The Esports Advocate can confirm through multiple sources that G2 Esports and Version1 (V1) (owners of the Call of Duty League team Minnesota ROKKR) have been in extended talks to merge for several months, and that those talks are still ongoing. According to sources, V1 and ROKKR would become part of the German esports organization and its current owners—WISE Ventures and Gary Vaynerchuk—would become minority stakeholders in the merged organization.
WISE Ventures is an investment group composed mostly of Wilf family home office members including Zygi, Leonard, Mark, Jonathan, Steven, Halle and Daniel Wilf, as well Stephanie Wilf Kahn, and Konrad Von Moltke. Collectively the Wilf home office owns the real estate developer Garden Homes, the NFL team Minnesota Vikings, the MLS team Orlando SC, and the National Women’s Soccer League team Orlando Pride, among other holdings. WISE Ventures’ portfolio includes Version1 + Minnesota ROKKR, and a number of sports- and entertainment-related properties.
At some point in March or April this year, the ownership group told V1 management that, while they didn’t want to abandon the organization completely (they still believed in the future of esports and wanted to be involved in it), they no longer had a desire to be its largest stakeholder.
This set V1 management on a quest to engage in talks with multiple parties (both endemic and non-endemic companies)—one of which was rumored to be G2 Esports. TEA does not precisely know when those talks with other companies began, nor do we know exactly who V1 has spoken to outside of G2 since that time.
It has been rumored that V1 has been talking to G2 Esports about a possible merger or acquisition, but there has never been a public acknowledgement from either organization that these conversations were happening. Nevertheless, TEA can confirm that G2 Esports and V1 have been discussing a merger since late-May to early-June, according to people with knowledge of the situation we spoke to over the last several months, as well as other sources of information we have access to. We can also confirm that V1 and G2 are still in talks, as of this writing, though no deal has been finalized.
More importantly, TEA can now paint a fuller picture of what led to this decision by V1 management, and how the organization’s largest investors compelled them to start looking for a partner to either merge with or be acquired by.
Beyond other factors, sources tell TEA that V1 not being selected as a partnered team in Valorant Champions Tour (VCT) Americas for the 2023 season may have been an additional determining factor that led to WISE wanting to minimize its holdings and obligations. From what we have been told, Jonathan Wilf, co-owner of V1, is a big fan of Valorant, so when the team didn’t get that partnered status, that may have had an effect on the decision-making process.
Budget Cuts, Hiring Freeze
On or around March 12, V1 COO Brett Diamond and Chief Marketing Officer Annie Scott Riley told staff that budgets were being reduced, and that there would be a hiring freeze. Diamond noted at the time that “esports winter” was a real thing, and like other organizations, V1 would need to make some adjustments and do some belt tightening. Staff did continue to work on content over the next several months, and V1 hosted several live in-person CDL matches in April and May, according to a source speaking on background.
V1 Merger Talks Revealed to Staff
On or about April 12, Diamond informed staff that V1 was seeking a partner to merge with or be acquired by, and that—as is generally the case with mergers—there would likely be several rounds of layoffs in the future. At the time, it was unclear “when” and “if” those layoffs will occur (generally early summer was the anticipated window), but because those decisions might be out of current management’s hands (in the event a merger was finalized), Diamond felt it was important to warn staff that these things were a real possibility. A source within the company tells TEA that staff were informed at the time that June – July would be the likely window for layoffs.
Diamond also told employees that V1 would talk about the possibility of a merger publicly (via a Digiday article). This was also the first time that staff was told that WISE and other investors wanted management to find a way to minimize their stake in V1.
Diamond noted the following in that Digiday article:
“We’ve started the process to explore options for the future of the organization. The focus currently is on pursuing a merger with another org that we feel aligns with our view and our ownership group’s view of the esports industry. We think that’s the appropriate step, given what’s going on in the industry as a whole. But it is important to our ownership group that they see a bright future for esports and want to be a part of that and build towards that future.”
Diamond and other C-suite level employees also encouraged staff to look for opportunities elsewhere quietly, and many employees did so, moving on from V1 between April – June, prior to the first round of layoffs that would come.
