After raising millions of dollars in investment, Cloud9 looks to join Blizzard's new esports mega-league.
After raising millions of dollars in investment, Cloud9 looks to join Blizzard's new esports mega-league.
Jack Etienne and his wife Paullie founded the iconic North American esports organization Cloud9 in 2013, and have since built it into one of the most recognizable and influential brands in professional gaming. Starting out with a single League of Legends team, Quantic Gaming, which it purchased for $15,000 in that first year, the LA-based Cloud9 has since grown into multi-title organization that has teams or players in nine different games, from Dota 2 to Super Smash Bros. and Overwatch.
Last month, Cloud9 completed a new round of funding for an unspecified amount, simply announced as "several millions of dollars," from big big-name investors that included San Francisco Giants' outfielder Hunter Pence, NFL legend Joe Montana, Reddit cofounder Alexis Ohanian and Bonfire Studios co-founders Min Kim and Rob Pardo – who was previously the chief creative officer at Blizzard until 2014. This investment supplements the nearly $3 million Cloud9 raised in November. Over the phone, Glixel spoke to Etienne about Cloud9's plans for the future and the organization's place in a rapidly changing esports ecosystem.
In the past six months Cloud9 has raised millions of dollars. What's the plan for all this money?
When people take on investment money, it's often because they don't run at a profit. But Cloud9 has been profitable from day one, so I had a different goal in mind: I wanted to make sure that we had the right folks and partners investing in Cloud9 to make sure that Cloud9 will be well-positioned to be a part of esports' current growth.
So, I sold a minority stake for folks that just wanted to be a part of esports, and people I thought would bring something special to the table and that could help Cloud9. But the money is mostly set aside to make sure that we can be involved in some of the franchising going on. Blizzard are getting people to invest in the Overwatch League, and there's going to be a significant buy in.
I'll come back to Overwatch League, but what does bringing "something special to the table" mean for you and Cloud9?
I've got a lot of experience of building team sponsorship, but I don't have a lot of experience with traditional sports teams. And there's a lot of venture capital folks who are now involved, and who have built a lot of large companies. These are the types of guys who I'm going to need when I go and talk to Activision or Riot when they're building their franchise leagues. They want to see that Cloud9 can expand and be ready to have things like an arena in a city. Through these folks, I can talk to major sports teams like the Dodgers, and those relationships and experience on those traditional sports teams will be really valuable.
My expectation is that the average age of players is going to get higher; the pay is good and there's no reason a good player can't play into their thirties.
We've heard that you're looking to build a new team headquarters in Los Angeles. Can you say a bit more about that?
We're already headquartered in Los Angeles, and we've got several team houses – our League team, our Overwatch team, some of our Hearthstone players and management staff are here too. But in this next stage of franchise esports, instead of multiple houses across Los Angeles, we need a single campus where we can have, like, a cafeteria and a gym where we can monitor our players and make sure they're doing all the exercise they need to stay in good shape. Also, we make our own content, which allows access to our players. When all the players are in the same place, that's much easier. Often, our video guy is driving all over Los Angeles.
What kind of challenges does centralizing everything into a single campus present?
Well, one, space. You need to make sure that you're going to have the right structure, so, say, really fast internet with no single source of breakage. If you have an internet line and it goes out for some reason – DDOS or whatever – you need a backup that you can switch to so the players can still play.
And players living together is great when they're 17. They really like communal living. But my expectation is that the average age of players is going to get higher; the pay is good and there's no reason a good player can't play into their thirties. So there's going to be a time when these players are probably going to have a girlfriend or a wife. We want to make sure that we can have a space for the younger players, but also that there's housing that's affordable nearby that players can get their own place and have their own lives as they get older.
Right now, most of our staff is dedicated to management of the players. We don't actually have our managers contained to a single game; after a big event, they rotate to another team so that they get a chance to know the different games and cultures.
Currently, a big part of my job is ensuring that we have really good player handlers and player managers. But as we expand outside of that, it's going to be really important that we build out our sales group to ensure we get partnerships with non-endemic companies.
With physical therapy and sports psychology, it's important that the players believe that it will actually help them play better.
When it comes to this support staff, how much of this is you predicting what players need to succeed, and how much of it is player requests?
Every single thing I've added on – sports psychologists, trainers, etc. – has generally been me or other management trying to guess what's best for our players. There isn't really a roadmap beyond what we see in traditional sports – we'll hear "oh, this sports psychologist really helped out this NBA player," and we'll go to the team and say "hey would this be something you're into."
The first time we tried that, it didn't work well. But we ended up trying it again and got great results. Same thing with physical trainers – we worked until we found someone who knew the teams. We brought her on, and we've seen a reduction in pain for some of our players. It started with her dealing with players in pain, but now we insist that the players do preventative exercises so there isn't a problem in the first place.
