Exclusive conversation with Wu Lihua, president of EDG: If the club only does traffic harvesting, it cannot continue to develop

On November 8, the second day of EDG's championship, the warm sun in Shanghai is still the same. The EDG base on Lingshi Road looks the same as usual, and the surging wave of countless people due to the EDG championship seems to have not yet swept here.

But they are the protagonists of this championship. On November 7, LPL veteran team EDG team made history, defeating DK teams from south Korea's LCK division 3:2 to win the League of Legends S11 Season World Finals championship. For EDG, which once had its best result in the global top 8, this is undoubtedly an unexpected surprise.

On November 8, the Beijing News shell financial reporter came to the EDG headquarters, and unlike the expected celebration scene, the company's employees worked quietly and methodically. In the base, except for the League of Legends division training room, which is empty because the team members are still in isolation, the young people who love e-sports in the training room of other divisions are training intensely, hoping to one day stand on the highest stage of the event.

"Winning the championship is really exciting, but life has to go on. In addition to the need for several BOSSes to receive daily media and congratulations from all walks of life, employees have gradually returned to normal working conditions. An EDG staff member said.

EDG Club was established in 2013, operating company for Shanghai Yangchuan Electronic Technology Co., Ltd., which is owned by Chaojing Group. Behind the EDG victory, how does this team break the spell? From the grassy era all the way, profitability is at the forefront of the industry, what is the secret of EDG's operation? From esports to the esports industry, what are they doing?

In this regard, Shell financial reporters visited the EDG Club in depth and had an exclusive dialogue with Wu Lihua, CEO of Super Competitive Interactive Entertainment Group and President of EDG, to understand more real EDG.

Winning the championship has been disappointed countless times, and the mentality tends to be flat

Beijing News Shell Finance: First of all, congratulations to EDG for winning the championship. You were in Shenzhen when EDG won the championship, what was the scene like that day, and how was the mood?

Wu Lihua: On that day, Tencent's official and League of Legends project team organized an offline viewing in Shenzhen. We watched the game through a big screen in a theater, and the atmosphere was very lively, but I was actually in a very calm mood.

At the last moment, when it was really won, the whole audience boiled! It would have been exciting, but it wasn't dizzy or up.

In 2013, EDG was established, and we experienced very good results and brilliant achievements in 2014, 2015 and 2016, but we also had unsatisfactory results in the S Competition, and the best result was stuck in the top eight, during which we disappointed the team members and fans many times.

So, there will be as much disappointment as there are expectations, and this year we have finally made a breakthrough, and our mentality has been erased by countless disappointments or sadness. For me, it's very calm to face this tournament very calmly.

At the helm, you can't use pure business to bind esports as it is

Beijing News Shell Finance: When you came into contact with the e-sports industry, the industry was still in the stage of reckless development, what was my personal understanding of e-sports at that time?

Wu Lihua: I was not an e-sports practitioner at the beginning, nor was I a professional e-sports player. At that time (entering the e-sports industry) also analyzed, what exactly is e-sports? I think it's a digital sport in a new form. At that time, I had deeply felt that all the characteristics of e-sports were actually no different from (traditional) sports.

Esports is a nascent industry. I think the core of eSports is the event, which is ultimately a content industry, and in this environment, there are quite a few things in common with my experience.

Beijing News Shell Finance: After taking over the club, how do you consider the core business strategy and the development of the club?

Wu Lihua: E-sports has a very heavy cultural content attribute, and it becomes very important to pay attention to quality. Good content and creating good content are very important, and we must go in line with this general direction.

The second point is that the club must have the ability to operate continuously and for a long time. On the one hand, we must consider the balance of the overall income and expenditure, so that the club can develop in a long-term and relatively healthy way, so that it is possible to talk about medium- and long-term planning. There is no accumulation bit by bit, but just to do traffic harvesting, not a business, there is no way to continue to develop.

Therefore, with the basic logic of breaking even, we do not have the idea of "making money this year, how much money must be earned this year". Because we pay more attention to the industrial core of e-sports, that original intention and love is the core, and we can't use pure commercial things to bind it to its original appearance. With the basic framework in place, we try our best to give the training team and team members the space to make decisions that are relatively flexible and autonomous.

