Controversies, Mismanagement and Excess Spending Take Down eSports Giant FaZe Clan

It’s almost game over for the world’s most prominent eSports companies. Since going public last year and breaking over a billion-dollar valuation, FaZe has collapsed 99% from $20 to under 18 cents and is at risk of being delisted from the NASDAQ. This year, FaZe laid off 40% of its staff, warned that it has the chance of going under, and fired its CEO, Lee Trink, last week.

The beginning: FaZe first became popular in 2010 for their Call of Duty trick shot videos, riding the YouTube wave to become a popular channel with millions of subscribers. Over the years…

• They added other members to the “FaZe Clan” and entered eSports to become one of the largest gaming and eSports companies.
• It amassed over 512M followers across 127 influencers — landing major deals with McDonald’s, Nike and General Mills.

Despite eSports having over 530M viewers globally, FaZe’s eSports teams were mostly unprofitable, per FaZe Rain. The company heavily relies on sponsorships, which dried up in recent years — while controversies and drama could be making it harder for the company to land new partners.

FaZe’d Out

In recent years, several FaZe eSports team members and influencers reportedly made racial and sexist comments, promoted illegal gambling sites, and were involved in crypto pump and dumps and sexual harassment accusations. But it could be the company’s inability to control costs that takes the company down:

• Before going public, FaZe projected sales to reach $651M by 2025. Instead, in 2022, sales peaked at $70M with $52M in losses, while revenue had fallen 38% in the latest quarter.
• The company had spent lavishly — renting a $12M property for filming while signing large salary deals with some influencers making as much as $500K a year.

Anything goes: Per eSports consultant Rod Breslau, “People on the internet are attracted to assholes — the toxicity and the edginess is what gave [FaZe] their appeal and spark to begin with” (Digiday). But after the Bud Light fiasco, brand safety and partnership alignment have been at the top of marketers minds — and the edgy persona that attracted early fans could also hold FaZe back from going mainstream.