In the esports microcosm, from small ERLs to big franchised leagues, the headlines most often highlight worrying financial reports and clubs struggling to refinance their losses with impressive sums.
Today, however, we are focusing on a tale of caution and the success of a modest economic model: "The team of friends," Solary. Solary recently celebrated its 6th year of existence, launched by several well-known personalities from the streaming and esports environment.
With an initial capital of €1000 provided by several shareholders from all walks of life, the club marked its community imprint which will remain at the heart of the company throughout its evolution. Present in games like League of Legends in LFL, Trackmania, Fortnite, Super Smash Bros, and Hearthstone, Solary presents a competitive model that is ambitious yet modest financially.
Champion of Finances?
Solary's economic model is based on a fine alliance between web TV and an esports club, allowing for a viable economic relay, compensating in their case for the absence of private investors. A few faithful sponsors such as Aldi, Logitech, Justin Bridou, or Predator cumulatively contribute more than one million euros in revenue, and the commitment of their fans through merchandising or the support of the various web TVs forms the solid and diversified financial foundation of the team of friends.
The financial data firstly describes a controlled growth over the last three years, reaching slowly but surely 2.9 million euros in 2022. We have already been able to study the risks inherent in cases of high growth, but by controlling this variable and its operating costs, Solary managed in 2020 and 2021 to publish a positive profitability indicator. The year 2022, on the other hand, ends almost at break-even.
The average EBITDA (profitability indicator) of the club over the last three years is 133,000 euros, but it shows a downward trend due to the overall increase in operating costs in esports (salaries in particular) and the increase in the club's workforce (70 collaborators, including about fifteen employees). This increase would not be compensated by a corresponding increase in revenue.
The years 2020 and 2021 have allowed for the durable consolidation of Solary's financial structure, with an average equity level of 480,000 euros, and this, despite a debt ratio at the end of 2022 of 86%, the company remains within the traditional norms expected.
Because of its stability and the solidity of its financial structure, Solary can absorb the slight losses of 2022 without jeopardizing the company.
Solary : Evolution of financial data
A Limited Economic Model
The financial health of the club is good, and the capital of SOLARYTV PRODUCTION has remained intact from any dilution, although the prospect of a fundraising round is potentially envisioned by the club.
A fundraising round is still part of Solary's medium-term plans but will come at the right time when the organizational restructuring of the club is fully completed and will aim to boost non-esports revenues. However, it appears from the balance sheet that Solary's financial model is eroding and needs to quickly find new sources of revenue to offset the increase in costs that began in 2021 and is symptomatic of the evolution of esports in recent years.
The risk of a glass ceiling effect could be a limitation of the club's modest and cautious model. At a time when the race for human, structural, and organizational expenditures in esports is in full swing, how can Solary remain attractive to Europe's top players? Part of the answer is provided by the support of a fanbase engaged on social networks and during offline events, which the club plans to capitalize on in the future, as illustrated by the upcoming release of the Solary application, which should reward the commitment of its supporters.
The transition from WebTV and the valorization of esports
In recent years, Solary has marked a major transition in their economic model, which was completed in October 2022. Where the golden age of WebTV was enough to cover the needs of most activities, they are now breaking even on Fortnite TV and Hearthstone and running at a deficit on TV 1. Each branch of Solary's activities aims to be financially independent, even though they are integrated into the same legal entity.
The reversal in the distribution of historical revenues generated by WebTV and those from esports sponsorship seems to have found a balance that projects a favorable horizon for Solary in 2024.
Beyond a global restructuring of Solary's workforce, specific actions have been implemented to improve control over revenues and expenses, such as regular tracking of short-term financial indicators and the internalization of strategic hubs (notably through recruitment such as Drijoka in the commercial segment).
Another measure is the overall cost reduction that begins in 2023, with a decrease in the salaries of esports teams, particularly the League of Legends team, which has never been as small.
Overall, the club admits to having much better valued and marketed its esports asset compared to WebTV, which has been among the most-watched on Twitch in recent years.
To conclude, the years of financial abundance for the team of friends seem to be behind them, and the company, whose esports activities are now taking a predominant place in their economy, are witnessing the reversal of their profitability indicators. Restructuring, branding improvement, and reinforcement of the workforce are, according to them, the key to financial reconciliation.
