Week 36 - What I Need to Know About the eSports Industry
Playing video games for a living - a dream job for many young girls and boys and a nightmare for most parents.
As of now, the eSports industry is getting close to being a billion-dollar industry, and that's before it's even gone mainstream.
Just to put some of that money into perspective, the winning team at the eighth Dota 2 Championship received over $11 million as prize money.
But even though eSports proper is still young and growing, competitive gaming isn't a new phenomenon.
Going back 46 years or so to 1972 you can find 20 people competing in a video game tournament at Stanford University's Artificial Intelligence Lab. This competition was dubbed the Intergalactic Spacewar! Olympics and pitted both teams and individuals against each other for the coveted prize of a year subscription to the Rolling Stone magazine.
Now who wouldn’t want that…
As the 70s progressed games became more popular. But in most cases, the competitive part was just beating someone else's high score. The only other major competition was the first Atari National Space Invaders Championship in November of 1980, which was won by Rebecca Heineman.
Soon after, in 1981, a database called Twin Galaxies was created for video game world records by a man named Walter Day. Then in 1983, he made himself the captain of the U.S. National Video Game Team and toured the country in a bus to challenge other people. His tour ended at the Video Game Masters tournament and was used to populate the next year's edition of the Guinness Book of World Records for high scores.
In 1988, a shooter/RTS game called Netrek would be called the first online sports game as it pitted 16-players against each other online and became more popular as internet speeds increased in the early 90s.
Nintendo, not one to get left behind, began their own World Championship. In March of 1990, the Nintendo World Championship toured across America and Canada, challenging gamers on custom NES cartridges (playing Super Mario Bros, Bad Racer, and Tetris).
But then, in 1997, Quake started what we know today due to their Red Annihilation tournament. This competition brought together over 2000 gamers virtually, with the top 16 getting flown to the World Congress Centre to compete at E3. The winner of that bracket (Denis Fong) won a Ferrari 328 GTS that was previously owned by the developer of Quake.
With Fong being recognized as the world first professional gamer, the idea that video games can be more than just fun was starting to enter people's minds.
The early 2000s were also foundational years in the eSport's world:
World Cyber Games launched in 2000
Electronic Sports League launched in 2000
Major League Gaming launched 2002
Xbox Live launched in 2002
Halo 2 broadcasted on national TV in 2004
Since then, gamers, developers, publishers, and sponsors have been riding the eSports wave. On top of that wave, we can see streaming platforms like Twitch and YouTube that make the industry even more widely accessible.
In 2018 alone, we're expected to get to almost a billion dollars in revenue, and there is still so much potential. In the near future, it might not be so weird to think of pro gamers the same way we do pro football or soccer players.
eSports seems to be a sector that most advertisers and investors would be amiss to at least acknowledge. With annual prize pots reaching tens of millions of dollars every year, and global viewership expected to dramatically increase over the next few years, eSports is a force to be reckoned with (and invested in).
The Overwatch League (OWL)
Fans and gamers alike are lining up to enter the Blizzard arena to watch their favorite teams go head-to-head in Activision Blizzard's game, Overwatch. The Overwatch League was created in January and featured 12 city franchises, and has a lot riding on its success.
But besides bringing together top talent to compete in a healthy competition, the rise of eSports is also a clear medium for advertising, marketing, and brand growth. For example, prominent sponsors include Twitch, Intel, Toyota, T-Mobile, and Sour Patch Kids.
Just like regular sports, eSports pulls many of the traditional and well-received elements, like play-by-play analyses and franchise models.
In Blizzard's case, they are attempting to bring eSports into the mainstream viewership and doing it on a massive scale.
What This Means for Brands
When it comes to marketing/advertising opportunities, eSports can be a fertile playing field. According to Intel, which has a long history with the eSports industry (both having their own tournament and being one of the biggest chip manufacturers), companies that get into this field will pull directly from tactics used in regular sports advertising.
In one example, Gillette created a series called The Pursuit of Precision, which was essentially a behind the scenes look at the life of eSports athlete Enrique "xPeke" Cedeño.
There are two important clarifications about eSports though as compared to their more mainstream cousins (like football, soccer, tennis, etc):
Mainstream adoption doesn't mean it will suddenly have a prime time spot on TV
Fans in eSports can be just as die-hard as traditional sports fans
A challenge with eSports is the variety of games, with some of the most popular viewed and played ones being shooters. Obviously, many companies are hesitant to slap their brand on games about killing the other team and thus lean towards more peaceful games (think Rocket League and other sports games).
