Swedish Startup Space

It’s Game Over For E-sports Startup Clutch’s Deal With MTG

Written by on September 1, 2016
Editors Note: This post is part of a series called Featured posts, presented by Breakit.

MTG and Clutch couldn’t agree on a price, according to Breakit’s sources.

Clutch Entertainment describes itself as “the world’s first gaming and e-sports ad agency”.

Clutch acts as matchmaker for advertisers and e-sports personalities. Its team includes high profile gamers such as HeatoN and GeT_Right, as well as gaming-related Youtube stars including Tejbz. Among Clutch’s ad clients are Sony Music, Swedish cable and telecom provider Com Hem, and the Swedish alcohol monopoly Systembolaget.

The company’s model follows a classic management structure; Clutch takes a commission from their talent, as well as consulting fees and ad revenue from media partners.

Earlier this year, Breakit revealed that media giant MTG, which has already invested in several e-sports related companies, had its eye on Clutch. But, according to Breakit’s source, that deal has since fallen through because the two companies could not agree on Clutch’s valuation.

“They simply couldn’t agree on a price”, one source says.

Another person familiar with the matter has confirmed that the deal seems to have faded away.

“I have no comment on the deal,” said Andreas Gillberg, co-founder of Clutch. “However, we have several collaborations with MTG, including Dreamhack and ESL.”

Last fall, the MTG acquired the media firm Dreamhack for nearly $30 million. In 2015 the Kinnevik-owned company also purchased 74 percent of Turtle Entertainment, owner of e-sport league ESL, for $84 million.

Clutch’s goal is to exploit advertisers’ difficulty reaching the young gaming audience, just as Splay and United Screens are trying to do with the Youtube generation.

The agency was co-founded in January 2014 by Ragnar Tingström, Andreas Gillberg and Gustav Käll. Tingstrom is also co-founder of Clutch’s sister media agency, Scream. Gillberg formerly served as Nordic Director for Ladbrokes, and Käll is himself a former pro-gamer.

When Clutch was launched, Swedish news site Dagens Industri quoted Mr. Tingström as saying, “it’s hard to reach them [gamers] with marketing if it is not done in a way they appreciate. It is too early to say whether we will have a turnover of 6 or 60 million dollars, but the market is huge.”

Now, two and a half years later, that high score of $60 million seems unreachable.

So far, Clutch has failed to become a major player in marketing to gamers. Their 2015 annual report shows sales of $500,000 and a loss of $190,000. The co-owners made a capital injection of the same amount, to cover the expenses.

CEO Gillberg stated, however, that Clutch’s revenues are growing rapidly. “We’ve already surpassed last year’s sales, and looks like we will double sales this year,” he said.

The agency is still in a growth phase, so profitability is not their highest priority. This year, Clutch invested in their own game studio in collaboration with Inferno Online. Add to that staff increases, and it seems that their figures will be in the red again this year.

“Our first priority is growth, more customers and to create strong cases,” said Mr Gillberg. “This year, we have doubled our customers.”

What kind of brands should be marketed specifically to gamers?

“It’s an audience that now is so big that it is almost synonymous with the demographic of young men,” said the CEO. “Every brand should have a strategy to appeal to the e-sports market, yet they do not know what path to take.”

The size of the ad market for e-sports is unclear. Internet advertising revenue in Sweden as a whole is estimated at around $1.5 billion, according to the IRM (Swedish Institute for Advertising and Media Statistics).

For Clutch, the challenge is that many marketing managers are still unfamiliar with the e-sports phenomenon.

“We have 100 percent focus on the gamer demographic, and can reach them better than other [agencies]. The next step for us is to show customers how much they can profit from targeting gamers,” said Gillberg.

With principal owner Scream backing them up, Clutch probably isn’t in dire straights financially speaking. But the annual report reveals that the company started taking from its share capital to the point that it was less than half of the share capital, which led to the establishment of a balance sheet for liquidation. The company has not filed for bankruptcy.

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