Gfinity, An External Attempt At Introspection

Michael Carmody
September 13, 2019

As Gfinity’s announcement has been made public, putting a final epitaph to a year that was already trending to a termination, the usual pundits, myself very much included, attempt to dissect what it means, what was wrong, and whether we were right all along.

Strangely, I found myself in the twitter trenches actually defending the Gfinity organisation, as the reflexive social media reaction trended to blind dismissal of the entire Gfinity enterprise. I considered what Gfinity had done, publicly and privately, and reconsidered what my thoughts were around the whole affair.

To masthead this piece upfront, I wish to affirm that the efforts of the Gfinity product and talent to put out a great esports broadcast product was without concern. They looked after the players, put on a good show and didn’t suffer from any significant issues that may plague other startup tournament organisers. I know pretty much the entire production, admin and talent team at Gfinity personally, and none of their work was anything short of an excellent representation of their best efforts. I applaud what they achieved, and very much conclude that the final outcome was not in any way representative of their individual actions.

A secondary starting statement needs to be made clear, I am aware of information that I can not disclose, as some initial negotiations were undertaken with an organisation I work with, and I consider this undertaking to be at least, in part, restrictive on my own disclosures. I shall be…uh… creative in some sections to work around these obligations.

A not-so-quick modern history retelling.

Gfinity in the UK has run the UK-focused esports league across a range of titles, that has seen some measure of continuity and product development. (The fact that this enterprise started in the UK is a key point I will return to later.) In conjunction with radio, billboard and public space (think bus stop shelters) media marketing company, HT&E, they decided to replicate the UK product directly in Australia. While HT&E’s cash injection does not appear to be significant or extant at all, they were a direct partial owner of the new GfinityAU. Initial rumours were that Gfinity was planning to invest big in the Australian venture, with some rumours hinting at a nearly 8 figure investment over half a decade. With the signing of Big Bash League Sydney Sixers COO, Dominic Remond, for what had to be a significant 6 figure salary, it was very clear that Gfinity was not here to mess around. A roadmap was announced, and details began to emerge via various channels that franchising was the name of the game. A public article very early on provided a concept for city-based franchises, and while the names were roundly derided as a bad joke, the starting concept had been established.

From this initial marketing launch, things became, at least publicly, very quiet. However, behind the scenes, the proverbial was going on. Gfinity was looking for buyers for their franchises, and every organisation's manager and owner was fast-tracking down rumours, while trying not to breach their own NDA’s. Everyone wanted to know what was happening, and nobody was sure what they could or could not say. Early into the piece two bold announcements were made, a Sydney franchise was awarded to Chiefs, and a Melbourne franchise to Avant Gaming. With two Australian mainstays locked down, the public quickly looked to other heavyweights to see who would jump next. But continue to wait was the name of the game. Not being able to disclose much more, other than the organisation I am involved with, conducted several rounds of negotiations with Gfinity, no other deals were announced for several months. The grassroots to pro online tournaments started up, with promises that if you performed well at the online development competitions, there was a path to a potential paying professional esports position with Gfinity. This dream sells well, and Gfinity’s weekly tournaments were reasonably well patronised, but not in any way streamed or broadcast other than some tweets around winners. It was a strange development pathway, but hinted at an organisation working hard to stand up to a sizeable endeavour.

Come the end of 2018 and no more franchises had been announced as yet, and from the rumour mill it appeared that less than “major” organisations were now in with a chance, IF they could afford the franchise buy in fee. Again running into things, not able to be disclosed, there were firming rumours that a LOT of money was required to be a Gfinity franchise. With time ticking on their self-defined roadmap, and questions being asked, some important staff hires had been announced, and it looked like the Gfinity engine was starting to turnover. Soon, of the alleged 6 franchises available, and with two assigned, two more franchise owners were announced. The newly-established Melbourne Order, and an otherwise Tier3 org based in WA, Ground Zero. The latter announcement left many scratching their heads, and it soon turned out that the remaining two franchises were not actually going to be sold or awarded at all, and were in fact going to be run as “in-house” franchises by staff and management directly appointed by Gfinity itself.

