18: Austin Woolridge — Where Playas Play

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Listen to the episode on iTunes

AMLG: I’m excited to be here today with Austin Woolridge the co-founder and CEO of Players Lounge a New York based company that allows casual gamers to play each other competitively on demand for money. Welcome Austin.

AW: Thank you for having me.

AMLG: And for disclosure RRE is a proud and early investor in the company.

AW: Record close.

AMLG: Quick work on that. It’s great to talk to you today, there’s a lot to cover, it’s an exciting space. It’s actually the first time I’ve talked to anyone on the podcast about gaming and eSports, not counting the VR sphere. Let’s start with a bit about yourself and how you got to where you are now, and your journey to founding Players Lounge.

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AW: I’ve always been into gaming. I’ve played video games pretty much my entire life. When I was growing up it was school, soccer and video games. I was also entrepreneurial. When I was 13 I finagled a job teaching kids how to beat video games for $20 dollars an hour.

AMLG: The early hustle.

AW: It definitely was encouraged by my parents and family friends. They said, oh this is a cool idea he’ll get paid $20 dollars to get his business acumen up.

AMLG: What were you training them in, Super Mario? How to beat Bowser?

AW: Something like that. We were playing Playstation and it was literally just like helping them beat the games, like get good at it.

AMLG: So you got to take over their controller, have some fun, and they’d pay you?

AW: Yeah. Like this is how you jump over this thing and then you’d give them a controller and they would try. I was actually looking at my eBay account recently and saw that it was created in 1999, so I was 10 years old. I would resell my video games to get money to buy the new ones. I can’t fathom how I did that at 10 years old.

AMLG: This is probably before GameStop existed right, before you could go in and trade them.

AW: Yes I don’t remember ever going to GameStop growing up. I’ve always been doing little things like that. Then in college I wrote an e-book on how to make money online. I was curious my freshman year how people could make passive income online. I discovered the concept of affiliate marketing and found a site where you could promote products. If someone bought the product or the service I would get a commission. So I packaged that in an ebook and tried to sell that on eBay, but no one was paying for it. Then I thought of uploading it to torrent sites where it was aggressively downloaded for some reason, like thousands a day.

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AMLG: A different community of people there.

AW: Right. That was cool because I paid for some of my college education off that money. Freshman year I made $20,000 dollars out of it, which seemed like a lot at the time. It’s funny, I also had to re-upload the e-book because it was considered spam. So every day I would hop around the computers at college — I went to Wesleyan University — I would hop around the library because they would ban your IP address.

AMLG: Because you were doing BitTorrent?

AW: Right. So I just uploaded it to a different computer multiple times a day.

AMLG: I’m picturing you scampering across the Wesleyan campus uploading your e-book.

AW: It was definitely better than working a job in the cafeteria. So I graduated in 2011 and was primed to go into finance, as my dad’s in finance and had connections there. Then I realized this was something I definitely didn’t want to do. So from then I was on my own looking for startup jobs in New York.

AMLG: And you went into rap producing at some point?

AW: When I was in high school and college I was making rap beats and ended up working with some up-and-coming artists of the time — Kid Inc. and Sam Adams.

AMLG: Any good tracks I can sample?

AW: There’s a song called Life is so Exciting by Fabolous ft Pusha T, and a song on French Montana’s first album called Bust It Open. Then I got a job at a digital agency with Rameet Chawla who you mentioned you know.

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Rameet Chawla, co-founder of Fueled, a mobile app development agency

AMLG: Yes shoutout to Rameet from Fueled.

AW: He taught me a lot about growing a small business as well as how to build digital products. I was working there for three years and decided I wanted to get into music full time, get a management deal. I pressed hard. But of course there’s no money to be made in the music industry unless you’re one of the biggest. So I had to find a new job.

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Alligator Lounge, Williamsburg

Then I had this idea to host video game tournaments at bars in New York. There was a MeetUp group that had something organized like that but it wasn’t active. So I took over for few hours a month. Then I found a bar in Brooklyn called Alligator Lounge and they were like “Yeah we’d be down to host a FIFA tournament.”

AMLG: And you would bring the consoles and the controllers?

AW: Right, we had to buy all that stuff. So I’m out to hold this event in Williamsburg and I run into one of my close friends and teammates at Wesleyan, we played soccer together — Zach Dixon. I’m like, yo I’m having this FIFA tournament at a bar. Would love for you to come. Because we played so much FIFA in college. I was basically trying to recreate that experience.

