The Rise of Esports: A Lucrative Play for Investors with Marco Mereu – EP 203

Justin Donald: What's up, Marco? Good to have you on the show.

Marco Mereu: Oh, hey, Justin. Good to see you again, man.

Justin Donald: Yeah, this is fun. Well, it's great getting time with you when you were here in Austin and a lot of cool stuff going on in your world, especially with M80 and Esports. And we're going to get into that a ton. I can't wait for you to share like all the cool things going on with your team. But I think you have a really cool story even leading up to what you're doing today. And I'm excited to explore it. So, yeah, you ready to dig in?

Marco Mereu: Let's do it.

Justin Donald: Love it. And real quick, how on earth did you even get into Esports in the first place? Because this is like one of the biggest like potential opportunities or booming industries that exist in the world right now.

Marco Mereu: Yeah. You know, it's a perfect, I think, culmination of good timing and interest being aligned and also passion, right? Like, very passionate about what we're doing. Yeah. I spent nine years as an attorney up in Boston practicing law and doing all the things that a good lawyer should be doing when they're practicing law. And I just showed up in my office one day, and I just had a stack of files a mile high. And I decided that I was done with it, and I didn't want to do it anymore. I wanted to move into an industry that I was passionate about. And for me, that had always been gaming, even from a young age. And I shut my practice down that day and decided to move into the game industry back in 2009. So, now we're talking about 15, 16 years ago. And here we are, right? So, it's been a really fun journey but I've enjoyed every minute of it.

Justin Donald: Well, I love your story because as an attorney you're making good money, right? You're making more money than the average Joe. You get to charge pretty high rates. You've built up a client base. So, a lot of people might look at you and say, "Gosh, this guy's got it made.” But you knew deep down you were kind of you were stuck. You're kind of as someone that is captive by a company, there's only so much like that ceiling is kind of closer than people think, right? And so, I love that you just were able to walk away and say, "Hey, forget it. I'm breaking free of these golden handcuffs. I make a lot of money, but I'm going to walk away from it because I'm going to do something I'm really excited about.”

Marco Mereu: Yeah. Part of my practice as a real estate conveyancing practice and that was right in the middle of the real estate boom back in the early mid-2000s, and we were doing really well. It was an enjoyable practice but I just knew that this is not, I hated tracking my time. I hated billable hours. It was just not the way my mind worked and where my passion was, and I just realized that. And I sat down with a wife and talked to her about that. And certainly, got the look at first where you got six months to make this happen, otherwise, we're going to get you right back into the firm. But I was really fortunate when I left the practice. I interviewed with a company based out of Hong Kong, actually, at the time, and we did an interview on Skype at, I think, 2 in the morning. And they wanted a general counsel here in the US, but also someone to run their operations and their development team here in the United States as well.

I took that interview. It’s the only interview I took and I got the job and I spent four years running one of the biggest browser-based games in the world, a game called Evony. This is back in the early pre-mobile game days almost. This is back in the Facebook connect days and Farmville, if you will, right, when people are still playing flash-based games. We developed and ran a game that really kind of wrote the book on how to monetize a free-to-play game for many, many years. It’s played by, I think, almost 40 million people around the world. The only country actually that did not have a player that played this game was the Vatican because technically, the Vatican is its own country, right? So, that was the only country we were never able to break through into the Vatican but otherwise, we had a player in every single country in the world that was playing that game.

Justin Donald: That's incredible.

Marco Mereu: Yeah. And from there, I spent four years doing that, and then I realized back in 2013, I really wanted to take a stab at entrepreneurship and starting my own company. At the time, I felt like there was a real void in mobile games. There wasn't anybody who was kind of serving the role of an independent publisher. So, kind of like an indie music label or an indie movie studio. I founded a company called Gameblyr, which is one of the first independent mobile game publishing platforms. We would work with really innovative and talented game developers who just want to focus on making the game and they wanted to leave the business side to somebody else.

So, I would come in and I would work with them on the monetization and go-to-market. We'd work with Apple on featuring the game. We got seven out of eight games featured in two years, which I think the odds on that now were like in the billions when we look back.

Justin Donald: Wow.

Marco Mereu: And really good experience, put out some really good games, really enjoyed that for about two years. And then mobile user acquisition, for those that worked in the mobile space, started to get very expensive. And it became very difficult to make that a profitable business. So, I took on the challenge of trying to figure out that problem. And at the request of some of my investors, I built a platform called Roostr. And Roostr back in 2015 was the first time you could do performance-based CPI advertising with YouTube influencers for mobile games. And up until that day, you were just writing a blank check to a YouTuber. They'd make a video and you'd never be able to measure your results from that.

Justin Donald: Isn't that crazy?

Marco Mereu: Yeah.