In an “ask me anything” meeting on or around April 14, Diamond shared what he could about why the company was in merger talks in the first place. He noted that, prior to the budget cuts in March, the company would have recorded a $10M USD loss for the year if it had stuck with its original 2023 budgeting plan. This may sound outrageous on its face, but V1 was built on the proposition that the organization would require continued investment for nearly a decade, and wouldn’t hit break-even/profitability status until sometime in 2030. Diamond also noted that, since its launch, V1 generally hit its budgeting targets or came under them. A representative told TEA:
“Every year of operation, Version1 has been positive relative to internal budgets and projections. In 2022, both revenue and expenses were positive relative to budgets, which includes significantly exceeding projections for org generated revenue.”
Given that CDL was being put forward by Activision as the next big sports league akin to an NFL or NBA, and projections on revenue share and media rights were high, it was expected that WISE would commit $100M – $120M over a decade or so, with the goal of of building a company that could be valued at $150M+ or considerably more by that time. A V1 representative told TEA that many of the numbers used in that April 14 meeting were approximations and not exact figures.
During meetings on May 3 and May 10, management continued to encourage staff to look for opportunities elsewhere, and that merger talks with multiple parties were still ongoing. While staff were warned that layoffs were highly likely, there was no specific date(s) for when these might occur.
Diamond said throughout these meetings in April and May that the reason he was sharing so much with staff is so that they would not be blindsided like employees at other organizations such as The Guard—owned by Kroenke Sports & Entertainment (which TEA reported on exclusively in February)—or Madison Square Garden Entertainment’s CLG.
Surprisingly, the trust in staff was well placed, as no one inside the organization spoke publicly about it until well after layoffs occurred in June and July. Sources we spoke to say that V1 staff were loyal because they believed in the organization and had an immense amount of respect for Diamond.
In Talks With G2, Layoffs Announced
On around June 21, Diamond confirmed to staff that a CDL Scrim Intel rumor posted on Twitter about G2 Esports and V1 merging had a slight ring of truth to it: V1 and G2 had been in advanced talks about a merger since late-May to early–June, but Diamond emphasized that nothing had been signed.
In addition, staff was informed that a round of layoffs would occur on June 30. While a deal was not finalized, Head of Esports Jacob Trobaugh was in conversations with G2 Esports competitive leads to prepare for rostermania at the time. Ultimately, there were two rounds of layoffs in the June/July period, some of which corresponded with the completion of competitive seasons for V1’s various teams.
Current Status of G2 Talks
Sources tell TEA that V1 is still actively talking to G2, and that as far as they know, V1 isn’t talking to anyone else. It is clear that G2 wants to have a presence in North America, as evidenced by its opening of a New York office in January 2020 and its recent signings for some of The Guard’s former Valorant players and taking over the organization’s VCT Americas spot.
Sources believe that the organization’s main focus at this point is in securing the ROKKR roster and its CDL slot, but G2 may also be interested in holding on to the all-women Game Changers Valorant team, given its dominance during the 2023 season. It is also rumored that G2 has signed two former V1 Rocket League players for 2024, but TEA could not independently verify this, as of this writing.
V1 declined to comment on some specific details and would neither confirm or deny its conversations with G2. G2 Esports did not respond to a request for comments. Activision Blizzard also did not respond to a request for comment.
Other Interesting Bits and Pieces of Information
- Brett Diamond told staff that he does not believe he will be kept on in a leadership role should a merger occur (though given that the Wilfs hand-picked him to run the organization, he might end up being a liaison between the new majority owner/WISE. V1 and Diamond declined to comment on this.
- In a June 14 meeting, Diamond said that by 2030 the hole from the Activision revenue share/media rights could amount to tens of millions, which is one of the reasons why WISE wanted to reduce their obligations in V1.
- Before pursuing a merger, V1/WISE considered entering into Riot Games’ League of Legends Championship Series (LCS) in North America, but given how the ownership viewed things related to the CDL deal, they were not willing to invest even more money in a new league controlled by a publisher. This and other options were being explored long before the conversations about mergers and acquisitions occurred. A V1 representative provided the following comment to TEA:
“We explored a variety of opportunities over the past few years, but don’t generally comment on the paths not taken.“
- CDL team owners and league officials have been kicking around the idea of getting rid of the city-based team requirements. V1 had “no comment” on this.