AMLG: That feel of community that you’d had in college?

AW: Right. We couldn’t go out on the weekends or before a game. So we would all pile into someone’s dorm and play FIFA for five hours. Definitely for money too.

AMLG: So this is how you and Zach came together. You knew each other at Wesleyan. Then you were running this in person MeetUp at the Alligator Lounge and another bar in Manhattan. So were you lugging around 100 pounds of gaming equipment after work?

AW: Exactly. Zach came to the first event and said I want to help you run this. I said, done. Let’s do it. He immediately became passionate about it. Zach and I were just seeing where this thing would go. We bought a thousand dollars worth of consoles and controllers and games and TVs. Zach is one of the best networkers I’ve ever met. Maybe the best. He got friends and family to come to these events and make them exciting. He got EA Sports to sponsor us, they sent us consoles and games to grow. Then one day Anheuser-Busch walked into one of our events, maybe six months in, and that opened up new doors — now we were working with Fortune 500 companies.

AMLG: They wanted to sponsor the events for branding purposes or to reach that audience?

AW: Their value proposition was for the bars. They saw us as a means to bring them more traffic and in return they would have to buy another Anheuser-Busch tap.

AMLG: I imagine it was a lot of operational overhead and a lot of organization. This was 2015 right? And it was all FIFA?

AW: It was all FIFA.

AMLG: Which is relevant this week because we’ve got the World Cup going on.

AW: Who are you rooting for?

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Harry Kane scores England’s second goal for a 2–1 victory just seconds into stoppage time in England’s opening match of the World Cup, June 18th

AMLG: Oooh. Well I watched the UK Tunisia match on Monday and I’m happy about the result. Also happy to call it a day after that. It was amazing. Kane is our new national hero. But yes I think I’ve got to pick a second team, figure out where my second loyalties lie. Who are you rooting for?

AW: I like Mexico. I mean I’ve got to root for a North American team right. I’m definitely rooting for Mexico and Nigeria looked great today. So those are the two teams I’m rooting for.

AMLG: Maybe I’ll adopt one of those. So how did you transition from running an in-person gaming community to an online gaming community?

AW: I actually played on competitor sites growing up. This isn’t entirely a new concept. What we’re doing is new in different ways. It’s an evolution, like MySpace was to Facebook. When I was playing on these other sites —

AMLG: Which sites?

AW: A site called Gamer Saloon. RIP.

AMLG: Which was for professional or casual gamers?

AW: It was casual. It was what Players Lounge is striving to do. The target market was the casual gamer engaging in eSports competitions and making money without being a professional. I’d had this concept in my mind since I was 18 and now that we had a brand and a following it was the right time to take a step back and realize, OK the ceiling for this event business is not that high. It’s capital intensive, it requires partnerships, there’s a lot of red tape. How do we make this a business where we own everything? All we need to do is get the customers. So in the summer of 2015 we started creating the MVP and spec’ing out how to build it. But we needed money.

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We had a launch party in April and one of our friends at Wesleyan who worked at a startup told us he had received investment from Strauss Zelnick. Strauss is the CEO of Take-Two Interactive, one of the biggest gaming companies in the world. They make Grand Theft Auto and NBA 2K. Our friend said — you guys should definitely figure out a way to get him to invest, it makes sense. But it’s difficult to get his ear. He’s a busy guy and the only way you can talk to him is by going to workout classes he has at the Harvard Club on Thursday mornings at 6am. I mean he’s been on Men’s Fitness, Men’s Journal, the Wall Street Journal. You can just google Strauss and working out. Someone had an interview with him during a workout and ended up throwing up. I’m not sure if he got hired or not. That’s the type of level he’s on. So I was like, hell no. But Zach said, I’m doing it.

AMLG: He took one for the team. What kind of workout class?

AW: Some kind of intense circuit training. So Zach went. The first four Thursdays he didn’t get a word with him. Then the next one he introduced himself, the next one he told him he went to Wesleyan, the next one told him he started this company with another grad. Then eventually got him to sit down with us.

AMLG: How many weeks of 6am workout classes did he do to pitch Strauss?

AW: Man maybe like three months?

AMLG: Wow. So Zach got in really good shape. And it worked, Strauss invested.

AW: Yes he invested and we used that money to hire a CTO, Dan Delaney. He built the MVP and we launched in February 2016 offering just head-to-head FIFA wagers.

