Category: General Sports Business

To call esports another ‘sport,’ tantamount to basketball, football and baseball, is doing a disservice to sports business. It’s an entirely new category – a seemingly endless and growing collection of competitions and ‘titles’ (games) that come and go, with innumerable leagues and business models springing up under this catchall umbrella of ‘esports’ as enterprising individuals and organizations seek to capitalize on the millions of fans consuming and participating in esports.

It was in this uncertain, opportunistic time that Sports Business Journal and Lagardère Sports partnered to hold the esports Rising conference in Los Angeles, bringing together the thought leaders and the movers and shakers in the burgeoning universe of esports to discuss where things are and where they may be going.

I didn’t attend the conference myself, but I was able to glean quite a few interesting thoughts and insights through the videos SBJ posted to Twitter from the event. An overarching theme is that these industry leaders recognize the inflection point at which esports currently lies, and everybody is trying to figure out how to assure all this potential turns into long-term, sustained, and growing success.

Why many are bullish on esports

Ken Hersh is an investor in esports because he can see the writing on the walls, he can see the signs that show why esports has not only arrived, but is here to stay. Just look at the younger generations now, the digital natives now starting to raise kids and the kids being born into this ecosystem themselves.

“Today’s parent is probably not going to take their kid to a baseball game,” he said. And given what we know about the genesis of sports’ affinities – how it’s typically during those years when a kid is 6-10 years-old when they fall in love with a sport and often inherit the sports their parents love – it’s no surprise many are concluding that the relative mole hill of esports fandom now may become a mountain in the years to come.

And Hersh also studies the experience of his kids, and how and why the sense of passion and community inherent to going to an arena, a stadium or a sports bar [not that esports can’t fill arenas] is also aflame with esports. It’s the ultimate lean-in experience for a fan and the barrier to entry for fans is slim to none.

“People who are gaming are having an intensely social experience, they’re just doing it in a room by themselves,” said Hersh “…It’s not a stadium of 20,000 people, but it kind of is – digitally.”

esports does not have a linear future

What do you think about when you think about esports? The casual observer may know Fortnite and Ninja. The next level of informed fan may also know about Overwatch League, DOTA, and PUBG. That represents a small fraction of the competitive titles and leagues out there, however. And in an industry where monetization will largely rely on the growing demand and interest of corporate partners and media distributors, a couple of the panelists noted there is risk with ‘too important to fail’ aspects of esports. Because if brands decide to invest in esports, but for them that means only Fortnite and the very few transcendent megastars like Ninja (Tyler Blevins), that’s tantamount to brands saying they only want to work with LeBron and no other aspect or player in the NBA. And that’s not a recipe for sustained success.

The word ‘ecosystem’ was used multiple times – as in an ‘ecosystem’ of esports that needed to develop – beyond a single title and beyond even the currently prevailing ‘battle royale’ format of games that seems omnipresent at the moment, but wasn’t the case just a few years ago. They encourage esports-interested leaders and brands to think ‘holistically’ when it comes to esports strategy and not to solely focus on capitalizing the flavor of the moment because there’s no guarantee Fortnite will be #1 next year, let alone next decade.

“The industry is not yet robust enough that the failure of a major esport can be survived by other esports,” said Riot Games’ Head of esports North America, Chris Hopper, who cautions about the fickle nature of individual titles and inherent change in what the influential star players and fans are focused on, particularly for games that are conducive to becoming true sports.

“I’m not 100% convinced Fortnite has the strategic depth to survive as an esport for a decades-long span…To me, there’s a difference between esport and video game competitions…If (the biggest players) stop playing…they lose a massive chunk of what made that game incredibly special.”

Monetizing esports

There are millions of fans, sure, but as most Internet entrepreneurs can tell you, all the eyeballs in the world amount to little without an effective way to monetize all those fans. Compared to the longstanding major sports, the revenue per fan is much lower in esports. But that represents an enormous opportunity for the industry, the models for monetization are just now beginning to mature. And the options are plentiful.