Justin Donald: That's nuts.

Marco Mereu: Yeah. It was even crazier trying to get, yeah, everyone told me at the time, like, "You'll never get YouTubers to do this. They’re getting paid to hand over fist. Why are they going to come and work on a performance model?” And I said, "Because you're going to make a lot of money if they do this the right way, and we're going to help them understand how to do it the right way.” We built a platform. So, a YouTuber who go on Roostr and find a game they like, click a button, get a link, make a sponsored video, and get paid per install. And we had YouTubers making $30,000 to $40,000 bucks in a weekend, $160 CPMs. It was a win-win for everybody.

And we had every mobile game publisher under the sun on that platform in the first 30 days. It was as product-market fit gets. And we sold that company in less than a year. And we exited to a company called Chartboost, which is a mobile ad tech company out of San Francisco. Went over there for about a year, left. And then in 2018, I started another company called Framerate. Framerate was a content play where what we did was we took gamers’ highlights and we allowed the gamers to sell those highlights to brands, users, ad units. And it worked really, really well because gamers make highlights every day for free. They don't cost any money to produce. It's very easy content to get. And it also happens to be the most engaging content you can put in front of a gaming audience. So, the brands loved it.

When kids found out, “Hey, I can make money with my gaming highlights, like, where do I sign up?” Again, like, we had great product market fit for that model as well. We did it all over social media. So, we didn't build our own platform. We did it on Instagram and TikTok and Twitter and all the major social media channels. And we grew to about 60 million views a month. And then we sold that company in 2019, and we exited to a company called Super League Gaming out of Santa Monica, which is a publicly traded kind of Esports company at the time. And went over to Super League as an SVP of Content to help them figure out their business a little bit.

I always had my eye on Esports, and I could see with a lot of the growth of some of the organizations in North America how quickly you could build a really exciting and compelling brand in Esports very, very quickly. If you bring the right components together and you've got good teams and the right games and you're winning and you've got marketable personalities, you could build a very, very, popular and successful brand fairly quickly. And for those that are not familiar with gaming, gaming is the number one consumer market in the world. It is bigger than music, film, television all put together. I think some of the Esports championships this year exceeded viewership for the World Series and other major sports titles.

So, when you're talking about a 30 and under demographic that spends money and is very active online and is interested in this type of stuff, that's really where you want to be, right? So, I decided that I wanted to move into Esports in 2020. And I did that.

Justin Donald: That's incredible. What a great track record. You have two companies. You sell them both. I would imagine that, in talking to you, the exit on that second one was bigger and better than that first one. But you jumped right back out there. Like, you could have taken some time. I mean, you may not have made enough to sit around and do nothing for life, but even if you did, you're the type of person that would get right back out there and hit the ground running. And you did that because you saw this opportunity.

And what I've been telling people for a long time, Marco, is that if you want to become wealthy and if you want to pay attention to like if you want to just figure out what's the next big thing, then pay attention to the largest wealth transfer in the history of the world that is taking place as we speak right now, from baby boomers to millennials. And it's going to continue to happen over the next 20 years and it's estimated to be around $100 trillion. So, think about our world being 800 or 900 trillion. I mean, this is a monster transfer of wealth. So, I tell people all the time, the next big thing is whatever millennials do. So, what do they do? How do they spend time? How do they work? What do they do for recreation? What do they do for travel? What do they do for leisure? Where are they spending the majority of their time?

And we could go through a number of things, but one thing just jumps out and screams very loudly to me, and that is Esports. And so, you've hit the nail on the head. But also, it's not just you saying it. We see the data, we see the eyeballs where we can see how many people are showing up in person, how many people are showing up online to these events. We see just the command of attention and eyeballs this has internationally. And I know in the US here, we might not see it the way that it's seen in the rest of the world but there are monster stadiums 50, 75, 100,000-person stadiums that are being sold out for these Esports across the world, right?

Marco Mereu: Yep. That's correct. I mean, just a few weeks ago, the IOC voted and announced that the Olympics are actually going to bring Esports in as an official Olympic sport now, too, right, which it's a huge breakthrough moment. Not so much really for endemic gaming people and Esports people like myself at least in the immediate future but it's a huge moment when you're trying to reach mainstream audiences and people that are not as familiar with Esports and they begin to understand the scale and the interest in this segment. Especially, like you said, for millennials and younger people, they're really doing three things these days. They’re playing games, they're watching other people play games, and they're watching Netflix, right?

So, for us, we cover two of those three categories. And if you're a brand or a sponsor or a partner or any really business operator who's trying to reach a 30 and younger audience, you have to have a presence in Esports and gaming. It's just not optional. That's why you see a lot of professional sports teams enter the space. Others are looking at the space and trying to evaluate which is the right opportunity for them. I had a conversation with one of those just this morning. So, everybody sees where it's going. You've got the Esports World Cup happening and Saudi Arabia now with a $60 million prize pool. You know, like I said, the interest levels just continue to go up and up.

