What Is The Company World Chess All About?
What is the story about the company behind it? What is their mission? And what connection does the company have to FIDE?
You might have seen the above graphic design from World Chess at the World Chess Championships in 2018, but what is the story about the company behind it? What is their mission? And what connection does the company have to FIDE? This is the rabbit hole you are going to jump into now.
But let us first start with their own presentation from their webpage:
World Chess was founded in 2012 with the aim to promote the mass market appeal of chess globally. We achieve this through our ecosystem of commercial offerings of different chess related activities, including the organisation of top-level tournaments, operation of the official online gaming platform of the International Chess Federation (“FIDE”) and other sport, lifestyle, social activities and merchandise related to chess.
Our vision is to build a global, leading intellectual sport brand by reinventing chess for the modern consumer. We intend to do this by becoming the leading platform for the global chess community through online, in person and hybrid chess events and activities, and by providing complementary product offerings to players, spectators, and partners through our ecosystem.
World Chess is a long-term commercial partner of FIDE and holds exclusive rights for the official FIDE online chess gaming platform, commercial rights to the FIDE Grand Prix Series as well as its proprietary products, including Armageddon Series.
World Chess is headquartered in London with offices in Berlin and Tbilisi but operates internationally.1
The whole story started back in February 2012 when Kirsan Ilyumzhinov was FIDE president and signed a contract with World Chess (named Agon back then).
Ilyumzshinov made an agreement with Agon that meant that Agon became the organizer of the World Chess Championship, the Grand Prix series, and the World Cup.
In return, FIDE got a 20-25% fee from Agon for the revenue of the events. Before the signing of the contract, chess.com obtained a leaked agreement between Kirsan Ilyumzhinov and Andrew Paulson (1958-2017), an American entrepreneur with business experience in Russia, the director at the time of Agon.
“It is stated that profits from these activities would be at the disposal of Agon and for distribution to its shareholders by way of dividends. The manager of the company would be Andrew Paulson, who would own 49% of the voting shares, while Kirsan Ilyumzhinov would have control of the board of shareholders and would own 51% of the voting shares. Mr. Ilyumzhinov would provide the company with its start-up capital in return for a share of the profits.”2
According to the chess.com article, both Mr. Ilyumzhinov and Mr. Paulson denied that the contract was in effect, and referenced it as an early draft.
If you notice the contract has signatures on it. However, the official records from Jersey show that Agon was established solely by Andrew Paulson.
Finally, The FIDE Ethics Commission judged in 2015 that Ilyumzhinov did not break the FIDE rules.3
The final contract gave World Chess the sole responsibility to organize the most important FIDE events, find sponsors, and even the option to pick a wildcard player for the tournaments.
A thought experiment could be to think about who could have benefited from moving important decisions about the most prestigious chess events outside the governing body of international chess and transferring the responsibility to a private company.
The strange construction has given way to suspicion of the real mission behind the company since the beginning. As you can read from this tweet from Garry Kasparov — he is not in doubt.
The 2014 World Chess Championship Match in Sochi and the Russian sponsors
Anand won the double round-robin candidates tournament that took place in Khanty-Mansiysk in Russia in 2014 to find the challenger to Carlsen, who one year before defeated Anand in Chennai.
World Chess had been bought by Ilya Merenzon from Paulson for 1 pound.4 If you have been following chess for a while you might know that Merenzon tried hard to copyright chess moves from World Chess events by suing Chess24 and other platforms for copyright infringements for showing moves from the games.5
It was hard for World Chess and FIDE to find a location for the 2014 match between Carlsen and Anand. But the final pick was Sochi in Russia.
The organizing committee was steered by no other than Arkady Dvorkovich. He was Deputy Prime Minister in Dmitry Medvedev's Cabinet at the time and also a member of the Russian Chess Federation.6 As a sidenote he also later served as chairman of the 2018 FIFA World Cup Russia Local Organizing Committee, collaborating closely with FIFA President Gianni Infantino.7
The Russian lead committee and Agon also found Russian sponsors for the event in Gazprom and Summa. Ilya Merenzon said the following in an interview with Peter Doggers from Chess.com:
“With Gazprom and Summa we had a commitment beforehand. We hoped to attract many more companies; I personally had a list of about fifty. I went to Oslo, I went to India...