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PWC 2016 survey [Source]

AMLG: So you launched in 2016 starting with FIFA and have expanded — you’ve now got Fortnight, Madden, NBA 2K, MLB, NHL, Call of Duty — those are all active?

AW: Yeah. Our entry point into the industry — because there are competitors out there that focus on other game titles — was we saw that sports skill-based competitions were underserved, and those were the games we knew best. So we entered the market with just FIFA and then a year later expanded to NBA 2K and Madden and NHL.

AMLG: These are all Xbox and PS4?

AW: Yes strictly console.

AMLG: OK. And will you go beyond that in future?

AW: We have some PC games up now — Fortnight on PC and PUBG on PC. There’s just a lot more bases to cover with PC. Cheating is rampant so you have to consider that, and it’s a different type of gamer. Part of what we’re doing is understanding each gamer and the culture behind the games they play, the consoles that they play. Because if you don’t relate to them on that level then your product isn’t authentic. When we add a new game we learn everything about the game. We learn how players like to play competitively. We learn the rules that they use and the nuances — like in FIFA no one plays legacy defending if it’s a real competitive game.

AMLG: And you’ve been seeing good traction, 100 percent month over month growth since December? Tell us more about the size of the community. I’ve got down 20,000 monthly active users, 2.5 million in wagers a month. Seems like a strong start?

AW: We’re happy with those numbers. It’s satisfying to see your market size analysis come to fruition. With 20,000 monthly active users wagering that much, if you know how many gamers are out there, there’s millions and that’s barely scratching the surface —

AMLG: Give us a sense of the size. I know people quote 350 million gamers globally over age 18. How do you go from that number to what your TAM is?

AW: There’s 350 million gamers above the age of 18 playing online and according to studies we’ve seen, around 50% of those are interested in wagering and skill-based competitions. At the moment we’re making around $20 dollars per month per user. Based off those numbers that brings us to a $40 billion dollar total addressable market. With the surge of gaming and eSports you can only expect that number to increase.

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An annual growth rate of roughly 29% [Source: Statista] These figures do not include betting. Including revenue from esports-related gambling. Activate estimates that the esports market will be worth $5 billion in 2020 [Source]

AMLG: They say 43 million people tuned into the League of Legends Championship in 2016 and that peak concurrence was around 15 million. For perspective, peak concurrent viewers for Game 7 of the NBA Finals was around 45 million. So it’s now in the same bucket as sport sports. The global eSports market did $655 million in revenue last year and its estimated to grow 30 percent a year and generate $1.5 billion in 2020, not including the wagering and the betting part. Including that they say maybe five billion by 2020. It seems like you’re jumping on this wave at a good time. And right now your model is to take 10 percent of those wagers?

AW: Yes. We keep it simple. Just 10 percent off the top that’s it.

AMLG: Would you consider doing ads? The studies show that the average view for an eSports broadcast is 84 minutes, which is an insane amount of retention for anything digital at this point. Given how competitive digital content is it’s a huge opportunity for advertising companies.

AW: I agree the opportunity is huge. But I would want to do it in an organic way that’s not intrusive. Our average time on site per user is an hour. And there are product features that we’re going to be adding that will increase that number. So the opportunity to make money off ads is certainly there. We do 10 million page views a month and there’s still a lot of room for growth. We’re still very early.

AMLG: What do the economics look like for your players, in terms of incentives or how much they can win?

AW: You can win whatever you’re willing to risk, but there’s also other means to make money. We have free tournaments that run every day. We have tournaments with large prize pools every weekend. We’re going to be expanding the tournament offering next month. We’re going to start having $5,000 and $10,000 dollar Fortnight tournaments. There’s definitely a certain set of gamers who aren’t willing to risk that one to one ratio of putting up what you would win, so we’re creating new programming to accommodate those gamers who feel more comfortable entering a $1 dollar $5 dollar $10 dollar tournament with the prize pool being in the thousands, where the ratio of entry fee to winnings is a lot higher.

AMLG: Tell me about the mechanics of running the site. People are coming online and can start playing immediately — how do you manage that liquidity?

AW: That’s a good question. One thing that investors would ask when we were raising money was, why don’t you expand to all games? Why are you only offering four titles? You would grow faster if you did that. It’s actually the opposite. You need to treat each game title as its own marketplace. If a user signs up who plays FIFA you need to ensure there’s enough people online playing FIFA at all times so that he has an initial positive experience. If he comes on and can’t find a game he’s like, alright this site clearly doesn’t work. You need to invest time in strategizing how to launch each game title. We think we’ve found a solid strategy there.