For me and my career with the companies that I've always been involved with, you got to be early, right? Like, it makes no sense to come late and to follow. You really have to lead when you're trying to really establish yourself, especially with me, because a lot of the companies that I built have not necessarily been with the hugest amount of venture capital or the biggest corporate partners. We’ll build an idea and a concept and build a really engaging brand around that and really quickly, even with M80, we built one of the most successful and popular Esports brands in North America in less than two years.

And that's really just built on the value of what we bring to our fans and our followers and the teams that we have and the players that we support, and really kind of the approach that we've taken. And it's a very interesting audience to have. Gamers want everything free. They want it now. They want it with no bugs, no errors, but once they trust you and they like your brand, there's a real level of affinity there, and there's a real level of engagement and commitment. And they will be repeat customers. They have disposable incomes. Many gamers are in their 20s, 30s, 40s these days, right? So, they're willing to continue to spend and follow their favorite organizations.

Justin Donald: Yeah. And if you don't think people are playing games, I mean, check out what your kids are doing, right? Those of you that are parents with younger kids, I guarantee most of them are playing games, right? And it's becoming more and more of a mainstream thing. Now, I want to get into M80 a little bit more because I'm excited about the team. I'm excited about what you're doing, and I know you've had offers to sell it where you could have already made money, but that's not the goal. The goal in this turn is not to just sell it and make a profit. You've done that before. This time around, it's a lot bigger. And I want to talk about that.

But I think it's also important to recognize that colleges and universities are getting in on this, too, right? Like, there's platforms now where they're trying to recruit student gamers and teach and like have teams represented, even have scholarship dollars for these students, right?

Marco Mereu: Collegiate Esports has completely blown up. And I've done a complete 180 on it, right? I used to not be a big believer in collegiate Esports. I used to say, "Well, if a kid is 16 and they're really good, just come play for my pro team. Forget college. You don't need it.” It was a lot like the NBA was, right, where kids are coming right out of high school into the pros. But what has happened over the last couple of years, in particular, well, number one, you have over 363, I think it is, Division 1 programs offering full scholarships for Esports now. So, the odds are more likely than not that whoever's listening to this podcast alma mater has an Esports program, is offering a scholarship in that Esports program, is investing real dollars in those programs, right?

So, I've done everything from partnering with local teams to partnering and to talking to teams like University of Texas in Austin has partnered with Alienware to build a massive facility, huge investment of, like I said, of dollars and an ecosystem for Esports down there. And you're just seeing that replicated over and over again because they also understand they want the students to come there, and this is what the students want. So, it really is a great opportunity for many students. Maybe a player might not be good enough to make a professional team, but they're good enough to play at that collegiate level. And that collegiate level is worth a full-ride scholarship these days. It’s nothing to sneeze at. So, it's a great opportunity for them. And I think it's also important for parents to understand this because a lot of times when parents see their kids playing games, they think they're wasting their time. But the reality is it's just like sports like this could be a kid's opportunity to get a four-year degree in a university they might not otherwise be able to attend just because they're committed to this, right? And a lot less injuries in Esports…

Justin Donald: That's right.

Marco Mereu: …than playing football, right? So, it's very, very early and it's a huge opportunity and I'm excited to be building some programs that are very closely aligned with that. And I've learned a lot from some of the collegiate programs and collegiate players that I've been talking to and working with over the last year or so.

Justin Donald: Yeah. It's incredible. And, obviously, you're a parent, you're a dad, and you can see the writing on the wall even for your kids. And it's cool to know that some of these opportunities exist. You know, I was talking to a parent the other day and they're like, "Hey, for female students, one of the best places to get scholarship dollars, there are a couple of sports, but golf being one of them, that they don't use all their dollars. There's dollars left over.” And so, I would assume Esports is probably one of those ones where it's like, "Hey, there's probably going to be more dollars than what's given out.” And for parents to just know this is another way you can get students to a really good school for really good education, for not a lot of money, maybe even a full ride.

Marco Mereu: Yeah. No, 100%. I mean, you also touched on women in Esports. I mean, women in Esports is massively growing right now. There's a number of different leagues that are dedicated to women in Esports, and it's going to continue to be a big developing sector. I can tell you from a brand perspective, there's probably no more, there's no area that we have that has more interest from brand partners than our initiatives around women in Esports and that category. So, I mean, it used to be like 90% to 98% male, 2% female, and then it got to like 90/10. And depending on the game you play right now, you can get pretty close to 50/50, 60/40, and that's great to see. It's great to see that games like Valorant are now encouraging mixed-gender teams to have male and female on the same team competing in events together. And again, that's really the future of Esports.

