CR4ZY CEO: "We accumulated around €20,000 of debt towards former players; this is my public apology to them"
During the New Challengers Stage of the StarLadder Major, we sat down with the CEO of CR4ZY, Antonio Meic, who opened up about his organization paying off outstanding debts to former players, and shared information about a potential franchised league in Counter-Strike.
The interview took place after CR4ZY defeated DreamEaters, securing a place in the New Legends Stage among the top 16 teams in Berlin (full video version). Mr. Meic approached us with the information that CR4ZY (formerly Valiance), had amassed a debt of over €20,000 from prize money to former members, including, according to information that HLTV.org has gathered, players such as Anel "NENO" Ceković, Đorđe "DJOXiC" Niciforović, and coach Darko "soLo" Mitić.
Mr. Meic said that the organization pulled additional funds from their investors to clear the debt to the players ahead of the Major but still decided to be "fully transparent" about the situation, thanking the players for their patience, without which, he says, CR4ZY would not have been able to make it to the Major.
CR4ZY's CEO also talked about buyout prices, mentioning that he has had offers between €75,000 and €250,000 for some of his players, which he described as "joke offers", and also stated that running a team such as his costs between €500,000 and €750,000 per year. Lastly, he mentioned that ESL is currently in talks about a franchised Valve-supported league, and cited a $2 million buy-in price for it.
The main part of this interview is tied to the fact that you wanted to go public about your organization owing some money to former players. Let's just start with that. How does that happen, how do you get into the situation?
I was motivated to do this by the recent development with NiP, everything that Richard Lewis was covering, what happened with Echo Fox and some other organizations. There is a lot of shit going on in esports and I always like to be fully transparent around some things that are not good, and I have colleagues telling me, 'ok, we shouldn't go public with this, we shouldn't go public with that' — which is fine, but I sincerely think that there are certain things that we can discuss. And I think we should first start discussing things about ourselves, cleaning up our own mess.
So basically, we went into the Counter-Strike with our team sometime in 2017, my vision was to go into a game from which I could learn how the tier 1 esports worked, how the environment worked, because at the time, we [Valiance] were organizing mobile videogame tournaments for kids, basically, and I wanted to get some insight into Counter-Strike. Basically, the team was successful to some extent, we were happy, but it was always a secondary thing I was doing next to the content production and [mobile videogames] tournament organization.
Throughout that period, the main part of the business was going through ups and downs and at some point we had difficulties with cash flow, which would usually happen between investment cycles, but with the high revenue we had in 2018, with all of the content production we did, we were always catching up with everything. As our investment was going low and as we are in a very volatile business, the prize pools that would hit our account we would use as normal cash flow to cover some other debt. Long story short, this year we accumulated somewhere around €20,000 of debt towards former players and this is mostly prize pool money. Because prize pool money usually comes months after we win it, and we changed our roster significantly, we changed the coach, several players, new players came in, and you know, these skeletons were in the closet.
With our decision to fully focus on esports, our revenue was hit very badly. We lost 90% of our production revenue in terms of content and this is where the majority of the problems started to happen. So it happened slowly, over a period of time, and sometime in the summer of 2018 we lacked full support of our investors, due to other reasons, and then we had this period where for close to half of a year, we were catching up with our own revenue, trying to make everything work, so for us, we went through several near-death experiences where the company was almost about to be bankrupt, but basically we did our best for it not to happen because then our debt to all of our partners and players would be significant. Not only because of myself or the organization or the people, I persisted in pushing the business as far as it could go because I knew that there were certain people who are not forcing us to give them their money, they were politely asking and then months passed until we came to the point where we could say "OK, we can pay back small amounts".
But coming into the Major, I told myself that this had to be resolved now. We had a discussion with our investor and it was very well explained that we could not carry on the debt indefinitely and, basically, we made an arrangement to pay off all of our debt towards the players. I can thank them very much. I think the reason we are here today is that none of those former players threatened, none of them were bad towards the organization, they had immense patience. In multiple situations, I came to them and said 'the money is going to be with you in March', and then in June I would say 'man, it is going to be in October'. So I felt really responsible because I think that at some point everybody owes money to somebody, but when you owe money for so long I didn't want it to be just, 'yeah, we have paid out everything to the players and we are done'. This is my public thanks to them and an apology that they had to wait for so long.
Can you explain a bit more about why owing players money becomes the sacrifice that you decided to make in those situations?
If you are looking at it from a cash flow perspective it is very difficult, CS is a game where players are priority number one, the majority of the prize pools goes to players, the majority of the sticker money goes to players, so organizations are basically dependant on content deals and sponsorship money. We are currently an organization that has very very low revenue because we switched from content production to an esports-only company. That is a big issue because everything needs to be financed from investment, and that is tied to investors and the investors we are working with are requiring certain milestones to be set and met and this is always a catching-up process. It's about how you can reach the next milestone and how you can cover the next part of the cost. But so far it is working well for us because from the beginning of the year, when we said, 'Ok, let's just focus on esports', we have been, at least from an investment side, cash flow positive, we are not lacking anything except that of course, we have a debt to service, and aside from the players we have 10-12 employees, the whole organization has around 16 people. That is a very cash-intensive operation in the end.
