Ralf Reichert, Turtle Entertainment
The gamers enter three to seven commands per second via mouse and keyboard to their character without taking their eyes off the screen. In this scenario, they are not sitting in their bedrooms, but in a stadium in the Polish city of Kattowice – and one million people are watching. “And these are only the actions that one can see. All of this is preceded by a highly strategic decision-making process”, enthuses Ralf Reichert. The Managing Director and second-largest shareholder of Turtle Entertainment knows what he is talking about. He and his colleagues have endured countless struggles in their quest to establish e-sports as a spectator sport.
Just like numerous corporate success stories, this one also started out in garages and basements: This is where the young people meet to immerse themselves in computer games. After a couple of hours, the floor is littered with pizza boxes and Cola cans, one or two people are grabbing a few winks in the corner, while all others are glued to the screens. Reichert is one of them. In 1997, he set up a team, or clan, with whom he competed in some initial contests. At the Gamers Gathering at the Duisburg LAN Party, which first broke the magic barrier of 1,000 participants in 1999, they claimed victory. This was also where Reichert met Jens Hilgers, who had set up the first “German Clan League” DeCL while studying and working, and had even persuaded his employer at the time to sponsor the servers. However, Germany was not enough: Together, Reichert and Hilgers relied on bootstrapping to set up the international “eSports League” ESPL. “I didn’t understand exactly what you wanted to do, but I was convinced that you would succeed.”
One year later, they were broke and spent three months in a car driving across Germany looking for investors. Tobias Engelhardt, partner at “Engelhardt Kaupp Kiefer” was the only one who believed in them. Looking back, he concedes: “I didn’t understand exactly what you wanted to do, but I was convinced that you would succeed.” This was an extraordinarily courageous move for a German investment professional, recalls Reichert. Back then, Engelhardt was investing not in a product, but in a vague vision that would take ten years to establish. In addition, when the game appeared to be up for the umpteenth time, he proved to be a loyal partner who remained steadfastly and patiently by the side of the on-line gaming company from Cologne.
The directors of Turtle Entertainment spent the entire first four years searching for their identity. Bit by bit, they withdrew from the many areas in which they were competing – including a content magazine, game server leasing and programming work – and contracted on physical eSport tournaments. “For us, it was completely obvious that computer games are a spectator sport”, assures Reichert. And the clear logical advantage of eSport was that, unlike soccer, it was not subject to geographical borders. Ultimately, players were able to find team mates on-line and play together at any hour of the day or night.
The history of Turtle Entertainment reads like that of a closely-knit team of shareholders on a protracted mission that ultimately succeeds despite the numerous obstacles along the way. It’s possible that the “rough-and-tumble heroes” developed the necessary stamina from playing computer games: For ten years, they literally ran through an obstacle course, were brought to their knees here, ran into a dead end there, and all the time, fate shared with them countless variations of the same message: “You are too early for the market.” Despite this, they chalked up some notable successes and forged strategic partnerships, such as that with INTEL in 2001.
And despite this, they fought on, growing on the back of internal cashflow. In 2006, they hosted first global tournament series and acquired foreign licenses even though they had yet to establish a “proper” business model. Naturally, they were also dealt some body blows along the way, for instance, in China where they spent six years in vain trying to get an office up and running. (However, in 2016 they successfully organised the first stadium event in Asia.) Another premature decision saw them purchase shares in GIGA, Germany’s leading TV gaming channel at the time. The station quickly went downhill and the economic crash of 2008 finished it off.
However, in 2009, nine years after its foundation, four magical doors opened almost simultaneously into which Turtle Entertainment could venture with only the lightest of armour protection. The average German household now had access to DSL, and on-line portals such as Twitch were opening up the streaming of video games. What’s more, the gaming community was now growing exponentially on the back of its own publicity work using the increasingly popular social networks.
And finally, the business model of the games manufacturers fell into synch with that of Turtle Entertainment. Put simply: Whereas the free-to-play games had previously already had shifted into the secondary marketing chain after around eight weeks, “we only get started from this point”, explains Reichert. That is because it is only at this stage that the game can ideally become established as a long-term discipline in eSport. Five of these, particularly Counter Strike and League of Legends, are currently the most popular, with a further ten in high demand.