Justin Donald: I love it. Well, we're both girl dads so as many opportunities as we can get for our girls, we love it. And that may not be the typical path or what parents envisioned early on but I say give your kids every opportunity that they can get. And so, you're doing that. It's cool. So, we've got one of my good friends, Chris Pronger, NHL great, Hall of Famer, gold medalist, Olympian, I mean, total stud. Awesome guy. He’s teaching our Lifestyle Investor community about investing in pro sports, which has been really fun. And so, you think about the major sports, obviously, NFL is the biggest leader in that. They control the most eyeballs. You go to where it's all media dollars, right?

What contracts do you have with the media companies, that's going to be a lot of what the value of these brands is based on. And so, you got NFL as the leaders, you've got NBA after that, you've got MLB after that, you've got NHL, and then you've got some of the soccer leagues, right? Now, it'll be interesting to see what happens like what else comes in. Is pickleball going to join that? Are there going to be soccer leagues that leapfrog NHL? And then my thought is, "Well, what is gaming going to look like?” Like, Esports could be something that moves into the five spot, the four spot, the three spot. You know, baseball's slowing down. There's less viewership. They're trying to shorten the game.

So, it's interesting to think about what the future in 10, 15, 20 years is going to look like. But I'm a big fan of being on the cutting edge, hence the reason I'm thrilled about being an investor in M80 and being friends with you and knowing all the cool stuff that you guys are up to, which we definitely should get into.

Marco Mereu: Yeah. I mean, I'll tell you, honestly, like we're not 5, 10, 15 years away from it. We're literally like less than five because when you look at the data, the average age, the oldest average age viewer of a sport is baseball right now. I think it's something in the early 60s, right? And already this year, I think the League of Legends World Championships eclipsed the World Series in viewership. And then you've got the NFL. The NBA does a really good job. And then you get the UFC and you get WWE. You get these entertainment sports as well. But once you hit 30 and under, Esports is really in that number one or number two position depending on really kind of what demographic you're looking at but that's really where the bread and butter is for Esports right now.

And like I said before, pro sports team ownership groups understand this and they understand that they need to entertain this audience because it's only getting older, right? And it's going to continue to grow with them for the next several decades. So, they need to build that brand affinity early on so that they can create those dynasties. With M80, 3 to 4 or 5 years from now, will we be the cowboys of Esports? You know, will we be the Celtics, if you will? You know, I'm a Boston guy, so I have to defer to Celtics. But that's really the hope, right, is that we develop that fan base.

And one of the interesting things about Esports too as an industry is it's one of the few businesses that I've been in that you can actually see the future, right? If you want to see the future of Esports 3 to 5 years from now, you look at Europe because Europe has been ahead of North America for several years. And the big organizations in Europe right now, they are building 3,000 to 5,000-seat stadiums just for their Esports teams. They're selling a gate, ticket sales, food and beverage, all of those traditional sports revenue drivers that have not really made it into Esports over here just yet. You're seeing it start to flow into countries over in Europe.

You're seeing government financial support for teams like Karmine Corp in France. You're seeing some really interesting business models and revenue-generating business models that are working really well. And then if you really want to go full Jetsons and you want to go…

Justin Donald: Asia’s ahead of Europe, right?

Marco Mereu: You want to go right ten years into the future, take a flight over to China, and see what they're doing over there right now. I mean, the Esports stars in China and in Asia are the biggest stars in the country. They're the ones on the billboards and the biggest city squares. They're filling 100,000-seat stadiums. They're putting out Super Bowl-like events for Esports over there. And again, like that's just a result of it starting earlier over there and just migrating over to North America. But those things are coming and we're really trying hard at M80 to be thoughtful about how can we put ourselves at the forefront of North American Esports, and how can we start to develop some of those business models.

The blueprint is right there. You don't have to reinvent the wheel, right? I mean, it's just a matter of developing a location or developing a program or investing in media rights. Like I said, we don't have to reinvent the wheel. We just have to do it. So, that's what we're doing.

Justin Donald: Yeah. It's awesome to think that the biggest stars in China are these Esports stars. So, it's the equivalent of Europe in soccer and the US and NFL or NBA. It is fascinating to think about. And going back to talking about pro sports teams, the Cowboys, the Dallas Cowboys would be most would consider them the strongest, most valuable brand, sports brand in the world, most certainly in North America, probably around $9 billion, $10 billion. We've had a few of these teams transact here recently, so we've been able to see some of these valuations in the several billions of dollars, right? You know, $4 billion, $5 billion, $6 billion.