- There have been concerns by team owners that splitting league media coverage in 2024 between YouTube and Twitch might be problematic, because YouTube might not agree to it. Activision signed a multi-year media rights deal with YouTube in 2020 for CDL and OWL worth an estimated $160M. V1 had no comment on this.
- We noted this earlier, but V1 didn’t expect to be profitable until at least 2030 and WISE was on board with this because they expected better ROI from its CDL franchise based on Activision Blizzard’s projections. Save the YouTube deal, projections on media rights revenue in the early years of CDL have been off the mark, sources tell us. V1 declined to comment on this.
- Also noted earlier, the Wilfs and V1 investor Gary Vaynerchuk are in alignment on being minority stakeholders in a merger scenario, but they are still committed to being involved. A V1 representative, speaking on behalf of the ownership group said:
“From the start of our process exploring M&A opportunities, it was important to our ownership group to continue to be involved in the esports space. They believe in the long-term future of the industry.”
- ROKKR will not be rebranded in 2024 by whoever buys V1, but V1 as a brand is likely to be absorbed in a merger scenario. A V1 representative confirmed that there will be no changes to ROKKR branding for the upcoming 2024 CDL season, but had no comment on V1 and ROKKR branding in future years.
- A number of people did find new jobs prior to the layoffs. Following those exits between May and June and the two rounds of layoffs in June and July, the company’s workforce was reduced dramatically. A V1 representative tells TEA that around 10 full-time employees remain at the company, not including players and coaching staff. A V1 representative added the following comment:
“We were transparent with our staff months in advance of the first round of layoffs. We encouraged and supported those who chose to pursue other opportunities after we shared the intention to pursue a merger in April.“
- Everyone we spoke to over the last several months, said that Brett Diamond was a great leader who actually cared about his employees. At times, Diamond got emotional as he delivered the bad news about layoffs, and consistently told staff that he was proud of their efforts and work. On several occasions, while delivering bad news this year, Diamond emphasized that the things that were happening with V1 were not because they didn’t do enough or because they failed to do a certain thing like hit a KPI or sign a big sponsorship.
It’s also important to note that investment decks tend to contain hyperbole, creative valuations, and optimistic expectations about growth, sustainability, and profitability. Though we have never seen the presentation Activision Blizzard pitched to investors in 2019 for its Call of Duty League, we imagine it involved at least some of these things.
We also imagine that Activision Blizzard, using the Overwatch League as an example of success at the time, pitched sports team ownership groups (like the Kroenkes and the Wilfs) on buying into a franchised team that could tap into the excitement of a younger demographic (whose interest in traditional sports is rapidly waning) and the lure of revenue that could be generated from this demographic from in-game sales; ticket, merchandising, and concession sales at home venues during home games, profit sharing on sponsorships and partnerships, media rights deals, and so on.
The cost of getting in on the ground floor of this new league? A modest $20M – $25M. The premise was that franchisees would be able to generate revenues over the next decade similar to what franchised league teams in the NBA or NFL do, while also tapping into that young demographic through one of the most popular entertainment properties on the planet: Call of Duty (in May of 2019, Activision Blizzard reported lifetime unit sales of more than 300M, according to data from Statista).
On paper, these things probably looked good to investors. Of course, with the pandemic impacting the CDL in its first few years, revenues were slow and most teams in the league weren’t able to pay all that much—according to some reporting, teams have paid anywhere from $4M – $7M each in franchise fees, so far.
This is all crucial context to note because it provides some insight into the decision-making process of the ownership group, who decided that they needed to reduce their stake in V1 in 2023.
While V1 declined to comment on specific points of this story, we believe the decision to merge with another esports organization was—at least in part—driven by a number of industry-specific factors, including shifting opinions on the long-term viability of publisher-controlled esports leagues, the global economy, diminished marketing spend in the sector, and the general cost of doing business in the space.
Certainly, Microsoft’s pending acquisition of Activision Blizzard (and the uncertainty that it creates related to Activision’s biggest esports operations) as well as the dismantling of CLG and The Guard earlier this year, have also played a role in V1’s decision.
Editor’s Note: We erroneously stated that the Game Changers team won the World Championship. Given that this event hasn’t happened yet, this is incorrect. We have corrected our story to reflect that (though perhaps, we’re psychic?).