How do you ensure that this doesn't happen down the line? Because people may be thinking 'they didn't pay players in the past, if they come to the same point again, they won't pay them again'?
First of all, we have a long-term investment deal with our investors, we are not the kind of a startup that has received an X amount of money and, if the money runs out, there is no more money, because we are not working with that kind of investors. We are working on quarterly-budget levels where we provide our budget needs in estimates and we receive monthly investment from them. Basically, the deal for them is that they have invested so much already into working with us, that for none of us failure is an option. Of course, we all understood that there was debt towards the players, this is now resolved and we are constantly making improvements in collaborations with our players, what we can do to minimize the risk towards players.
So far, in two years, we have paid every salary, we have never been late with salaries. Salaries were always paid between 15th and 25th, the last months it was 14th, 15th. We are trying to be in that cycle. You never know when a business is going to go bankrupt. But it is esports, it is entertainment. We see in our numbers that we are growing, we see in our results that we are doing some smart and good moves. We have a good global strategy so as a brand I don't think we are just going to disappear, you know?
A way of adding to the cash flow is obviously through sponsorships. As we see, you don't have anything on the jerseys right now. A team that has been in the top 20 for six months or more, has good players, how come you don't have a single sponsor on your jersey?
I don't know. My colleagues and I have done significant efforts in trying to acquire sponsorships. Unfortunately, there are two parts of that equation. First, there are results. This Major is the first result that is very serious for us, in front of hundreds of thousands of viewers online. So just now, as a brand, we are getting some visibility. Then, we have a very young roster and our players, unfortunately, have not invested a significant amount of time into their social media channels and now there is a balance that needs to happen between achieving results, growing players as their own brand, growing our own brand, and then the sponsorship money will follow.
We have had some discussions for lower sponsorship values, but I don't want to take Logitech mice and keyboards or equipment because, yeah, it is a nice perk, but the organization burns a lot of money monthly and we need to pay salaries so I'm interested in what we as an organization can offer to sponsors. The kind of content they want to shoot with us, the kinds of editorials, marketing campaigns, etc. We have a great team and this is what we want to offer them. However, the majority of sponsorships come from endemic sponsors and with 15 already established esports brands we now need to fight our way in to get some money towards us.
How much does an organization like yours need to actually function? As you touched on now, it is hard to get a good sponsorship, especially as a lower team, players have a lot of expectations, the community has expectations... is this sustainable?
I definitely have information that some organizations are breaking even, so there is a light at the end of the tunnel. it is about the kind of people you work with.
How much money do we need? Let's say you have a small, functioning organization and you want to compete in Counter-Strike, and I can only speak about the perception coming from South-East Europe, the Adria-Balkan region, you need €500,000-700,000 yearly as a budget. Divide that by 12 and you get a fair estimate of what is minimally needed monthly for an organization that has a team, a coach, a manager, a content team with two or three people, a business development manager, a marketing manager, because in the end, when you look at the content we are doing now, somebody needs to think about it, organize it, and we see how labor-intensive that is, but still, we are trying to make it happen, somehow.
One of the ways organizations can make money is by selling players. You have a pretty talented roster, a young roster, with some exciting players. I think there is no secret that people have been inquiring for huNter- for a long time. My question is: how much can you earn for a player like that? What have the offers so far been like?
The real value comes down to how much someone is willing to pay. It is really difficult to say. Maybe to someone huNter- is worth five million because he is going to fit perfectly in the position and that is a fair price. If they can meet that price it is fine. I have had information about a lot of players on the market, I think the price for players currently revolves between €50,000 and €250,000 on, let's say, not-so-famous players, but still up-and-coming and really good ones. Depending on their marketability and social profile their prices can reach higher numbers. Stars go anywhere between €300,000 up to €1,000,000.
So the market is between €50,000 and a €1,000,000, I've heard rumors of coldzera joining 100 Thieves for a million dollars, who knows? I know 100 Thieves has the money to pay that price but I don't know if they will do it. It is difficult to say, if someone would come and say, as they have, "I want to buy huNter-", it is not about how much I want to sell him for or how much I think he is worth, I'm just going to be thinking: "How much is he worth to you?". My job is to maximize the profit on the player sale. We have never considered selling huNter- because he is a part of our core roster, just like any of our other players. We have had offers so far from several organizations, everything between €75,000 and €250,000. You see where we are, I think these are joke offers.