The “path to pro” for Gfinity hopefuls in the online tournaments manifested as a very sporting league looking draft, with top-ranked online performers shortlisted and franchises being required to select a minimum number of players from the draft. However, this clause did not actually require these draftees to be used in the tournament, or even paid, but it was an initial attempt at delivering on the promise of providing developmental pathways for aspiring esports players.


At this point we see HT&E’s paternity come to bear, as for a brief few weeks an esports product was marketed hard on traditional media channels like radio, billboards and bus shelters. It was gratifying to see some penetration of the mainstream consciousness around esports, and it was all due to Gfinity. Outside of an event like IEM Sydney, almost nothing else has moved the needle on esports awareness for the mass public. This marketing push though appeared all too brief and was not significantly sustained at the initial levels for the length of the two seasons.

The Elite Series began, but a very much last minute rule clarification barring VAC-banned players, and calendar conflicts with international events, saw the Elite Series belying its name. The level of competition in the “premier” title of CS:GO was likened to a Division3 skill contest, with organisation actually fielding Division 1 players not encountering any real significant contest. The product was derided as a premier tournament, despite the production and entertainment value being at a perfectly reasonable level. Casters with professional ability were engaged and the delivery of the show started at a high level, and continued that way.

For the other two titles, Rocket League and Street Fighter V, there was a very different story going on. Rocket League had been a contested tournament product between the former “Spiral Media aligned companies/Showdown-Throwdown” entities and ESL Australia. Rocket League had a qualifier to a worlds event, and had reasonable Australian success on a world stage. A smaller 3-man roster also meant that most Div 1 teams remained intact through the Gfinity drafting process. Rocket League for Gfinity very much mirrored the RLCS league play product and delivered reasonably for what it was. While not matching the level of engagement or audience of the RLCS League product, it held its own as the “second known” title in a league context for Gfinity.

Of most interest to myself was the FGC title of SFV. This was the first time the FGC community had a high tier tournament league product being broadcast, with most of their engagements being more weekend events. I was eager to see how it would do, and while Gfinity’s overall viewership initially wasn’t great, it’s hard to judge what the viewership for a weekly FGC league actually is. Nonetheless, despite some protests of the format being compromised from FGC purists, the entertainment product of FGC players delivered, at least in part, on the dream of strong personalities producing a great spectacle that the FGC has always had inherent to its nature.

I visited the Gfinity “arena” at the Hoyts Cinema complex at Moore Park Entertainment Quarter, and while the point of sale staff member struggled to sell me a ticket, I persevered, and now have a genuine ticket stub for a Gfinity Elite Series weekend. But it was clear that ticket sales were not a regular event. The crowd at most weekend events were very much awaiting players, their family and friends, and that the organic in-person audience had yet to develop significantly. The numbers for Twitch audience, anecdotally didn’t really take off, and the audience, at least for the first two seasons did not develop.

Starting in 2019 it was March before I realised that Gfinity Elite Series should have started and that it hadn’t. The unofficial, official, wording was that Gfinity Elite Series was on “hiatus” for 2019, with not much reason as to why. Gfinity did run some specific events in 2019, finally landing the RLCS qualification league, giving its now missing EliteSeries Rocket League a chance at validity. A tie up with Supercars for a sim-racing league was also announced, with a familiar franchise buy-in format involved, this time, initially, from established actual Supercar organisations. While EliteSeries was not running, Gfinity Australia appeared to still show signs of life. Then of course, most recently, HT&E acting as the grim reaper, announces the Gfinity Australia entity was being closed, after delivering on the SuperCar product previously announced, but nothing further, and the Gfinity dream has ended.

What went wrong?

Given the initial rumoured intentions of investment magnitude and time scale, this closure actually surprised me. I also found myself, almost instinctively, defending the Gfinity organisation on social media in the debate online post announcement. Where was my motivation?