Third, tap into the commercial value of e-sports as soon as possible. I was very impressed with this part, and when I first got involved in the operation and management of the club, [I found] that the sponsorship fees were very low. Esports clubs are similar to traditional sports clubs, and sponsor revenue is an important source of income. However, at that time, the income in this regard was very low, and it may be that a sponsor's annual cost is only two or three hundred thousand, and the category is relatively single, basically a manufacturer (brand) related to computer peripherals.

We've done a lot of experimentation and change, including getting to understand the needs of our sponsors. Now our business team is relatively mature, and we are gradually stabilizing the basic disk of some commercial value in the club. Although there is still a gap compared to traditional sports, it is also a space for growth, which I think is still quite good.

Strategy: Walk on multiple legs to walk longer

Beijing News Shell Finance: How does EDG achieve profitability?

Wu Lihua: EDG's source of profit is mainly composed of three parts. The first is the league division, the value that the League of Legends tournament alliance creates for the clubs together, and then distributes it to the clubs. The second is commercial sponsorship, and the third part is live streaming revenue.

Very early on, we also tried to develop an online mall, develop an independent app for the club, and commercialize EDG peripheral products.

However, it should be noted that commercial sponsorship and live broadcast revenue are uncertain due to the commercial value of the club's own performance factors. Therefore, I think the overall comprehensive income of the club must have a reasonable structure, that is, the various sectors should not be too unbalanced in terms of proportion, and need to walk on multiple legs to walk longer and more steadily.

Beijing News Shell Finance: From simply operating a club to the overall layout of the e-sports industry, why make strategic adjustments?

Wu Lihua: If e-sports develops in a more orderly manner, it needs to turn to commercialization and industrialization, because you always want it to become bigger when you do a business, and only after it is bigger will there be an industry, otherwise it is just a small shop.

Esports is a very engaging industry, it has a huge audience base, and there is also a high degree of emotional connection with fans. In addition, its instantaneous traffic and attention are also very high. Through these industry advantages, we can see that it is an important breakthrough point to enter the young people's market.

But if it's just the commercialization of the club, you will find that it is simply not enough to support the income of the industry. So when esports connects with young people, where is its extra business value?

Through the analysis of the 24-hour time dimension of young people and the consumption scenes of various places, we find that today's young people gradually accept various fragmented times, and their consumption scenarios change, then the cultural entertainment content will inevitably change, and we need to use new things to cater to the new entertainment culture and consumption scenarios of young people.

Therefore, we have sorted out the business sectors covered by the super competition group today, including e-sports clubs, e-sports life halls, social platforms, cultural and creative industrial parks, animation IP and content, e-sports education and training, variety entertainment, etc., hoping to use the industry as much as possible to form more connections with young people.

In addition, we also hope that through commercial operations, we can make young people happier in the consumption scene, whether it is thematic or immersive, and finally combine these plates.

Esports is difficult to do without "rich" investment

Beijing News Shell Finance: In the development process of the e-sports industry, many "rich second generation" choose to enter the market, which has also prompted some changes in the industry. What do you think about the esports industry's relationship with them?

Wu Lihua: It should be more accurate to describe it as "relatively wealthy individual investors". I think this thing (esports) would be very difficult to do without them.

At that time, e-sports was not a business, nor was it a business, there was no financial investment or investors willing to invest, and there was no commercial return.

At that time, those who were willing to invest money needed three elements. First, be young, otherwise he wouldn't have paid attention to the field of e-sports; second, he must have money; third, he has time and needs to spend a lot of time pouring out his hobbies. At that time, the only group that could meet these three points at the same time was the group (the wealthier individual investors).

(2018 can be seen as a watershed) Before that, the entire e-sports industry developed in a relatively pure market-oriented operating environment without violating domestic values. After 2018, the market began to pay attention to this industry, the e-sports industry has also been greater development and more professional segmentation, industrial expansion has led to a relatively large increase in operating costs, and the industry has come to the stage of "not pocket money can support club operations", at this time the industry or market forces everyone to do (larger) commercialization.

The advantage of professional investment institutions and large companies entering the market is that they are relatively standardized in all aspects.

Sometimes you think esports is strong, and sometimes you think esports is thin. When you feel thin, these large companies often make you feel dependent, whether it is traffic or other aspects to get more resources, but also to make the club and industry more orderly development.

Beijing News shell financial reporter Qin Che Li Yunqi Editor Wang Jinyu Proofreader Liu Baoqing