Bigger issues remain though, like understanding the actual effectiveness of eSports as an advertising medium and general shelf-life of a game.
With very little and scattered structure to the eSports industry, it's hard not to see the current atmosphere as a wild west situation.
The Overwatch League seems to be confident in it's future though, as it believes the fundamental structure of the game (6v6) will always be a popular format, even if Overwatch itself changes.
Games come and go, some die out, some don’t live up to the hype, and others we just don't know if they'll last. The best players last years are not necessarily going to be the best ones the next year, and teams are not even necessarily tied to their franchised city.
So while it makes sense for someone in D.C. to be a Washington Redskins fan, it gets a little more complicated in eSports when the team is tied to London, owned by U.S. citizens but all its players are Korean. While these kinds of situations do happen in regular sports, it seems to be much more common in eSports.
But, I would argue, one of the biggest challenges that people have with investing in eSports, is the stigma around gamers - nerds living at home in their parent’s basement (among other things).
The Future of eSports
While acceptance and recognition is still on the rise, who knows how eSports will develop. In one instance, it might be incorporated into the Olympics through efforts from Intel. What's clear though is that gamers are becoming more accepted and mainstream, and companies and platforms have the option to make a lot of money.
Screaming fans wearing their favorite team's jersey.
Eyes fixed on the game.
Just your typical Dota 2 International Championship with a winning prize pool of over $20 million. The winning team at this 6th Dota 2 Championship each took home $1.87 million. It's no 1.6 billion Mega Millions, but hey, one million dollars is still a lot.
This eSports competition, which many just define as professional competitive gaming is quickly becoming a go-to form of entertainment. At least among 22% of the male millennial population.
With annual revenue increase year-over-year (with $1 billion in revenue expected by 2020), it's getting harder for the mainstream world to not see the power behind eSports.
Curious as to where all this money is coming from? Me too.
A majority of it comes straight from ads and sponsorships. Not too surprising if you're familiar with the sports world at all. Game developers use eSports as a way to not only gain exposure for their game, but also ensure that it has a long(er) lifespan than if it was just commercially played.
Video games, and thus eSports, are also one of the best ways to buy the attention of younger audiences. Depending on your product or service, this could be a goldmine of an audience, especially with the heavy amount of attention dedicated to each event. And as we know, attention is your most valuable asset. Companies like Coca-Cola, Geico, Arby's, Red Bull, and more are already buying into this.
Even regular sports teams are seeing the opportunity with eSports partnerships:
Philadelphia 76ers buy Team Apex and Team Dignitas
Miami Heat partners with Misfits
Various European teams have gamer representatives
And as more organizations take note of the value in eSports, the price of entering the game will increase. As of now, while it's still cheaper to advertise in the eSports world than in the traditional sporting industry, it will most likely change.
What I think the real kicker is when it comes to eSports though is the medium through which it is consumed. Take Twitch, the leading platform for viewers and streamers, for example. Not only do you have a massive variety of channels to browse, but you can interact with each and every streamer. Gone are the days of one-way viewership and incoming are the days of interactive broadcasts.
But the eSports industry itself is inherently changing too. A natural next step would be to incorporate a VR aspect to a popular event as a way to steep viewers in an even more intense experience that many traditional sporting events would have trouble make work.
And a special eSports vein that can't be overlooked is the mobile world. While this subset is smaller than it's PC oriented older sibling, companies like Skillz are already working on how to really monetize it.
A word of warning however: an eSports athlete is not a stable or mature profession. Just like how many traditional athletes have other jobs to supplement their income, eSports athletes are no different. This is a budding profession, and while it has seen immense growth in the past few years, still has far to go. But it might not be as far as you think.
Too Long; Didn't Read
In the past 6 years, the eSports industry has gone from an annual revenue of $130 million to a little over 900. That's an almost 600% increase in revenue in just 6 years.
Even though eSports seems to be gaining relevance, it's not such a new phenomenon. Competitive gaming competitions have been happening for decades, they just have a lot more money now and give the winners more than just a magazine subscription.
The line between traditional sports (and athletes) and eSports (and its athletes) is slowly getting blurred. Advertisers are getting in on the action, sports networks are picking up their pace, and teams are even partnering with their digital cousins.
Entire leagues and tournaments are quickly taking shape and gaining relevance (and bigger prize pools), and the upcoming generations will only increase that.
Sure, not every company needs to invest in eSports. Just like how not every company invests in traditional sports advertising. In most instances though, the tactics will look the same and there's a lot of money (and attention) to be won.
Who knows, we might even see professional gamers in the Olympics one day.