My personal motivations with esports have never been short term, as I am very much of the strong conviction that every aspect of esports will need year, on year, on year, on year development. There is much maturing and growth needed, and there is no way, no matter how large the cheque book, to short circuit to a sustainable and thriving esports “anything”. Gfinity’s first year, while suffering from some low engagement and poor audience reach, very much was an establishing year. Selling two-thirds of their potential franchises, landing some larger sponsors off of a yet-to-exist product, and putting on two seasons of a professional level production broadcast are all major achievements for an organisation that did not even exist mid-2017. So the issues that did exist, in a sense are only to be expected, and the relatively low nature and number of them speaks to the high level of execution that was achieved, even if unappreciated. Gfinity was not a failure, had established itself, had the beginnings of a commercial sales pipeline and the ability to expand their product portfolio. I would argue that 18 months into its life, Gfinity had made a strong step as part of a larger growth plan, with a future of many potential positive possibilities in front of them.

Why then is Gfinity now a “failed” entity?

If Gfinity’s actual goal was to make money in less than two years, or show significant revenues to sustain Tier 1 TO status with a peak production capacity and actual physical ‘arena’ venue, then someone in the upper management was sorely misled or deluded. That sort of scale of revenue generation for an entertainment product in a very much developing industry as esports is not going to happen unless they have a magic formula that has otherwise been missed by a large range of very smart business people over the past 5 years. I am idealistically assuming that Gfinity strategic management were not this naïve, because otherwise, they deserve all the ridicule heaped upon them thus far.

It has taken Riot Games many millions of dollars over 6 years to reach the current state of the OPL, and they are still considered to be small fish on a global scale. The OPL may be one of the “most successful” leagues, but it is far from considered an actual commercial success in its current form, with grumblings from established OPL organisations recently surfacing. For Gfinity to think they could ‘do it better’ than the establishment players such as ESL Australia, LPL and Riot Games in such a short time, I can only assume that no-one is this arrogant and stupid. Gfinity always had to be a 3-5 year play. So assuming that 6 figure CEO’s and parent management of large companies are not all collectively arrogantly stupid, then what really caused the plug to be pulled on Gfinity?

This is the key question to be asked. Gfinity as a product did not fail. It did not die under lack of audience, or lack of sponsors, or a poorly executed product. It was deliberately put down by its parent companies. Let’s analyse this specific angle shall we?

An international play with a non-endemic domestic partner.

From our above reading, we must remember that GfinityAU was an expansion play by GfinityUK. GfinityUK is a public company and its financial reports are available online, as are HT&E. The 2017/2018 financial year shows a cash transaction by GfinityUK to GfinityAU of over half a million pounds (nearly 1 million AUD). This obviously was seed funding to allow GfinityAU to startup.

HT&E’s contribution is not precisely known from their annual report. What we do know is that HT&E Events formed Gfinity Esports Australia Pty Limited with GfinityUK and that GfinityUK hold a 30% stake. HT&E Events would hold 40% and Ikon Media & Entertainment the remaining 30%.

It would be a reasonable assumption that HT&E contributed either a similar value in cash or in-kind service value (media air/placement buys) for its share of the initial startup shareholding.

HT&E’s annual report does have some interesting comments to make about the GfinityAU entity:

Excerpt 1

Gfinity is in the early stages of development as a commercial medium with varied business models being pursued domestically and internationally. With our joint venture partners, we continue to assess our options in this area with a view to breaking even in 2020.”

Excerpt 2

Despite momentum building over the year, and revenue in excess of $1.6 million, start-up and operating costs meant the business incurred an EBITDA loss of $4.4 million in 2018. This was largely in line with our expectations of the first year performance when we entered into the joint venture to launch eSports in Australia

Excerpt 3

Plans are being developed to reduce this loss in 2019. The esports market is still developing and while we are pleased with the progress we are making in establishing Gfinity as the leading provider of integrated esports solutions, we have revised our OpEX number down from previous estimate of $10 million with a view to breaking even in 2020.

So the highlights for me are:
  1. They were looking to only break-even in 2020
  2. The loss of 4.4 million, on revenues of 1.6 million, are interesting numbers in their own right, this implies GfinityAU spent nearly ~6 million starting up and on the first few months of operations (til June 2018)
  3. This loss was “in line with our expectations”

While accounting treatments and “billing yourself for services to yourself” will mean that this $6 million was not all cash spent, there was some value expended/utilised to reach the revenue and EBITDA figures.