And to think about what Esports is going to look like down the road, like right now is about as good of a time as ever to get in because there's nothing that is worth that much quite yet. But literally, every day that goes by, a new contract can get signed that can add crazy value to the team. And we're seeing with M80, right, like, I mean, just with different sponsorships, with different partnerships or different agreements. In fact, you guys now have I think the record of having sold one of the top player contracts ever sold, and then bringing in someone new for much less that ended up outperforming everyone.

Marco Mereu: I mean, it's a sports business, right? I mean, so one of the business models is similar to European football in that player contracts are bought and sold just like traditional sports. This is a question I get a lot of times for people that are not familiar with the space. They ask me, "Is it really like sports? Like, did these guys play just for you?” “Yeah, these guys are on player contracts, just like an NFL or NBA player. They have salaries. They have performance incentives. They have bonuses. They have deliverables that they're required to do for the organization from a marketing perspective. They are assets that can be bought and sold and traded, depending on the value of the player in the team. And you always want to try to sell high and buy low.”

We did execute one of the biggest transactions in history from North America to Europe for one of our players recently. And he's a wonderful young player that was very special for us and I had a great affinity for and to be honest with you, I said no maybe five times before I finally said yes. So, yeah, I mean, like sometimes you have to do those things. And we sold that player to one of the top three teams in the world. So, it was as much about giving him an opportunity to do something and have some success that he's been working for for a long time as we scale up our program, which is a top 20 program, but it's not top three yet, globally.

So, yeah, I mean, it's just really about Esports. A lot of people, maybe even some listeners to this podcast, Esports is a space that has been seeing pretty heavy investment for the last ten years, right? It is still very early in Esports and I think what's happened is over the last ten years or so, a lot of money came in and just was not really, it was not allocated or set up to have success. A lot of these teams early on were run by content creators and YouTubers or former pro gamers that had never run a business before, and money was not spent with a particular purpose in mind. It was spent with, "Hey, we're going to build something. We're going to build a unicorn. It's just going to happen. We'll figure it out.” And the reality is that that's not how the world works and that's not how business works. And you have to be a lot more mindful of how you deploy capital.

As a result of that, though, this has become a great market for companies like ours because it's a buyer's market, right? Right now, if you're a well-positioned Esports organization or gaming company, the world is your oyster. There's lots of assets that are available to be bought and sold, acquired to scale out your business. Lots of tremendously talented people. I mean, every single person we've hired in the last year is an A-player, right? Like, there's no B-players on our team. And that's only because a lot of these people have lost jobs at companies that just did not run their business right.

So, we're really mindful about that. We don't want to grow too fast. We're scaling as the business allows us to scale. And we always have an eye on getting ourselves to profitability as soon as we possibly can, which shouldn't be too far away, given the way we're performing right now. And once we get to that point, it's a whole different business because now you've got this super valuable asset that is well positioned, has contracted players for years to come, franchise spots in the biggest leagues, and we're cash flow positive. We're making money and now we can kind of decide what we want to do with the business from that point.

Justin Donald: Oh, I love it. I love that you're taking it slow and your focus is, "Hey, let's not just spend money to spend money and have…” The goal is not the biggest revenue. The goal is profitability and to grow that profitability. And I even see that in how judicious you are in your decisions even on you're looking at moving your headquarters here to Austin, and I know one of the places that's high on your list and I know it would be awesome and completely epic. And I hope that it all works out, but I also love that you're thinking critically and saying, "Hey, we don't have to rush into this and let's be really smart with these dollars,” even though you're winning big contracts right now and you're gaining some pretty notable sponsorship dollars and sponsorship partnerships, and you brought in a killer VP of Partnerships who used to work with the Golden State Warriors.

Marco Mereu: Yeah.

Justin Donald: I mean, you got a lot of good stuff going on.

Marco Mereu: Yeah. I mean, up and down the line, like I said, like everyone we have are just great. My Head of Social Media who I hired when he was 19, after a cold email to me on LinkedIn a couple of years ago that he wanted to come work for me. He just made Forbes 30 under 30 this year. He's still under 20. I'm still waiting for Forbes 50 over 50, and I haven't seen anything. But we've got really, like I said, we've got really good people involved. I just put up a position the other day, and I think we've had almost 400 applications in less than 48 hours from people all over the world that want to come and work with us.

Justin Donald: That's so cool.

Marco Mereu: It makes me feel really good. And yeah, Austin, so one of the best cities in the country, tech-savvy, sports savvy, culture, music, food. The way this culminated was it can be a hotbed for our players to boot camp there because the paying is so good for the connection and when they're playing. And so, players are very favorable toward Texas and Texas, we just like Austin a lot. But what we found is players loved being there. It had a real young community that really fed into Esports and gaming, and you've got great things like South by Southwest and other events that come through town.

