T1‘s audit has been completed, and the news reveals something rather shocking for esports. That is, T1 has turned a profit.
The organization has historically operated in the red, relying on investments from third parties, parent organizations funneling funds into it, or something else. But on rare occasions, extremely well-balanced organizations with strong financial revenue streams can turn a profit.
And today, that appears to be the case for T1.
Here comes the money
According to Inven, the Korean source that broke the report, T1 managed to increase revenue by nearly 80%. Operating profit reached 25,122 million won (~$18.6 million USD), and the company turned a surplus for the first time since its founding, overcoming the deficit from the previous year (a loss of 88 million won / ~$65,000 USD). Net profit also hit 1,231 million won (~$912,000 USD), returning to a surplus from a loss of 62,825 million won (~$46.5 million USD) in the previous year.
One cannot underestimate how important that is for the scene. Esports is often not a money maker for many. It’s a privilege for the few, more likely. So T1 being able to balance its books for a year is a good sign that esports has hope.
The money seems to be coming largely from merchandise sales, particularly in the South Korean market. The cost of goods equated to about 20.6 billion won (~$15.3 million USD).
Is merch the key for esports organizations? Only if you’re T1, let’s be real
For T1, it means a lot that it can return a profit. Given that T1 is by and large one of the most popular organizations in Korea, on top of being one of the most decorated, it means it’s weaponized its prestige as a brand, alongside its players, to get players to buy into the T1 branding.
Not only this, but merchandise is one of the only ways to guarantee revenue for a brand. Franchising in League of Legends certainly helps, but it’s hard to fully tell how much it gets from the LCK from those numbers in the full audit.
Being able to flip a profit is great for the organization for several reasons.
The first is that T1 is heavily in debt. Inven reports that the T1 debt ratio is about 713.1%. It raised 4,330 shares, and the share price was set at 263,000 won (~$195 USD) to help manage that debt.
Being able to flip a profit also means it can look interesting to investors and help clear that debt off, despite the gloomy look in esports right now.
As it stands, League of Legends is not exactly the big esport that we thought it would be during the esports explosion a decade ago. Throw in the esports winter — a term used to describe the low yields of value and investors willing to enter — and finances dry up. An org becoming self-sufficient is a very good sign for the industry, indicating that T1 has found ways for fans to spend money.
It reminds me of this conversation that, because we have got it for free, fans typically won’t pay. Tech Girl had a pretty good short on the subject the other day that I feel resonates quite hard. Seems like T1 has found a lot of those 10% of fans willing to pay.
We’ll have to see if that continues with T1’s rough start in the LCK, losing 0-2 to KT in the telecom wars, especially after Kkoma’s leave of absence. Maybe fans are fickle and may turn on spending on merch because of it? Who knows.