XSET envisions the deal with QC to include joint content production and collaborations on merchandise like branded hoodies.
The partnership is just one of many that the music industry is making with the gaming world, QC founder and CEO Kevin “Coach K” Lee said.
“The big companies, whether it’s the Universals, the Sonys, the head companies, I think they’re working out the deals,” said Lee. “Everyone’s making money, so you can’t cut us out on the music side.”
Lee described a changing ecosystem, where soon music labels could have deals in place with gaming organizations, and content creators on Twitch could stream licensed, popular music. Twitch is owned by Amazon, whose founder, Jeff Bezos, owns The Washington Post.
That would be a drastic shift from the current situation on Twitch over the past year, where streamers received copyright strikes for playing songs like 50 Cent’s “In Da Club” in video clips captured from a few years earlier. Facing potential bans if they reached three strikes, many Twitch streamers turned to using music provided by smaller artists or paying for it themselves from a subscription service offered by record labels.
Over the next month, XSET is planning to announce more venture capital partners — from industries including traditional sports and marketing — that are part of the $ 10 million raised. XSET declined to disclose the amount QC is investing.
XSET was founded last July, in the middle of the pandemic, by CEO Greg Selkoe and chief business development officer Clinton Sparks, who both left Faze Clan, citing business differences. XSET is relatively new to the esports scene, and has been raising funds throughout the pandemic. Several other esports organizations, including FaZe, filed for Paycheck Protection Program (PPP) loans during that time. FaZe declined to comment.
“We were just starting, so we didn’t have the burn that other people would have,” said Sparks, the chief business development officer.
The company is also taking on newer talent with smaller social media followings, even as it attracts pro athletes and esports celebrities. It signed on Ashton “Astonish” Harris, a 21-year-old based outside Atlanta, Georgia, who won $ 50,000 in the 2019 Fortnite World Cup, which he used to help his mom buy two cars.
Lee, the CEO of QC, said he chose to work with XSET rather than a more established brand like FaZe, which has seen investment from some artists on the QC label including Offset and Lil Yachty, because he likes to catch the wave early.
“Say an artist pops on TikTok, and every label just starts going crazy and trying to sign it. We never really got into those bidding wars. We’d rather like to find the unpolished diamond,” Lee said.
XSET is one of an emerging group of gaming organizations primarily associated with esports that no longer market themselves on esports alone. Groups like FaZe Clan and 100 Thieves aren’t just running competitive gaming operations, they rely on brand sponsorship deals and fans buying their merchandise as a main source of revenue.
“There is a lot of variation among esports brands and teams and how they have tried to become revenue neutral or ideally, profitable,” said Will Partin, research affiliate at the University of North Carolina at Chapel Hill. “A lot of them have moved toward this idea of being a lifestyle brand. 100 Thieves I think is the most successful one. … Esports revenue on their own have not really risen in a way for teams that are making [teams] sustainable businesses.”
In esports, game publishers often keep a large cut of revenue, leaving pro teams scouring for other ways to stay afloat.
Competitive gaming and combining pop culture with games are both saturated spaces, so XSET is still taking on a risky bet, despite its co-founders’ past successful experiences with FaZe. It remains to be seen whether the company can capture enough attention through its content without running out of capital, said Partin.
Rather than call itself an esports organization, XSET prefers the term “lifestyle gaming.” Although it owns nine teams competing in games like “Call of Duty” and “Counter-Strike: Global Offensive,” XSET’s largest source of revenue is brand sponsorships, said CEO Selkoe.
“We’re conscious that … you’re only as good as your last announcement. The QC thing is obviously a major boost in the right direction,” Selkoe said. “If we’re not continuing to bring freshness, newness and excitement to the fans, then the fans will respond in kind. But I think one of the things we are good at, as Clinton said, is really having our finger on the pulse.”