“The two main sponsors are really good companies and we're trying to work with them so that they embed chess into their marketing or into their every-day life. For example Gazprom, we're trying to help them to have chess tournaments. Tens of thousands of people work there, so that would be really cool. Also to other sponsors we come to, we say: ‘not only sponsor it and put your logo there, but hey, make it part of your corporate culture, have people come to the tournaments, the grandmasters will come to you. Just enjoy it and use it in your marketing.”8
It is worth remembering that the organization of the World Chess Championship in Sochi happened the same year that Russia illegally annexed Crimea.
Agon has been criticized for its ability to find suitable sponsors outside of Russia. The main sponsor for the 2018 World Chess Championship was the Russian fertilizer company PhosAgro. PhosAgro is a phosphate mining company.
It might not be clear to the average chess follower how this company is a perfect fit for chess or visa-versa. However, PhosAgro is pretty clear about why they sponsor chess:
“Through our extensive support of the sport of chess we hope to encourage children and adults to sit at the chess board and test out their abilities at this most "intellectual" and traditionally Russian sport. I will not deny that I strongly hope that the challenger to Magnus Carlsen in the final of the chess championship will be a Russian player and our country will again have a chance to regain the chess crown.”9 - PhosAgro press release 30. November 2017
In a 2018-interview during the FIDE presidential election campaign ChessBase Editor-in-Chief Macauley Peterson asked Dvorkovich about the sponsorship situation with World Chess:
“I wonder if I can prevail upon your Russian business expertise. When a Russian company wants to sponsor a chess event like the World Championship in the UK, can’t they just write a check [i.e. make a normal bank transfer] to World Chess PLC — I mean how does their sponsorship practically occur? What we have now with World Chess PLC in the UK is there are shares owned nearly 100% by Ilya Merenzon. But a fraction of them are transferred to a Cyprus-based company called ArnoInvest Holdings and those shares are assigned a value — which is not the nominal value — but €404 euros (PDF) — a very specific amount — which makes those shares worth about €2 million — about the cost of organising the match. Is this a normal way of funding the event?”10
Dvorkovich gave a politician’s answer to the question, but the question might supply some insights into how World Chess worked in the past.
The withdrawal from the deal
After years with the special agreement between World Chess and FIDE, FIDE decided to get out of the deal. According to a tweet from Nigel Short, World Chess generated very little income for FIDE.
In 2017 only 39,000 € was delivered to FIDE.11 It was therefore expected that the new FIDE leadership would take back the organizing rights for the big chess events at the beginning of 2019.
Here is the announcement by FIDE Director General, Emil Sutovsky.
After the break between FIDE and World Chess, there is still cooperation between FIDE and World Chess in regard to the FIDE Online Arena.
In the minutes from the 2nd quarter FIDE Online Council Meeting in July 2020 it seems that FIDE might want even more change:
“To express dissatisfaction with the nature of the current agreement regarding FIDE Online Arena and to authorize the President to seek legal advice to revise or terminate the agreement for the FIDE Online Arena.”12
How does the future look for Chess World?
If you made it this far down the rabbit hole you might be wondering what is next for World Chess? I reached out to World Chess and got some replies from their communications manager.
How does the future look for World Chess?
“It’s exciting. We are trying to build an ecosystem and become a global chess brand that links up official online gaming with clubs, other experiences, merchandise, and events. And we are building it on a global level. It’s remarkable that chess as a business is new, and we are inventing or developing things as we go along and also we learn a lot, but we love chess, we believe that there is so much potential that there will be enough space for 100 IPOs, not one or two.
Right now we are working on the listing, as well as developing and releasing new features on FIDE Online Arena, the official FIDE gaming platform, as well as open clubs and launch amazing TV-first tournaments.”
How long does the contract with FIDE run?
