able to continue to run a handful of quality events without payment delays, while also working through the outstanding payments.
If we stop running events, it’ll only further delay our ability to get payments out. Although it may be frustrating to see new events announced, it is our best and fastest way to get everyone paid while continuing to support our community.
I apologize to everyone who’s been impacted. We’re committed to learning from our mistakes and will continue to do everything we can to build a stronger and more sustainable future for esports.
Thank you to all of our community members for your continued support. We are nothing without you.
You can read more about Nerd Street’s challenges here.