• Andy Marston

Schalke 04 scores 265% ROI from esports venture after forced exit

After relegation from the Bundesliga, the German club has sold its League of Legends European Championship (LEC) spot to Swiss esports organisation, Team BDS.

Photo Source: Esports Observer

In what could be the first example of an esports business being sold to fund a sports one, FC Schalke 04 has completed the sale of its LEC license to Swiss esports organisation Team BDS.

According to a statement by Schalke 04 Esports, their place will be sold at the end of the Summer Split 2021 for €26.5m (£22.8m), which represents a 265% ROI over 3 years, as reported by Strive Sponsorship.

The sale was first suggested back in February, when it became apparent that the Bundesliga club was having some serious economic issues and was concerned with the threat of relegation, which has since come to fruition.

Schalke was also dealing with the resignation of its former president, who was involved in a health scandal surrounding a COVID-19 outbreak in one of his properties. Furthermore, a year ago, Schalke’s debt rose to a staggering €200 million, according to ESPN.

Whilst private investment initially flooded into esports teams from investors looking to benefit from the growth of the industry, raising funds has become a lot more challenging given teams’ inability to monetise their audiences. Just look at Guild Esports, who announced a loss of £4.3m over a six-month period, ending March 2021.

However, this investment from Team BDS does demonstrate the benefit of investing in a franchise over a non-franchise esports organisation. This is because of the scarcity value of the place, and the appreciation in value this place has as the league scales – similar to what is being experienced with the valuations of franchises in the MLS (but on a smaller scale).