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eSports sales revenue by country (in million euros). The U.S. was the leading eSports market in 2016, with $98 million in revenues [Source: PWC]

AMLG: So you make sure you’ve conquered each title before you add on different communities. Speaking of communities, you’re in the U.S. only right now. Obviously Asia is a huge part of the gaming market. How do you think about getting into Asia?

AW: There’s a lot of hurdles to jump over to start a business like this. There’s payment processing. You need to ensure that you have proper KYC. Legally you need to make sure you’re protected. That’s a lot in the U.S. alone. Expanding to a country where you need a consultant to know exactly how things work over there is a large endeavor. At the moment we’re still scratching the surface of our U.S. base. But as we grow and have more fundraising rounds and can afford to investigate, that expansion is going to be huge for us. The market there is is massive and they are always the most forward-thinking when it comes to eSports.

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A gaming cafe in China [source]

AMLG: Is there a difference in titles? I know DOTA and League of Legends are big over there. I lived in China for two years and there were Starcraft cafes everywhere. As someone who grew up playing Warcraft I would try and get in there, but I’m definitely in the casual gaming bucket so couldn’t even compete. I’d love to be able to play Starcraft casually and not get killed in minute two.

AW: That’s exactly what Players Lounge is for. The localization effort of translating, on top of the legal restrictions — we’d have to prioritize those things. We’re not at that point right now given that our product is still in its infancy. It’s gaining a lot of traction but we want to make sure that the product is perfect before we expand to other markets.

AMLG: You mentioned the legal and regulatory climate. Listeners have probably heard about the FanDuel Draft Kings lobbying situation — the genesis of that is in 1992 Congress passed a law that makes it illegal for people to bet on sports in most states. Draft Kings and FanDuel are the two biggest U.S. daily fantasy sports platforms and have been lobbying in D.C. for the last couple of years. New Jersey went up against the government on sports betting, and that case made its way to the Supreme Court. There’s still a lot of activity. How does it impact you?

In May 2018 the Supreme Court made sports betting legal in New Jersey [Source]

AW: Right now it doesn’t affect what we’re doing, because we are legal to operate under the same law that Fan Duel and Draft Kings are legal to operate — that is, we’re offering competitions around games of skill. It’s not considered gambling. I could have a basketball tournament in New York right now for money because basketball is clearly a game of skill. But with FanDuel and DraftKings, it was harder for them to argue that because daily fantasy is not a thing that everyone knows as well as basketball or soccer. They had to prove that it was a game of skill and that cost them a lot of money. Fortunately it paved the way for me not having to spend those legal fees. When it comes to the new sports gambling law, basically New Jersey was arguing that it’s unconstitutional for the federal government to ban sports betting in all states except Nevada and Montana, and they won that case. That sets the precedent for every state in the country to legalize sports gambling if they want. So states are already putting in legislation to do so. Overall it means that the health of this industry is very —

AMLG: It’s a good time to enter market.

AW: Yes. That’s not necessarily a good thing for me though because it decreases the barrier of entry into the business. Before it wasn’t quite clear. I took the risk to go for it, pay tens of thousands of dollars for legal opinions to ensure that we were following the law. But now that straight up sports betting is looking like it’s going to be legalized, then skill-based competitions are obviously fine.

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Bobby Kotick (Activision Blizzard CEO), Robert Kraft (Patriots owner), Jeff Wilpon (COO Mets) discuss the growth in eSports and their gaming investments, July 2017 — watch here

AMLG: You’re just going to have to move faster than all the competition and crush them. It is interesting though, to see the traditional sports world starting to merge with the skills-based gaming world. Activision Blizzard sold the rights to the first seven professional teams in their Overwatch league for $20 million each. Some of those buyers included Robert Kraft who owns the Patriots Jeff Wilpon from the Mets. I think the traditional sports world recognizes how much of an opportunity it is and that it’s not so different. The audience might be different but when it comes to the nature of the industry there’s a lot of similarities. So it sounds like regulatory is not a headache for you. What keeps you up at night? What are the big question marks for Players Lounge?

AW: Well there’s not much proprietary about the technology that powers Players Lounge or any other site that could be doing this. You can have a superior product but if someone comes along who is heavily funded and wants to start buying users and raising the cost of acquisition for everyone in the space, and essentially create a war of attrition —

AMLG: Which is what happened with FanDuel and Draft Kings.