And we looked around. The commercial market was where it is right now and we saw some really good opportunities. And we said, “I think this is where we want to kind of like lay our roots and build out our physical HQ for some of the really exciting things that we're working on right now.” And sure enough, we're doing that. We're in the process of doing that. And I'm excited to break ground on that location later this year and announce it. And we're going to be running everything from live events there to boot camps to album release parties to game release parties to summer camps for kids that want to learn more about gaming and a lot of different uses we can facilitate out of that location. And I can't think of a better place to be than East Austin, right?

Justin Donald: No kidding. Yeah, I'm excited to hear about that and to learn about that. And we definitely, I want to talk about this learning platform that you kind of hinted at. But before we get there, I alluded to this earlier. You had a chance to sell M80 for a nice profit and a good payday, and everyone would have won. Everyone would have made money, but you decided against it, and I'm glad you decided against it. As an investor, I see the upside. I see the potential. I see where it's going. But why? Why not clock a win when it was an easy win? What do you see here that is making you kind of hold back on any transaction like that until it's at a much bigger valuation?

Marco Mereu: You know. So, there's a couple layers, right? I mean, one, I love what I do, right? So, I love what we're doing right now. I can't imagine a scenario in which I would sell this company and walk away from it and not be remiss about what I built and feeling like I left something unfinished. When we came into Esports, there was a lot of doom and gloom and a lot of, "Oh, gosh, this is a tough business and nobody can make money here and nobody can run businesses here.” And I was kind of like, “I'm going to show you that you can and we're going to do that.” And I have a lot of confidence in myself and not just myself, but my team. A lot of people that work for me at M80 have worked for me in prior companies, even more than one company.

And my investors, I have a lot of repeat investors that have invested in more than one company, and they have confidence in us. And they didn't invest in me to just turn this around and for them to make 2X or 3X what they put in. And I see the opportunity. I'm not going to lie. I see what's in front of us right now and what we've been able to do so quickly. So, I'm very confident that we can build a really big business and big company with M80 over the next several years and then be really well-positioned to be a leader in this space. I try to do the best I can advocating for Esports and the business of Esports and where this industry is going. And a lot of people talked about the Esports winter. And now I'm a big proponent that we're in the Esports spring now. I mean, we're about to hit the summer. It's getting so hot.

So, for us and it just to watch the rise of some of the business models in Esports that are developing. Sometimes with industries, you have to go with where the money is and you have to go with where the opportunities develop, right? So, for example, a lot of people will complain years ago, "You can't get the media rights in Esports because the game publishers and all the media rights, and that's where sports teams make all of their money. And if we can't make it exactly like the sports teams make their money, then you'll never be able to make a business here.”

And a lot of people believe that. And media rights have been figured out. They're now co-streaming events with game publishers where we can bring in the biggest streamers in the world to help co-stream our matches. And many of the time those co-streams get bigger visibility and bigger viewership than the official matches. And we can sell against that, right? So, that's our media rights. But what's interesting is the last several years you've seen digital goods absolutely explode, right? So, as an Esports team and the Esports that we compete in, we can actually work with the publisher to sell our digital goods in the in-game stores for those games, right?

So, the publishers host the goods. They process all the payments. We do a revenue share with those publishers on those payments and those digital goods gross millions of dollars per year per game, right? So, when you're in two, three, four, or five games generating digital goods revenues anywhere from 2 to 3 to 5 to $6 million per year per game, and just for the digital good, not even the sponsorship revenue, not even the e-commerce, but the consumer product goods or the other businesses that were just the digital goods businesses can be real money makers for us. So, digital goods have zero cost of goods sold, right? Like, zero. So, if you're counting widgets, you don't spend any widgets to make a digital good. So, I'm sure people understand that business. And, yeah, it's exciting.

Justin Donald: Yeah. No kidding. Well, I love it when you say, “Hey, we're not here to just make our investors a 2X to 3X because we have a lot of people listening that are like, “Hey, all I want is a 2X to 3X but I like that you're thinking bigger. I like that you know that it's bigger. We know the direction that it's going in and I'd love for you to brag for a second because we're talking off-air before we started recording about all the cool stuff that's going on, the tournaments, kind of a big bid that just happened. I mean, there's a number of things like the partnership with Exodus and the tournament that you now, I think that there's the tournament that you are part of that you guys just won or got accepted into one of the highest leagues there.

And I believe that there's a franchise, partnership spot that you were awarded, which is worth a lot to the brand to M80. So, share some of that, and then let's talk about kind of the next big thing that I think is going to take the space by storm.

