Scott Harrison became a pro-gamer by mistake.
In 2015, Harrison and a handful of gaming hobbyists from various massively multiplayer online games came together to create a gaming guild. The group nerded out playing “World of Warcraft” four days a week for a few hours each night. There were no deadlines, weeklong sprints or competitions – just a group of 20-or-so strangers bonding over their favorite game.
As the guild’s roster added and dropped members and the team honed its strategy, they decided to compete in real tournaments. The guild became so popular that Santa Monica-based Team Liquid acquired it in 2022. The players of Liquid Guild, as the team is known, went from at-home computer setups to training 12 hours a day, six days a week in a facility armed with top-of-the-line gaming equipment and performance coaches.
“We went from everyone playing in their stereotypical mom’s basement to now playing at an Alienware training facility in Santa Monica,” said Harrison, Liquid Guild’s general manager. “It’s kind of a fever dream.”
Few have sustained their esports careers like Harrison. Esports, once characterized by fan-driven obsession and double-digit prize pools, entered the mainstream cultural zeitgeist in the mid-2010s and quickly spawned a web of game developers, talent agencies and billions of dollars in capital. At its height in 2022, roughly $4.8 billion was deployed in the U.S. esports industry, according to PitchBook Data Inc.
As investors abandoned the space, valuations declined and companies shuttered, the sector saw record-low funding numbers across the board in 2025. Today, roughly 25% of all esports companies in L.A. have gone out of business, PitchBook figures show.
Those that have survived are cautiously picking through the rubble of esports’ former glory, looking to slowly rebuild their beloved, niche hobby into a profitable business.
“I love video games. I love watching other people play video games. I will play video games until the day I die,” said Steve Arhancet, co-chief executive and co-founder of Team Liquid. “And I think that has led us with an advantage over a company that’s funded by a VC with a hired-gun operator that used to work at Google.”
The rise and fall
While developing “League of Legends,” developers at the West Los Angeles-based Riot Games Inc. saw the gradual evolution of the esports communities that ensconced early multiplayer games like “StarCraft” and “Counter-Strike.” When “League of Legends” was released in 2009, amateur gamers could win $20 by spending an entire Sunday playing in a tournament.
It was one of Arhancet’s favorite games. Arhancet, who had formed Team Liquid with co-chief executive Victor Goossens in 2000, would often play these low-stakes tournaments. Twenty dollars was considered money well-deserved back then, but paltry compared to the millions of dollars in winnings today. Team Liquid’s “League of Legends” players have earned $2.23 million in prize money, per Esports Charts.
“The stakes are real,” Arhancet said.
Esports slowly evolved into an integral pillar of gaming companies’ business strategies.
After spending years and hundreds of thousands of dollars developing a game, companies look for strategies to stretch a game’s longevity after hype around the initial release dies down. Today, many developers fuel the million-dollar prize pots themselves. There’s also the compendium model, whereby gaming publishers will create a digital good in the game (like a sticker or skin) for everyday players to buy. Revenue from those digital good goes toward a tournament prize pot.
“‘League of Legends’ and a lot of these games have been popular for many, many years, primarily because of what esports does for it,” said Marco Meru, founder and chief executive of the Santa Monica-based esports company M80. “It carries the storylines and the competitive elements and gives the fans something to cheer for and players to be fans of.”
The fan-led congregation that built esports faded as the push to professionalize esports led to more involvement from game companies. Today, most developers own their own esports leagues, including Riot. In 2017, Riot began contracting teams into its league, asking them to pay around $10 million to participate in exchange for 50% of the revenue generated. It was a common model among developers, who hold the keys to their games’ intellectual property.
“Another big part of the dream for esports was to make playing ‘League’ a meaningful life pursuit where a player could potentially build a long, well-paying career playing ‘League of Legends,’” John Needham, Riot’s president of publishing and esports, said in a 2023 blog post. “This desire to organize and professionalize esports and to deliver a high-quality experience for our players was the beginning of modern esports as we know it today.”
That upfront cost forced esports teams to raise capital elsewhere, and the industry quickly swelled with gaming companies, streaming platforms, marketing enterprises and talent agencies operating without a fleshed-out business model. Companies relied on taking a piece of prize money and sponsorship funds. But player salaries inflated as more esports teams launched and competed for talent, and most funds went toward talent.
“A lot of investors got pretty far down the road on the runway before some of these businesses figured out they really didn’t know how to make money other than thinking sponsorships were just going to land at their doorstep, which is not the way it really works,” Meru said. “A lot of investors early on were not really clear regarding what they were investing in.”
Los Angeles saw three new companies enter the esports ecosystem in 2013, according to PitchBook. In 2019, 17 new companies entered the fold – only a quarter of them went out of business by 2026, the Business Journal found.