”World Chess organized Championship cycle events between 2012 - 2018 and organized three World Chess Championship matches, including Sochi, New York, and London. World Chess also has a minor commercial stake in the 2023 World Chess Championship Match but is not involved in organizing it. We currently are FIDE’s commercial partner and operator of choice for the FIDE Online Arena (FOA), the official FIDE gaming platform, the contract is long-term for now.”
In recent news, it has been announced that World Chess will float on stock exchange to raise funds. Can you provide any details?
”On October 13, we announced our intention to become a publicly listed company through a listing of the company’s shares on the Main Market of the London Stock Exchange. We decided to do that because listing as a public company has multiple benefits. It ensures a higher profile and increased transparency for the company’s activities, enables a wider group of investors to share in its success, and makes it possible for World Chess to access capital on an ongoing basis to fund the Company’s growth strategy.
We expect that the listing will become effective and that dealings will commence in November 2022, under the ticker CHSS. World Chess’s aim is to raise up to £8 million. Final valuation will be clear after completion of the roadshow and actual listing.”
How will World Chess earn money moving forward?
”When we started out, money and chess was very much apart, but as we (and the sport) developed, the industry grew into something big and we learned as we went along. We are building an ecosystem that is based on several revenue streams, paid subscriptions to the FIDE Online Arena, chess merchandise, educational products, as well as sponsorship, and offline events.
We also operate World Chess Clubs (we are opening one in Berlin next month). An important project for us, and, we believe, for the industry, is Armageddon Series, a tournament and a show that is developed for television and will be broadcast from a purpose-built studio in Berlin.”
Yuri Milner is mentioned as a possible investor. Can you provide further information?
”There was some investment in World Chess by an investment vehicle held for the benefit of Breakthrough Foundation, founded by Israeli science and technology investor and philanthropist Yuri Milner and his wife Julia. We are aware that they are big chess fans.
Yuri himself and his team were guests at the events that World Chess organized in New York and London, and it was natural for us to approach Foundation’s team when we started raising funds. They were extremely professional yet helpful in talking to us and we are very happy to receive investment from such a well-known group.”
Is it a member's chess club or an online club? or is it a venue for organizing tournaments?
“In 2022, World Chess will establish in Berlin the first ever dedicated multi-functional chess space, club & bar and a permanent home for one of the most popular games.
The space will be created to contribute to a new form of communication with audience and sport fans. World Chess Club Berlin will be located in the city centre, at Unter den Linden. Located in a convenient place for all neighborhoods, a new venue of almost 1,000 sqm allows building a multifunctional space that will host all major international and local chess events.
The space in Berlin held the 2021 FIDE World Chess Grand Prix Series with participation of top international grandmasters. The venue can accommodate up to 200 people depending on the type of event.
The chess club will be functioning not only for all devotees of the sport, but will also offer the best food & cocktail menu. The venue will be open from morning to late night, serving coffee lovers and bargoers. A place that welcomes each and every, offering a surpassing gastronomic experience and providing a place for people to connect through their embrace of chess.”
For the Armageddon Championship, there is a 460K € prize fund. Who are the sponsors for the prize pool? https://chessarena.com/armageddon
“Thank you for another question. I'm so sorry, but there will be no more information for the time being. I will add your email to the media list and if there are any updates you will surely receive them.”
After reading the answers to my questions I’m still not sure I understand the business model completely, and if it is worth a potential million investment by Yuri Milner.
Milner interestingly invested in the Play Magnus Group in January 2022.
PMG accepted a $10M investment from Milner’s foundation, The Breakthrough Initiatives, which is located in the Cayman Islands.
Yuri Milner got a board seat in the deal with Play Magnus Group. Leonid Solovyev, Director of Operations in the foundation, has gotten the seat. How to interpret this possible investment in World Chess is unclear to me.
It also seems like World Chess is not interested in answering my question about who sponsored the 460K € prize fund for their Armageddon Championship.
I hope you found this article interesting. I think there is a lot more to write about this, so I might do a follow-up newsletter at some point.
If you have any questions just leave a comment!
Also, consider becoming a paid subscriber and support my publication. It is independent and reader-supported. New paid subscribers also receive my ebook ‘Blindfold Opening Visualization’.
/Martin
Very interesting piece, thanks very much.