John Yao on what it takes to run Team Secret successfully

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Phoenix

Hi John, thank you for sitting down with us for an interview. Let's get right to the point. How has the overall trajectory of esports been, more than a year after the pandemic hit the globe?

John

I think esports is hotter than ever. The pandemic put esports in the spotlights as an entertainment category, much like television or streaming. With more countries starting to come out of this pandemic, the momentum has only picked up. Not only is esports resilient to global slowdown events like the pandemic, but it is here to stay - as evidenced by the continued strength in viewership and mainstream acceptance. 

Phoenix

Speaking of which, how has Team Secret handled the financial stress, if any, during the same period?

John

Financially, Team Secret is doing better than ever. We increased our sponsorship revenue by over 26% year over year even during the pandemic slowdown, when many businesses, unfortunately, struggled during this time. Our audience continues to grow in size and engagement, so our much valued partners doubled down in their commitments to us. We were able to sign some significant new partnerships as well. 

The biggest impact of the slowdown for us has been the lack of international tournaments. Esports is a very global community, international tournaments are the universal translator that brings everyone together in the sport that we love. I’m glad to see their return this year. 

Team Secret

Phoenix

What kind of measures were taken to ensure the well-being of the org and that the financials of the company were protected?

John

We’ve always been very disciplined in our operations management. In fact, I would not hesitate to say that we are the best run organization in the industry. We’ve been profitable since our inception as a company 4 years ago, every single year, and we continue to increase our annual sponsorship revenues by double digits. There is a sense of “we must grow at all costs” within the industry, but that’s not how we see it. 

Esports is a long game, and we intend to win over the long term. To do this, we need sustainable growth. Iconic brands and iconic teams do not get built overnight. There have been many organizations that have built exciting brands in a few years, only to fizzle out once the realities of running a business set in. Personally, I’ve been running businesses and advising executives of Fortune 100 companies for over 10 years, so everything I’ve learned along the way we are applying to Team Secret.

“We’ve been profitable since our inception as a company 4 years ago, every single year”

John Yao

Phoenix

Not long ago Secret announced their partnership with DMScript, a blockchain-based company. We are seeing a rising trend of such companies entering into the esports landscape, however, it is still unclear as to the additional values such partnerships bring. Could you shed some light on this?

John

We’re really excited to work with them because cryptocurrency, despite the usual growing pains, is a digital medium, with a digital audience. That aligns with esports very strongly, and there are even games in development with in-game economies built upon crypto. The path forward is not well defined, but that’s because it’s at the cutting edge of the digital ecosystem, and it is a path that we will work together to forge. That’s what makes it exciting.

Phoenix

Is esports a bubble?

John

I think it’s too broad of a term, to say that esports is a bubble. Certainly, there are pockets within esports that could be overvalued and in a bit of a “bubble” but overall you need to look at the industry growth rate in the context of other entertainment categories, and the upside potential of the digital ecosystem that is still largely untapped. There’s no other industry that offers this much growth, connects this breadth of audience around the world, captures the exceedingly tough to reach younger demographic, and continues to offer upside potential. Sure some things may be overvalued in the short term, but the long-term prospects for the industry at large still remain. 

Phoenix

We’re witnessing automobile companies like Mercedes and BMW entering into the esports space. From a CEO’s perspective, how do these companies benefit by advertising in a niche industry such as ours?

John

The esports audience in many places around the world actually has a higher family income than audiences of traditional sports. Young people who buy a $3000 gaming PC are exactly where I would advertise if I were running a luxury brand. That’s why you don’t just see car brands, but luxury brands like LV, Gucci, and TUMI enter this space.

Phoenix

From a CEO's outlook, how profitable has Dota been, especially after the changes to the majors in 2017?

John

Dota has never been profitable in a sustainable way. Sure, if you place Top 3 at TI, your team can be profitable that year, but beyond that, I can tell you the vast majority of teams are not profitable at all. While TI’s prize pool continues to grow, the prize money outside of TI continues to shrink. I think if you look at the competitive scene, excluding TI, for the past 3-4 years, the total financial pie has decreased every year. 

In Dota, TI is everything, financially and competitively. It is near impossible to run a company based on competitive results from a tournament that happens once a year. Before this DPC regional format was enacted to force players to compete, teams would even skip out on the first Major of the season. That should speak volumes about how the rest of the annual competitive scene is viewed. 

I suspect that’s why you see many other popular organizations decline to enter Dota, and why many of the DPC Circuit teams are unsigned. Organizations like Cloud9 would just pick up a team for TI and then dump them after the event. Why carry a team for an entire year when you can soak up the majority of the value by just focusing on the 1 month that matters. That’s not our philosophy, but I can also see the perspective of organizations outside of Dota looking in.

DreamHack

Phoenix

Let's talk a bit about the mobile gaming scene. Secret currently fields a roster in PUBG Mobile in Malaysia. How does Secret intend to capitalize on this investment from a business standpoint?

John

We have several mobile teams. Most recently we expanded into the Philippines by investing in Wild Rift for instance. Mobile gaming is the highest growth segment in gaming, but it's concentrated in Asia for the most part. We are going to continue making investments in this space, focusing on PC gaming in the West, and Mobile Gaming in the East. The identity of Team Secret is to bridge the audiences of East and West to be a truly global organization.

“Dota has never been profitable in a sustainable way”

John Yao

Phoenix

Is Mobile Gaming the future of esports as compared to traditional PC Gaming?

John

Mobile Gaming is not going to replace PC Gaming, I think it’s more of an extension to esports and gaming as a whole. The upfront investment to enter Mobile esports is less than PC esports, but you also have to consider that the scene is more volatile, less structured, and Mobile games typically have a shorter lifespan than PC games. I don’t view it in binary terms, as I think you can be successful in either, or in both together.

Phoenix

If you’re comfortable, I’d like to talk about the situation that took place between Midormeepo (Secret) and Ceb (OG) which took a nasty turn. I’d like to hear your thoughts on the situation

John

I had a pretty good chuckle about it. Midormeepo didn’t cross any red lines for me and we support our guy 100%. We even made sure he got a nice bonus for all the toxicity he had to endure during that episode.

Phoenix

Does it bother you to see the trajectory of the Dota team, considering the fact that they start off on a solid note at the beginning of the year, and as the year progresses, the team withers. Is there personnel to help out the team on a psychological level?

John

I think our team will be fine. They are one of the best in the world, and their skill level and teamwork are unquestionably top tier. Once you qualify for TI, I would say the motivation drops off significantly.  In past seasons, the “schedule meta” would be to skip the first Major, and then qualify to TI through the second and third Majors. In this current regional circuit format, the “schedule meta” is kind of shifting to trying really hard to qualify for TI through the first Major, and then chilling until TI itself. Until the value of TI is balanced out with the rest of the annual competitive circuit, this type of mentality will not really change. 

I’m not saying this is the right way to approach it, or that we prefer this as an organization. But I definitely understand it. TI is worth 90% of Dota on an annual basis, maybe even more, so you cannot be surprised if the level of effort and passion and investment from the teams is also 90% focused on qualifying for TI and TI itself, and not so much on the rest of the year.