AW: That’s exactly what happened. The founder of FanDuel and I are close and he’s been giving me great advice through this journey. They were the first ones to do daily fantasy on that scale. They were doing well, very comfortable for a few years then all of a sudden Draft Kings came along and were heavily funded and started giving away millions of dollars in prizes. Just burning money to capture the market. To some extent it worked. That’s something that we’re cautious and aware of as a potential problem.

AMLG: Probably a lot of that comes down to community — your brand is known and getting stronger every day. Tell us about who is the community, how do you engage them, do you have any power users or fans?

AW: When we were hosting events we realized that there was considerable power in community. People would come from all over the Tri-State area to a fairly disgusting bar in Brooklyn. People from Connecticut on a Tuesday were driving to Alligator Lounge. We realized that you want to have fun with these people, you want to be competitive with these people, you want to win money, you want to lose money with these people. We built the foundation of Players Lounge around that principle. We want gamers to feel and acquire three things, and this is advice that the founders of Twitch gave us while we were at Y Combinator — fame, love and money. Twitch does a good job of that. They figured out that if they can give their customers one or all of those things they’d have a positive experience. So we’re trying to recreate that within Players Lounge and how we celebratize our users and how we create a community around the games that they play and love.

AMLG: It’s not anonymous right.

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Players Lounge leaderboard 06/29/18 — average wager for the past 30 days

AW: It’s not anonymous. We keep it as personal as we can. Because people are people and I think they want to be known as someone who uses Players Lounge, that’s the goal.

AMLG: Tell us about how your experience in Y Combinator has informed the business. I know the Twitch founders are investors and supporters — tell us what you’ve learned from that community?

AW: Y Combinator changed the whole trajectory of Players Lounge. Before getting into Y Combinator we had a million dollar offer on the table from sports owners and they end up not investing. But during that time when we were in limbo we went to office hours with Michael Siebel the CEO of Y Combinator and one of the founders of Twitch and Social Cam and told him about the deal. He was like “don’t take that. You should apply to Y Combinator. You already have revenue. There’s a decent chance you would get in.” So we applied, got an interview, flew out and prepared for an entire week. Built a spreadsheet of every question we thought we could be asked and memorized every answer. Like 300 questions —

AMLG: You were like, as long as there’s no 6am workouts involved we are going to nail this!

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Y Combinator statistics as of summer 2017

AW: I’ll do anything except that. So we ended up getting in. It was an amazing experience. They help you focus on what’s important, what you should be building, why you should be building it, what metrics to choose. It was a mini bootcamp. 90 percent of the time it’s you and your team taking what they said once a week and then applying that through the rest of the week, grinding in the same house together.

AMLG: And why did you come back East? Why New York?

AW: They tried to get us to move out to San Francisco. Maybe we will eventually, but Players Lounge would not have existed if we’d tried to start it anywhere else. The amount of people in New York, the amount of different ideas, the ease of transportation — it was a perfect storm that created the event stuff and the event stuff evolved into the company as it is today. Without the event origin, Players Lounge wouldn’t have existed. It was important to me that we kept true to our roots and not forget where we came from.

AMLG: New York is a special place. We’re happy to be investing in companies here and there’s a lot of great companies that now choose to be built in New York and not Silicon Valley. You’re a great example of that. And I guess you’ve translated some of that YC vibe. You guys live and work in Brooklyn all close together right?

AW: Yep we’re packed into an office slash apartment where everyone crashes.

AMLG: I’m picturing piles of controllers and consoles.

AW: We try to keep it clean. There’s a lot of consoles, a lot of TVs and computers. We make sure to have fun. There’s a lot of opportunity to have fun throughout the day but we also work hard.

AMLG: What will Players Lounge look like a year from now?

AW: Definitely a lot more users. We have features on the roadmap that should make things exciting. We want to continue to build out the community aspects and make people feel good about being very active and put them on a pedestal. We also want to offer different types of competitions, maybe competitions that don’t necessarily rely on head to head. Maybe who is the best at an offline game. But there are ways that we can know what your score was to ensure that we can find a winner. And we want to further de-stigmatize the nerdiness of gaming and be the brand that makes it cool to enjoy playing video games.

AMLG: We’re excited to see what comes next. Everyone go check it out, play some FIFA or Fortnight or 2k. Thank you so much Austin for sharing the story.

AW: Thank you so much for having me. I had a great time.

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https://www.pwc.se/sv/pdf-reports/the-burgeoning-evolution-of-esports.pdf

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