Los Angeles-based esports company FaZe Clan debuted on the stock market in 2022, where it struggled to maintain its stock price until the company was delisted in 2024.
“I think (the gold rush) brought the wrong actors into esports – investors that wanted to come in just for a return, and they didn’t understand the space; they didn’t understand the jargon,” Arhancet said. “And they appointed management teams that also didn’t understand what they were doing.”
Course-correcting
As the dust settled, player salaries fell, publisher costs leveled out and esports companies consolidated. M80 and Team Liquid are among a handful of L.A. companies that have survived the esports boom and bust.
At first, they may seem different. Meru, a gaming industry veteran with 20 years of experience across development, publishing, marketing and influencer platforms, founded M80 in 2022. It’s a nimble company of 10 employees and six teams that compete in games like “Valorant,” “Call of Duty” and “Counter-Strike.”
By comparison, Team Liquid is the largest esports company in the world by employee count, Arhancet said. The company also has a whopping 26 teams under its belt.
But where both companies agree is their stance on investors, and both Arhancet and Meru expressed being conservative of where they take their money from, and how much. Though money was flowing through the esports space in 2022, M80 raised less than $10 million over two funding rounds at a time when the average deal size was $13 million, according to PitchBook figures.
“We don’t really celebrate funding milestones here because all that means is you’re giving up some ownership and equity,” Meru said. “We celebrate revenue, we celebrate profitability.”
Team Liquid has forgone venture capital money entirely. The company’s primary investors are sports team owners Ted and Zach Leonsis, and Peter Guber, co-owner of the Los Angeles Dodgers and the Golden State Warriors.
Both also focus on revenue-generating models like publisher partnership deals that allow for revenue sharing around digital goods. Some esports companies sell merchandise, such as apparel emblazoned with popular inside jokes between gamers. Others let their players stream for hours, where they can garner sponsorships and tokens from fans.
“Some people thought of esports just like sports, but it’s not just like sports,” Meru said. “It’s more sports entertainment; it’s more WWE than it is NFL.”
Team Liquid was the second-most viewed esports organization in the world, according to Esports Charts. The company’s Santa Monica facility boasts a command center that broadcasts streams and tournaments to tens of millions of people across YouTube, Twitch, Roku, and the China-based live-streaming platform Huya. Some of its content makes its way to fast channels on flights. Sponsors and partners make up 33% of Team Liquid’s top like revenue.
“We need to run a sustainable business,” Arhancet said. “That means that everything that we do, we need to be able to commercialize effectively.”
Building a legacy
Team Liquid is looking to build what Arhancet calls “the largest, multi-generational global esports team” – a lofty goal given how many cautionary tales plague the sector. Under Team Liquid are 26 different esports teams that compete in various games, from “Fortnite” to “World of Warcraft” to “StarCraft.”
To that end, Team Liquid invests in winning. The firm has won more than 75 championships. Liquid Guild has won three championships in a row. Its “Counter-Strike” team completed the fastest Grand Slam in 2019, securing the million-dollar prize pot in just 63 days. At the entrance of its Los Angeles training facility is a top-to-bottom wall of trophies – still only an eighth of what they’ve won.
Their teams train in state-of-the-art facilities worldwide. Outside of Santa Monica, Team Liquid has a 30,000-square-foot facility in Brazil, a 25,000-square-foot center in the Netherlands, and other training hubs in Indonesia, the Philippines and Washington D.C.
The company built custom software akin to telestrators for its streams. Players are equipped with wearables that track sleep and health patterns. Team Liquid built an extra fiber-optic line to meet its intensive connectivity demands. The company invests in cybersecurity. It boasts marketing teams, finance teams and a content team that broadcasts color analysts in a studio. An in-house chef fuels players while they compete for weeks on end.
“A lot of people who maybe don’t follow esports still suspect we eat Cheetos every day and that’s all,” Harrison said. “At this point we have chefs that cater to what normal athletes in a normal sport would eat.”
Harrison, as Liquid Guild’s general manager, handles everything from overseeing the team’s health, sleep and dietary goals to managing sponsorships – which sometimes means encouraging team members to repeat a marketing line too stiff for their usual banter on stream. As esports becomes more commercial, maintaining the authenticity that gave the industry its edge can be hard. But compared to the esports companies that have come and gone, he said, Team Liquid has survived by knowing its audience better than the rest.
“When I talk to Victor and Steve, I see myself in 10 years,” Harrison said. “They were playing the game, they were passion-driven, and I’m not talking to someone corporate who doesn’t understand me. I am talking to somebody who stood in my shoes.”