As their business went through the roof, the boys at Turtle Entertainment suddenly found themselves as old hands in a growing market segment. “Since we use to just run around with a vision, we went to great length to ensure that we implemented it extremely well. We learned to produce a great result from limited resources”, remarks Reichert. Apart from that, they already knew “what going international meant” and how to stage the entire concept as a spectator sport. Within two years, Turtle Entertainment had transformed itself into a globally successful company, as a result of which its “Electronic Sports League” (ESL) also became established. Word of this also reached Poland.
In 2012, the advisor to the Mayor of Kattowice offered the eSport company use of the Spodek – a multi-purpose hall that looks like a UFO, which explains why it is named after the Polish word for “saucer”. One year later, they jointly staged the first tournament. The arena, with a capacity of 11,500 spectators, was bursting at the seams. Although this overwhelming interest may have initially been attributed to the fact that 29 million people reside within a 250-kilometre radius of Kattowice and a lack of competing entertainment, the fact is that ESL had in the space of four years developed into the world’s largest eSport event, and had been catapulted into the mainstream. Reichert knows why: “Go to an event and you will understand it.”
Apparently, a great many people have understood “it”. The battles with policy makers and the press, which the entrepreneurs had waged for many years with Engelhardt Kaupp Kiefer at their side, have become less frequent and less aggressive. Video games were for a long time perceived as “the new evil”, recalls Reichert, emphasising that every new medium triggers the same reaction. The fear of exposing people without any guidance to influences that have yet to be fully researched is always high, he adds. Today, he is amused at how people laugh about immoral rock ‘n’ roll lyrics. During the 1960s, however, people feared they would bring about the end of Western civilisation. If computer games had been invented before books, says Reichert, citing a hypothetical scenario, people would have been afraid because books contain no pictures and encourage readers to give free reign to their imagination; and because, unlike computer games, they are consumed passively and in a solitary setting
“Society is always afraid of things it does not understand. And this was also the battle we had to fight.” Incidents of people running amok during the ‘noughties’ also inflicted “hundreds of moments of pain and sorrow” on the entrepreneurs, triggered by discussions of much stricter regulation of computer games. Reichert points out that people would be running amok every day if there were a simple causal link – because more than ten million people currently play first-person shooter games in Germany. “Just as with other media, 99.9 percent of users are capable of making a distinction between fact and reality. And the remaining 0.1 percent are always a risk.” For them, there are awareness campaigns, treatment facilities and assistance for families affected.
In 2014, Turtle Entertainment successfully crossed the pond – completing a bountiful conquest from which it currently generates more than 30 percent of turnover. Engelhardt Kaupp Kiefer saw that its time had come and announced its exit in May of the same year. Although Reichert would have preferred to focus his energies on further growth rather than on exit discussions, the revelation that the eSport company was three to four times more valuable than expected certainly sweetened the pill. During the 15-month negotiations, the excellent team work that had prevailed up to then continued, despite some differences of opinion. “We worked together to overcome any natural areas of conflict that arose due to conflicting interests”, sums up Reichert. During the 15 years in which Turtle Entertainment was supported by the investors, strong friendships were created, “which endured through difficult times”. From the quest to implement a hazy vision, during which Engelhardt Kaupp Kiefer kept itself largely out of the picture, through to everyday business dealings, discussions about individually running amok, and the economic crash: Reichert gives great credit to Engelhardt and his team for remaining reliable partners even during difficult times, for often simply trusting him, which meant that “they didn’t destroy too many things”.
During the search to find a new owner for Turtle Entertainment, the human element was also an important criterion for Ralf Reichert. In 2015, he and his colleagues decided on Stockholm-based international entertainment group MTG, which acquired a 74 percent interest in the company worth EUR 78 million. Certainly by this stage, their mission had proven itself a success and the eternal questions as to whether eSport was actually a sport at all, and whether the vision “could perhaps turn into something”, were now superfluous. Reichert is sure of one thing: “The only question today is HOW big this thing will get. And how we can maintain our very strong position in this market.” He essentially provides the answer himself when he says: “My generation is the first to grow up with computer games. So it was perfectly clear to me that the target group would continue to grow – until ultimately everyone played on their computer in the same way as they play sport or drink water.”