ESGN Having Financial Difficulties, Unable to Pay Employees

In early December 2013 new esports broadcaster ESGN, the eSports Global Network, held their launch event at the Waldorf Astoria in Berlin. Invited were two hundred journalists and esports personalities from across the globe. Among that number were prospective partners, competitors and commentators to whom they hoped to demonstrate their commitment to the development of esports.

CEO Jong Hwan Lee

Enquiries suggest a €50,000 total outlay would be conservative for the hiring of the Waldorf Astoria for a function that featured two hundred people, provided food and a free bar, as well as rooms and travel expenses for a significant portion of the guests.

Six months later, the same company that took part in such a lavish announcement of their arrival has gone three months without paying their staff. Not just a few employees, something that could be dismissed as a clerical error or teething problems of a burgeoning human resources department, but a significant portion of the staff. A recent email from the company’s CEO Jong Hwan Lee, that was circulated to all staff, would read:

CEO Jong Hwan Lee

“Dear Clauf members,

The worry that all of you have experienced in the past few weeks weighs heavy on my heart.

The March salary has still not been paid out.

I am sure most of you know, but maybe some do not – it has been 3 months since our Clauf project has officially launched and the viewer numbers have been on a continuous decrease. We and our investors are not doubting the future potential and the long-term vision and goals of our project, however, there are concerns regarding the current decrease in viewership, the high production costs and the low daily broadcast runtime.

For this reason, our investors and an external IT business consultant have visited us last week for an interim report. The final report of the consultant will be done by this week, for this reason our funding is still being delayed. I am talking to our investors every day to ensure a healthy cash flow in the future.

It is my unfortunate duty to inform you that the salary for March will be paid out on April 15th. However, if we get the funding from the investors earlier, I will make sure you get paid as soon as possible. The following salary for April will, of course, be paid out according to the regular schedule.

I apologize for any worry and inconvenience caused due to the delayed payout of March’s salary and would like to ask for the understanding of all executives and staff members.

Thank you.

Jong Hwan Lee”

That money has yet to materialize. The staff are considering a strike action, indicating ESGN management may not be able to keep a lid on the growing dissent.

The tardiness over paying their staff also extends to talent and players. Players and casters were offered €1,000 simply to attend. The winner was expected to win €1,600, €500 for second place and €200 for third and fourth. All were assured that every expense, such as travel to and from hotels, would also be taken care of. All told €15,000 of prize money for the Starcraft competition alone.

According to several high profile Starcraft players, they have not received payment for ESGN Season 2. The exchanges they had with ESGN staff left them feeling that no payment would be forthcoming. One player seemed resigned to not being paid:

“I accept that my money is gone. What is more worrying is the way they have treated the crew. It is disgusting. While I was there I would speak to people who had no experience in e-sports at all and had moved to Germany for their first job. They haven’t been paid and I can’t imagine what they are thinking right now.”

There have also been several redundancies due to corporate restructuring. They were notified of impending layoffs via email:

“Dear Team,

Tomorrow morning Andreas and Morgan are going to announce the company and staff restructuring. Everybody please come in by 11am and bring all company possessions like keys, computers, etc.

Mr. Lee will be at the studio in the afternoon to speak with the team.“

One source insists that all staff were instructed to bring their equipment in as they still hadn’t made decisions about who was going to go until the very morning they held the meeting. “It was a race to find the right scapegoats.”

So far the layoffs had been kept quiet. Employees, both past and present, have been advised to not update any statuses on sites such as LinkedIn or to post anything on social media relating to the situation. Any questions directed to them about their employment status were to be deferred.

While only a handful of people have been affected, it seems that might change. Internally there is an air of uncertainty over what direction to take and the management are supposedly exploring a number of options. According to one of our sources, the management could easily find themselves on the chopping block.

“They are having massive meetings this week to explore options. One might be to cut fifteen more staff. Another might be to fire a lot of the bosses. There’s a third option they are discussing that hasn’t been made public but they are kicking it around.”

Many employees have been presented with no contracts and have been operating under the good faith that contracts would come once the “restructuring” has finished.

“I have never signed a contract,” one staff member told us, “everyone was extremely frustrated by the HR department who were just another wing of ESGN who fucked everyone relentlessly. It became a running joke among staff – “hey maybe we’ll get a contract this week” or “let’s go out for a beer, I hear Mr. Lee will be there with contracts” that sort of thing.”

ESGN also knowingly ran events that they would not be able to pay out, specifically the League of Legends Fight Night. An email from Morgan Stone sent company wide explained the rationale to continue despite there being no money for outgoing payments.

“I know this is not what everyone wants to hear and this why I have yet to write an email like this, but… things are still undecided.

We contemplated very seriously canceling fight night ( again) due to the current climate, but we are shooting lol fight night this weekend , but only for 3 reasons….

1) we can pay for flights, appearance fee, and hotel later ( after staff has been paid)

2) We already canceled LOL once… and the streamers/players would never want to work with us again and would speak very negatively in the press

3) basically we have very little out of pocket expenses and felt that if we did not shoot it

it would be far worse…. but we seriously contemplated cancelling it yet again due to our current situation”

There is one common question among all affected parties – “why?” Sources report that Sapina, the investment group behind ESGN, is equally perplexed as to how ESGN has used up the first block of funding ahead of schedule and are aggrieved that, even with the expectation to make a considerable loss in their first year, the company have exceeded that threshold of failure to such a degree. It is estimated by insiders that the company will run at a €1.5 million loss in its first year of operations.

Internally there is blame on a culture of overspending. “In the early days they were piling in money left, right and centre” one staff member recalls. “It was insane. It was almost like they were trying to burn through money. It was incredible.”

For example, while even some established television companies would operate out of warehouses and lock-ups to keep overheads down, this start-up elected to take a studio in Babelsburg, the German equivalent of Hollywood. The studios there are part of cinematic history, having housed Fritz Lang’s “Metropolis” right through to Tarantino’s “Inglorious Basterds”. According to a member of the production team:

“Basically their initial plan was crazy and never going to work with all this opulence. Having been around studio set-ups for a while I can tell you that given our requirements this setup is extravagant to say the least. A much cheaper option would be just as viable and there were such options available.”

ESGN have refused to answer any questions and have issued the following response:

“Upon careful consideration, it is the management’s decision to decline the interview at this time.

Clauf, as a start-up company, is going through its growing-up phase. Growing up as a company of course has its challenges, and probably every company at one point has to deal with overcoming issues related to bureaucracy, structure, image, expectations, and so forth. Clauf is good on its way and we would like to revisit the opportunity of an interview at a later point, when the timing is better, and would then be happy to share the company’s honest point of view, based on actual facts.”

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