So what does this tell you? There was, as of June 2018 report, no issues with GfinityAU’s financials, everything was going according to plan, and there was quite a significant ongoing investment from an AU esports industry point of view. But 12 months later, everything is officially shutting down. While it will be some months before we have access to the 2018/2019 Annual reports and get a guess at the full figures, and the executive comments on the next 12 months of operation, there are some thoughts we can form from a wider context.


GfinityUK’s direct financial reports are a bloodbath of red ink. They have been losing millions of pounds year on year, and could encounter as much as a 12 million pound loss for FY17/18. Their corporate annual report talked-up increased revenues from 1.7 million pounds, to 4.3 million pounds, but this was on the back of a huge increase in operating costs. To simplify it, they spent $5 to make $1.50 in 2017, and then “improved” on this, by spending $12 to make $4.30 in 2018. Gfinity is burning money, money raised by selling shares in itself. The hard story there is that their share price has also plummeted by over 80% (£35 -> £4) in the same period that the GfinityAU enterprise has been in operation. GfinityUK frankly has audit notes about their ongoing viability in their publicly listed report. Things are not good for GfinityUK, and they need to keep themselves alive.

HT&E’s 2018 report on the other hand is green arrows, 7% increase in EBITDA, and net increase in cash on hand, the wording in its 2018 report reflects that spending a few million on an expansion play is something it can afford to do. But there are a few signs. They just sold Adshel (bus stop signage) with the stated reasoning it was an “out of home” industry, and that they see themselves as a “leading audio and radio” business. So divestment of non-core businesses, and re-iteration they really like radio. Hmmm….

So HT&E’s recent pronouncement of doom contained some interesting tidbits. Their revenue is down 4% from their stated message. When you are a publicly listed company, and you start the pre-messaging on bad results, you need to start the early messaging on what you are going to do about it. Shutting down “flights of fancy” expansionary activities that are non-core, is a very good way to keep shareholders happy, and your share price not in the bin (*cough* GfinityUK  *cough*). Some other fun financial notes in the statement is that GfinityAU was down as a AUD$5.3million net investment loss as of June 30 2019. Given that they were down ~4.4million in 2018, it means HT&E put in very little money over the last 12 months.

So what can we conclude? GfinityUK is haemorrhaging cash and being punished with their share price. They lost more money in the past two years than what they have on hand by a multiple of 5. They issued over 110 million new shares to raise another 5.5 million pounds, to get cash on the books, but this raising, barely half of what they lost in FY17/18, diluted the company shareholdings by 25%. GfinityUK is unlikely to send any cash to GfinityAU as a matter of simply trying to stay in business. Parent number 1 has likely turned off the tap.

HT&E is not in a familiar space in esports, entered into a partnership with an international esports provider, who doesn’t look very healthy and wobbly on its feet, and now finds itself with softening radio revenues at home. HT&E are very unlikely in this situation to pick up the slack GfinityUK is going to be leaving behind. At this point cutting their losses is the likely course, and the likely reasoning behind the termination.

The only world where HT&E, a non-endemic “owner” of an esports company keeps the lights on, is if that newfangled esports company is making a balance sheet and financial sense. Which means GfinityAU would need to be generating net income to the bottom line. As per our reasoning above, this is very unlikely to be occurring for an 18-month start-up of this type. HT&E were smart enough to realise that this needed continued investment of millions of dollars to become a thing, and that money was coming from their partner. Without the appetite to continue the original investment plan, then this venture draws to an inevitable and depressing conclusion.

An Unanswered Question

I find myself in a mixed state of mind as I consider my conclusion. GfinityAU’s establishment spoke to interesting expansions in the Australian esports space, and a sizable investment that created opportunities that were not fully explored by other players in the space.

I have very much avoided talk of the specific financial aspects of Gfinity’s business model and franchise strategy. This annoys me as I would love to see a parallel universe where Gfinity is allowed to play out its ambitions, purely to see just how successful they may have been.

This early termination means that Gfinitys specific executions and strategies will never be judged on their merits, or be allowed to prove themselves in the real world marketplace. Was Gfinity’s market number estimations, franchise pricings and commercial strategies justified? This now falls into Australian esports history as an unanswered question, well, at least until another idealistic venture starts up, self-convinced of their own righteous merits and glorious plan. Let’s give it a few months?


Figure: Drop in share price at most recent share raising