How do players take to this kind of 'parenting'? I'm guessing some are more open to it than others.
It's interesting. Some take to it, and others are very skeptical and don't give it their all. If that happens, we point to success stories. I don't want to call out a team, but one team in particular has not been very receptive to a sports psychologist, and there's another team in the same scene that has had tremendous results with a sports psychologist. So that made our team go "Hey!" and give it another shot and take it a bit more seriously.
With physical therapy and sports psychology, it's important that the players believe that it will actually help them play better. If the players aren't into something … well, you get out of it what you put into it. Same thing with sports psychologists. You really need to want for it to be effective for it to be effective.
So in addition to tending to your players as competitors, how are you working with them as personalities? Is everyone getting media training now?
It's been a process. Every time you bring up new players, you forget all of the work you put into making your old players comfortable. Sometimes, you put a new player in front of a camera and you're like "oh my god, I'm watching a train wreck slowly! What have I done to this poor kid?" and we're going to have to talk to them about this.
Like, if a question is uncomfortable, you don't have to answer it. Just answer a totally different question. Take a breath after a question to collect your thoughts. This doesn't come naturally, and it takes a little work to get it right. But most of my players are comfortable with media now. The next thing up is the Overwatch team because a lot of them are new.
When you're hiring support staff, do you look to bring people up from the esports community, or do you hire from elsewhere?
Historically, I've just focused on the esports community because the pay hasn't been great and the hours are awful. But we're starting to see a bit of a shift. People with fantastic professional skills and experience are interested in esports and are willing to put up with the hours or take a pay cut to just be a part of it. That was a big part of this investment. If they weren't personally interested in it, or really passionate about it, I couldn't afford them. But they're here and it's very exciting.
You mentioned before that you're looking to traditional franchise models for guidance when thinking about what Cloud9 is going to look like in the near future. How much do you look to the 'model' versus your own instincts?
For the first two or three years, I did things pretty intuitively. Esports could stay as it is now indefinitely, but if we want it to grow and to become competitive with traditional sports, we need to start seeing these franchises. There's a lot of reasons for it, but one is that the NBA and NFL have benefited from having their brand stick around for decades, so love of a team is something that gets passed on from father to daughter. I grew up watching the 49ers and loved them before I knew what football was all about. We need to have that esports brand become a family tradition, and that's going to happen with a franchise league that sticks around.
Additionally, a huge percentage of Cloud9's revenue is corporate sponsorships. We don't really participate in the media rights revenue, which is what carries traditional sports. Until we're part of a league where that's part of the revenue share, we're not realizing the whole potential of the viewership we get. It cripples our growth. So we need to see those systems set in place to tap those dollars that we need to go grow as a team.
Hence, your emphasis on ensuring that Cloud9 is part of the Overwatch League?
Overwatch is in its infancy, but Blizzard-Activision is putting everything together for OWL to blow up really fast. There are concerns about how easy Overwatch is to watch, but Blizzard-Activision has a ton of very smart people and I'm sure that's one of their top priorities, how to make the viewing experience more enjoyable and interesting. One thing you can't deny is that people love playing the game. We need to figure out how to translate that into "I love watching people play the game.”
In general, 'Dota 2's scene isn't friendly for organizations. There just don't seem to be any plans to have a franchise system and Valve just hasn't really opened up and had much of a dialogue with the teams.
Morgan Stanley issued a report last week stating that Overwatch League has the potential to generate hundreds of millions of dollars. Are you as optimistic as they are?
Yeah, I'm super optimistic about Overwatch League. It's a huge priority for Cloud9 to take part in it. I would love to see those guys do analyses of other games, because that report was one of the best I've seen on esports franchises. I'm bullish like they are.
On the flipside, Cloud9 recently reentered Dota 2 by picking up Danish Bears. Can you talk about why this was the right time for y'all to return to the scene?
We had a strong Dota 2 team for a couple years with EternalEnvy, and then we built our own North American team that got to the first major. That was great, but we ran into issues with a player who was not representing the brand well, so we dismantled the team and started over. We tried a couple of lineups, but we couldn't find the right folks to get behind. We ended up taking a shot with the Danish Bears, and we're trying to support them and make a strong team, but it hasn't been easy. They haven't qualified for events like we hoped they would.
In general, Dota 2's scene isn't friendly for organizations. There just don't seem to be any plans to have a franchise system and Valve just hasn't really opened up and had much of a dialogue with the teams yet. Teams pop up and fall apart and pop up and fall apart; the brands are constantly shifting – well, besides the Chinese teams, which are often run by very wealthy billionaires who can afford to do this even though it's not organization friendly.
I would love to see Valve attempt a franchise system, but I don't have any communication with him on if they're interested in doing that. Frankly, I think the best way to get them interested would be for Overwatch League to be really successful.
This interview has been edited and condensed.