And now if something happens, we go deep into the New Legends Stage, or maybe luck shits us so hard that we end up there (points at the Mercedes-Benz Arena, where the playoffs will be held), we secure spots at the two next Majors. So how much is it worth to have two Major spots, that is what I'm asking? One million, two million, maybe four million? It is about the market, how much somebody wants to pay, it is a market price and I can't calculate a fair price. For me, huNter- is worth 100 million and I can tell you why. He is one of the most hard-working people that I know. He spends every single second of his time thinking about the game, being in the game and every organization would be so lucky to have him. So for me, he is priceless.
Then again, there are business decisions, there are emotional decisions, there are investors, there is common sense, so I would evaluate any offer that would be on the table that is good enough to be looked at from a business perspective. I think now, with this roster, we are finding a good fit. We are not there yet, we still need to work a lot as a team. You saw that we are not playing the best. But the quality of a great team, as my colleague Alen Šola says, is to win when they are playing like shit, that is what we did yesterday against Dreameaters. But this comes as a culmination of months and months of work of so many people.
Let's say you get to the playoffs and you have Major spots in the future. Is selling off the team one of the options for you?
If someone comes with a bag of money and says, 'look, I have a home for your team that they are going to love', I'm not the person that is going to withhold the next opportunity for my players. There is a cap on salaries I can pay, there are certain conditions I can meet — I don't have an Esports Performance Center for them —, and if the opportunity comes which would take the whole roster we have built to the next level and provide life-changing opportunities for huNter- and my guys, who am I to stop their dreams? So if there is an organization that would like to buy the complete roster and take them to a beautiful home, I think we would just have an awesome, big farewell party. I would not stop them from progressing in a career because our contract lasts for I don't know how long.
I think that we have proven that in the last two years that we know how to build a roster. It is the collaborative work of people in the management of CR4ZY, and I'm ballsy enough to say that if you give me nine months and a sufficient amount of money and freedom I could have a new team in the next Major [cycle] going through all of the things that need to be done to come to the Minor and then the hopefully the Major. I know it is a bold statement but I come from an IT background, from the process-design background, and I think we are thinking through all of the steps we are doing and I think that Counter-Strike, esports, is a low-tech, highly human resources intensive operation and I think we have done a great job in scouting, evaluating players, understanding what their marketability is.
We know this now, with the current roster that is great, of course. We cannot go back with all the mistakes that we made, but we have what we have. Would I sell them? If they are going to a beautiful home, better than the one they have here, and if the price is right, I would not deprive them of that opportunity and I would keep on going in Counter-Strike from the beginning [with a new team], the same grind from top 100 up to top 10.
After the first six months you had with this international lineup, in which the team failed to qualify for the ESL Pro League and for other big tournaments, what would have happened if the Minor had not gone so well and you had not made it to the Major?
I don't know. It is a really tough decision because it would depend on what our investors would want us to do together. Because at that point we would've invested a lot of money without having any kind of a result. ESL Pro League [qualification] is an example of what happens when leagues are run poorly. To win all of those matches (CR4ZY was undefeated in the ESEA MDL regular season) and then to lose one after months of working... I think it is bullshit, I think the system needs to change.
If we had not qualified for the Minor and gone to the Major, I think we would be facing a major team overhaul. Because I would have to do something to show that I'm resolute enough and that I have the vision to reach the next Minor.
There has been a lot of talk about things changing in the CS ecosystem, a franchise league, an exclusive league popping up and taking over, maybe as the main thing. If you are an owner in that kind of a world you have to be in the league, it seems like, to be relevant. Do you know anything about it and what are your thoughts?
What I think is that there are two models, one American, and one European. The US model is based around city-based esports organizations, the trend started with Overwatch and I think it is working very well, not for Overwatch but as a system, because of the topology of the US, the demographical situation where 90% of the population lives in huge metropolitan areas. And you know, it is the US, 10 years ahead of us and I think franchising is a great model depending on the game, the developer...
In terms of Counter-Strike, we live in the Wild West, players are kings, organizations are in a very bad position, sponsors don't necessarily want to go into a shooting game, mostly it is endemic sponsors that understand the situation. So for me, as an owner, it is important to branch out to some of these franchises. Currently, we are looking at Apex Legends, Fortnite, FIFA, and maybe League of Legends. For all of those games, we have a clear vision of the market and of the timeline we can have a team ready for a franchise spot...
But Counter-Strike, I know that the player union is now negotiating with ESL in the US for this, let's call it, "Valve-supported league". I think the information is out there because a lot of people are talking about it. When it is going to happen or if it is going to happen at all, let's see. I think that a league that would be supported by Valve and that would have a buy-in slot would make sense, but only if Valve knows how to do their job. If they leave the job to be done by ESL, who am I going to pay the $2 million buy-in to, ESL? I'm not going to be paying $2 million to ESL for anything because what kind of sponsorship equity are they going to bring to the teams, what are the deals going to be like, and how fast can we recover the cost of buying a franchise spot? So I know it is starting in the US and I know that nobody is talking about Europe, where the strongest teams are.