Marco Mereu: Yeah. So, the teams that we have, we compete in some of the biggest games in the world from an Esports perspective. Think for the top five streamed games on Twitch. We have teams that compete in. We didn't pay a dollar in franchise fees for any of these teams. We were able to enter into these games based on our ability to put competitive rosters together and build our brand and compete and win, and kind of push our way to the front of the line against companies that have been around for ten-plus years and raised $30 million to $50 million, and we've done it at a fraction of that. Right? So, we've really kind of bootstrapped and slingshot at ourselves, I think, to the front of the pack.

And again, like games like Valorant, which is one of our cornerstone titles here, we'll be competing in September down to Mexico in the Ascension Championship Tour in order to earn a franchise spot in the international league.

Justin Donald: And you just earn that, right? Wasn't that you just played to win that just a moment ago because you had sent me an article on it?

Marco Mereu: Yeah. We played for the right to be one of the top two teams in North America to go now to be one of six across LatAm, Brazil, and America. And the winner of that, winner-take-all all gets an international franchise spot on the biggest Esport in the world.

Justin Donald: That's incredible.

Marco Mereu: Yeah. We're going to go and get that spot in Monterrey in mid-September. So, feel good about that. Yeah. The other games that we're in are all working. Publishers are working much more closely with organizations now as well, which is great. And you have to feel good about that because they understand it's a business. Without teams, they're not going to have leagues, and without leagues, they're not going to be able to sell digital goods and their games and SKUs and their businesses. And we add a lot of value for what they're doing. And I think a lot of the good publishers are starting to recognize that now. So, that's really terrific.

And then what's great about Esports, just like sports, is once you have the visibility in the audience, I think we have about 14 million followers across all of our social channels and the players’ social channels, that we can touch at any given time, now we're moving into categories like consumer product goods, right? And now we can, don't be surprised if you walk into a Walmart or a Sam's Club next spring, next summer, and you see an M80 product on the shelves that you can buy for your kids, because that's what's coming next, right? We're talking with beverage companies. We're talking with candy companies. We're talking with toy companies about action figures. I mean, it's all coming. And again, like, for us, it's just a natural evolution of the space. And again, like you had alluded to, we feel like we've got some really good designs on where we want M80 to go in the future.

Justin Donald: Yeah. That's amazing. And it reminds me of the old days of the NFL when there were a bunch of leagues or WWF or WWE, right, where there are a bunch of different leagues and we didn't know what exactly was going to happen, but it was regional. And then all of a sudden they started to consolidate. One would buy the other. And then in the NFL you were kind of left with the AFC and the NFC. And then they combine for a Super Bowl, the winner between these two leagues. And you know all of a sudden that became just one league, the NFL housed that. And you saw that with WWE as well, right?

And so, we're in the early days here on the Esports side of things because we don't know who the big leagues are. I mean, we know who they are today and what teams are going to be in what leagues, and how that's going to consolidate. But it's fun and exciting to kind of be in on the early side of something that we know just based on looking at demographics, just based on the numbers, just based on how it's performing today internationally. We know this is here to stay.

Marco Mereu: Oh, without a doubt. No, without a doubt. And like you were mentioning, I mean, we started to think a few months ago about how do we really differentiate our company from other Esports teams, right? When you're an investor and you're looking at different investment opportunities in gaming, what makes M80 stand out from 10 or 15 other companies that are similar to ours that maybe been around longer, have raised more money, have spent more money. You know, if you're a brand, why would you want to partner with M80 long-term over other organizations? And that's really important to me is how do we differentiate ourselves and what is special about us.

And one of the things that we've done really well over the last I'd say five years or so, my team, not just me, but my whole team, is we've been one of the best in the world at developing talent, and we've worked with some of the youngest players. People ask me all the time, “How do you find these players?” I scout them just like I met watching 16-year-olds at high school LAN tournaments meeting their parents just like Sonny Vaccaro was with Nike 30, 40 years ago, right? So, a lot of it is at getting down and scouting and watching young players develop and trying to understand and Billy Beane it a little bit and recognize when someone's got something special that we think we can really develop.

But we really enjoy doing that too. It's been a rewarding experience for us personally to see so many of our players come up and be the biggest stars in the world of Esport now, even for other teams. And we step back and one of my partners at M80, one of my minority co-owners is a guy by the name of Daniil Medvedev. And Daniil is the number three men's tennis player in the world. He's a very successful, very smart guy who also happens to love Esports and gaming and was an M80 fan. And by chance, I had a chance to meet him last U.S. Open, spent some time with him and his manager, and two weeks later, he's a co-owner of M80 where he’s had a shot to what we do.

Justin Donald: That’s cool.

Marco Mereu: And he's a very active behind-the-scenes owner with me. We talk about the teams, the players, the vision, the brand, marketing. He's competing in the Olympics right now. But as part of that, I also became close with his manager, who is an IMG Academy alumni. And for those of you that may or may not know IMG, an IMG Academy is really the go-to brand when it comes to developing sports talent. So, if you're a young aspiring professional athlete, more likely than not you're going to be going to IMG Academy. And we started to look at the business of IMG Academy, which was acquired last year for, I think, about 1.3 billion.