It seems like the last few years have seen a proliferation of subscriptions. Maybe it’s for food delivery, for Netflix, for Amazon Prime, and, oh yeah, Internet and cell service, to name just a few. Well, there is an option for the IP owners to offer an option that eschews advertisers, a white-label solution of sorts, that drives revenue directly from the consumer.

But of course there are sponsors and advertisers. And if esports distribution rights are ever to maximize revenue, it’ll likely be through successful integration of brands. However, esports fans are notoriously tough, skeptical and eager to identify and shun marketing and advertising. It’s benevolently forcing a better paradigm in the sports industry, as brands recognize they have to do it differently for this audience and this space.

“You have to do something different for this particular audience who can sniff out marketing right away,” said Shiz Suzuki, AT&T Assistant Vice President for Sponsorships and Experiental Marketing.

She thoughtfully noted that it should not and cannot be about driving fans to retail first and foremost, they, as partners, must ‘drive benefits back to fans.’ This may be through awesome content, through interactive activities at events, through freebies and prizes, and it can get more creative from there. Christian Flathman, who works in sports sponsorships for ExxonMobil, identified a unique opportunity in esports, too – value-add activation into the game itself.

Flathman noted a sweet spot is to “take our product benefits that we put on the [race] track in real life (and) actually see a product benefit in a game also.” So maybe one’s character can drink a Red Bull to get some energy back or to grow some wings, they can view the board better thanks to AT&T or ClearEyes, or any number of integrations that fans and players will welcome, because it enhances the game and actually helps them in the game – a positive interaction and a relevant activation. This will be an interesting area to watch.

The structure and consumption of esports

It’s pretty cool to see a sport, a number of leagues, and a model for distribution, live events, monetization, and, well, everything be born in front of our eyes, particularly in this digital-first world. We’re seeing now how esports consumption is different from that of ‘traditional’ sports and some of the esports habits and features are even making the day to traditional sports, and a little vice-versa.

Turner Sports’s Executive Vice President and Chief Content Officer Craig Barry hit on some thought-provoking ideas on traditional sports presentation – emphasizing that these young fans don’t necessarily want to be dependent on the produced broadcast, they want to pick their own experience, cameras, and angles. But that’s if you can even get them to tune in in the first place – Barry noted the omnipresence and ease of access for highlights. For them, watching highlights is equivalent to watching the game. Barry knows they’re living in a time of transition and change – that’s not to say the experience of watching a full game, lounging in the EZ-Boy is dead, there are just other experiences to consider, too.

“There will always be a place to lean back and watch, but the day-to-day consumption of content – that landscape is changing, and it’s highly digital and mobile,” said Barry. “And therefore the habits of the way people consume content has changed. And esports is a primary driver of that.”

Another interesting area where esports and traditional sports look to share some similarities – kinda – is the power of superstars. Except it’s to the nth degree in esports. Yes, clubs in the NBA, NFL, et al. benefit greatly from star performers that turn heads on and off the playing field, but the financial viability of an esports franchise and league can rise and fall with a star’s ability to build, engage, and activate a fan base even more so than in other sports, where winning titles remains the most valuable objective. But an esports athlete that brings along with him/her a fan base, whether they’re #1 or #10 in their sport, is worth everything. They can help attract more sponsors, more viewers, more fans just as much or more, for now, than winning the Super Bowl of one’s esports competition. It’s a unique trait if esports, but not surprising for an industry and ecosystem that was born through digital and social platforms, beginning with Twitch streamers attracting audiences of millions – for their play, but also their personality.

Finally, Brendan Donohue, Managing Director of the NBA 2k League, offered some insight into how they’re envisioning a fully formed league with teams representing cities. The likely outcome will not be traditional home and away games, with teams traveling to and from opponent cities throughout the season, but is more likely to evolve as a ‘traveling studio’ in which the league visits each of the member cities to put on the competitions; a barnstorming of sorts. It remains to be seen if this is also the long-term vision for other esports leagues, as well.

 

Major pro sports was largely an invention of the last century, but here we are in 2018, watching a new sport arise to major participation, popularity, spectatorship, growth, and monetization. There remain several questions unanswered, more developments and models to come, but it’s the 21st century now, and digital gaming is no longer a curiosity or a niche; digital is the new way of the world.