eSports: Time To Level Up!
Over the last few weeks, my attention has been focused on what I believe will be the next big thing in the media & entertainment world: eSports. Or, if you prefer, competitive gaming.
In fact, saying that eSports will be the next big thing is probably inaccurate. It is already here. And it is big! Some examples to show why:
- The 2014 League of Legends World Championship finals were watched online by 27 million viewers. Game 5 of the NBA finals that year, between San Antonio Spurs and Miami Heat was watched by 18 million viewers. Let me put this another way, 50% more people watched kids playing a video game, than those who watched Tim Duncan beating LeBron James on the deciding game of the 2014 NBA finals.
- TBS, best known for re-runs of Seinfeld, Friends or Family Guy, will be airing live a new eSports league, starting next year. Valve (publisher of Counter-Strike: Global Offensive) has signed to participate in the first season of the televised competition.
- The VC community is starting to get all over it. A group of LA angel investors acquired Team 8, a professional League of Legends team, now renamed to Immortals. Marc Cuban invested in eSports betting platform Unikrn. Sand Hill has joined the trend as well, by investing $12M in Vulcun, a fantasy eSports startup. Super Evil Megacorp, creators of the mobile MOBA Vainglory secured $26M in a new funding round, led by Index Ventures. And you know that if there’s VC money being dumped into something, it’s because they smell growth (and gold, pun intended).
But if this doesn’t convince you of how big eSports is becoming, maybe this will:
Madison Square Garden, League Of Legends NA CS Final
A picture is worth a thousand words, right? These are 20,000 people inside Madison Square Garden watching the League of Legends North American Championship Series final, this August.
Newzoo estimates a total eSports global audience of 205M people this year, expected to grow to 335M by 2017 (CAGR +20%). It is worth noting that over half of this audience is defined as ‘occasional viewers’ which raises the question of how often do you have to watch a game to be considered an occasional viewer. Once a month? A year? SuperDataResearch estimates a smaller global audience of 134M, so the difference may come from this definition of occasional viewers. Still, these are pretty high numbers! Even if we assume that the global audience is just made of eSports frequent viewers and enthusiasts (around 90M people), that places it at the same level as ice hockey or swimming. If this number grows to 145M by 2017, as estimated by Newzoo, the eSports global audience will come close to that of American Football!
Another point worth noting: around 40% of viewers do not play any of the top eSports franchises – which shows signs that gaming is exciting enough to become a spectator sport.
On the revenue side, Newzoo reports that eSports is currently generating a total of $194M, growing to $465M by 2017 (CAGR +29%). But, in fact, this may be a conservative forecast, because it is assuming an average revenue per eSports enthusiast of only $3 by 2017. In general, individual sports generate $20+ per fan per year, so assuming a higher revenue per eSports fan of $7 is not too far-fetched and would mean total industry revenues of $1B by 2017.
But to get there the industry will need a lot more structure and co-ordination from everyone involved to make it more organized and, consequently, more appealing to larger audiences, advertisers, sponsors and players. Below is a quick breakdown of the main entities involved in eSports and, in my opinion, some things they can do to help grow the industry.
Publishers
Well designed and engaging games are the soul of eSports. Publishers need to think about their long-term strategy to keep the industry growing. Consider two of the main publishers, using very different approaches to eSports:
- Riot Games, with one single title in their portfolio (League of Legends). It is the most popular competitive game out there and the company does a really good job not only with frequent updates to challenge players, but also by organizing some of the major League of Legends competitions. The events business is not profitable for Riot, but they need it to raise awareness and reduce the risk of players stopping to play the game;
- Blizzard, with a full portfolio play. They have the most famous RTS game (Starcraft II), the largest MMORPG (World Of Warcraft) and probably the most popular online CCG (Hearthstone). To complete the portfolio, Blizzard just launched their own MOBA (Heroes of the Storm) and will soon release a FPS (Overwatch). Every single top competitive gaming genre will feature a Blizzard title.
I’m not saying that Blizzard’s strategy is better than Riot’s. But if the decline of World Of Warcraft serves as an example, I would not be surprised if Riot has difficulty in maintaining their top position over the years, unless they launch another title.
Teams
The events business is becoming too chaotic and needs more structure. Top teams can play a key role in defining and implementing that structure. In fact, some of the top Dota 2 and Counter-Strike teams have recently formed a team ‘union’. However, calling it an union is not entirely correct and many are saying that this is actually more like a cartel. In any case, these teams have now more bargaining power to deal with event organizers and to stipulate minimum requirements for top talent to participate. It will help filtering good tournaments from bad ones… even though some of the requirements announced by that ‘union’ do need some rethinking.
Also, with top players starting to achieve celebrity status and large social media followings, it will be their responsibility to become good role-models for other kids to follow (and for parents to understand). Expect talent management to become a key component of eSports.
Leagues
Leagues need to work with everyone else in the industry to, among other things, start defining a progression path for players. Right now, someone willing to get into professional competitive gaming will probably spend 15 hours locked in her/his bedroom, practicing scrimmages non-stop. Using other well-established sports as example, there should be a more defined way for players to ‘level up’ their game - from training facilities, to local events and different league tiers (local, regional, national, etc)
Brands
A lot of popular brands are already involved in eSports, from consumer electronics (Samsung, HTC) to energy drinks (Red Bull, Monster), and it is easy to understand why: growing brand equity with a younger crowd while indirectly driving their main business. But by being the ones sponsoring key events, brands have ultimately a lot of power to define the state of the industry - see what is happening with FIFA, for example.
Brands can work with the Leagues to help create the progression path for players, particularly at the local community level. They can also work with publishers on potential synergies to improve the global industry. Brands can sponsor and/or own teams, provide talent management or help players improve their skills. Finally, brands are uniquely positioned to help non-mainstream sports rise in popularity (think Red Bull and snowboarding) and eSports may be the next one.
Channels
Finally, the growth of eSports wouldn’t be possible without streaming channels which appeared over the last few years. YouTube and Twitch, just to name two of the most popular ones, are playing a very important role in getting eSports out there to a wider audience. They are already sitting on a lot of content which, together with some original production efforts like Free to Play, could help educating the wider audience. eSports is still not seen as a serious alternative for a professional athlete, mainly because of the lack of available information, examples and/or role-models. Parents don’t know what their kids are getting into and are afraid. Investing in high-quality content with wider distribution would definitely help.
Expect this channels segment to grow. A lot. I mentioned above the recent TBS announcement - I would be surprised if other cable networks do not follow suit. Other companies that could potentially have quite an impact in the streaming/distribution of eSports? Facebook, Snapchat, Pluto.TV...
These are just some ideas to improve the state of eSports. It will require close coordination, strategic thinking and long-term partnerships from everyone involved. The key goal here will be to grow the entire industry as a whole, sometimes at the expense of a quick buck for a particular player (publisher, team, league, brand or channel). The typical prisoner's dilemma.
I, for one, am extremely interested in seeing how things will shape up over the next couple of years!