And we said, “I think that we can take M80. We can still do what we're doing well right now, but we can turn M80 into the IMG of Esports. We can really build M80 not just into an Esports team, but into an Esports performance academy.” And that's exactly what we're doing and what we just launched recently. So, now M80 is not only competing in professional Esports at the top of the mountain but we have, as you mentioned earlier, we've got an entirely another sublayer that's dedicated to working with players that may want to go to collegiate sports programs and get those opportunities, as well as amateur and aspiring professional players that just want to continue to practice and work on their skill set.

And we offer programs to work with our coaches to come out to Austin for a period of time and spend time in a live environment as well. But because it's game, we can do a lot of this online, remotely. And we really open this up to a 13 to 18-year-old demographic now of aspiring gamers that may want to sign up and come to M80 because they want to be a pro player, because they want to get a college scholarship, or they just want to get better at the game that they're passionate about. So, we're really excited about that. We've got some great coaches in the program. We got a great system. We're working on some additional curriculum right now.

I mean, I've taught courses in Esports four years ago at universities. And we're really, really excited to hit the ground running with this, especially with the Austin HQ opening up very soon. So, yeah, M80 is really kind of built on being the first Esports professional organization to build out an academy program like that.

Justin Donald: It's incredible to have a learning platform, an academy that trains up the new ranks, the younger ranks. But, I mean, the value that that creates for the organization as a whole is unparalleled. I mean, just that portion of the business can be worth more than the rest of the “professional sports team,” which is crazy to think about. But as a platform play, I mean, it's massive, the opportunity, the scale, the potential because so many of these people are never going to be professional players or collegiate players but they can still be better than their friends. They can still learn all these things. They can still get college paid for and then move on to a different profession.

So, I think it's brilliant. I love that you guys are doing it. And I'd love for you to be able to share how people can learn more about you, Marco, and more about M80, for those that are interested to learn more and follow your story and maybe even get involved on a small or medium scale.

Marco Mereu: Yeah. So, I would love for all the listeners to follow us. And if you have an interest in this, you can always follow me on Twitter. My Twitter handle is just M-F-M-E-R-E-U and M80 is M80GG. Happy to have you follow both the org. Reach out to me personally if you ever have questions or you want to connect. Our website is M80.gg, and that's where you can learn more about everything from the Esports teams to the sponsorship opportunities or if you're a business that wants to get into this space. We just did a huge deal with a midwestern amusement park that we’ll be announcing fairly shortly as well to do a big live event and kind of meet and greet and fan engagement there. So, I'm really excited about that.

And then also the Academy program will be there too. You can learn all about what that looks like either for yourself or for your kids and if you think it's the right fit. And you know, much like sports we have one of the best mental health professionals in all of sports in Esports is a key part of this organization. Educating kids about managing their mental health, managing their wellness is a critical part of this. Sports has always been good, I think, for kids growing up, giving them structure and giving them as kids get older and they need that. I think that even though we're Esports and not sports, we provide that as well. And I think we see a lot of really top-shelf people coming out of our program, which makes me feel really good that have a good head on their shoulders and they know what they're doing.

So, yeah, I would love to share that with anybody who wants to learn more. And certainly, watch out for us and all the big titles that we're competing in.

Justin Donald: Oh, I love it. Yeah. Well, definitely root the team on. You know, M80 is going places. We're so glad to have you on the show, Marco, to share your passion for the sport but also just the insight that you have in the industry and on the M80, specifically your team. So, I'm just so excited to be along for the ride. And we've enjoyed our time with you here today.

Marco Mereu: Yeah. Thank you. Justin, I appreciate it. Look, I love talking with you. I listen to the podcast myself. I got to read the book. I haven't gotten the book yet, but I'm going to read it. And, yeah, I love having you as an investor and you're a great resource for us as well. So, excited to have you over to the space in Austin as soon as we get that ready to go.

Justin Donald: Well, I got to get you a copy of the book. Just give me your address. We're going to get you the new one. I don't know if you know.

Marco Mereu: No. I want to support you, man. I'm a business guy. I'm going to buy your book.

Justin Donald: I like it. Well, all the proceeds go to fight human trafficking, and we're thrilled about that. But, yeah, the new updated and expanded edition of The Lifestyle Investor is officially live. So, we're thrilled about that. And I like to end every episode with a question to our audience. And that question is this: What is one step that you can take today to move towards financial freedom and truly living the life that you desire on your terms so not a life by default, but a life by design? So, what's one thing you heard and learned today from Marco that you can put into action in your life? Please do it. Keep moving forward. And we'll catch you next week.