The following was co-authored by Columbia student Maurice Eisenmann. You can also listen to our eSports podcast here. Also there are many links worthwhile, as part of this little eSports education…
If the last couple of months have made one thing clear to us, it’s that eSports are here to stay in some growing way in the coming years. With NBA and NFL owners buying eSports teams, the lines between traditional sports and eSports are blurring. Where back in the day a good month in eSports would be when there was one mainstream breaking news story, now not a day goes by without hearing about some key players making some amazing deals. We often get asked what the biggest trends and opportunities are in eSports and to be honest there is no definitive answer. With eSports expanding at such a rapid pace, trends are constantly evolving and new opportunities arise every single day, and with that comes great risk but also great potential reward, not unlike what was seen in the emerging days of MMA less than 10 years ago. However, we would like to try to give you what we think are the most crucial trends and opportunities in the eSports industry. (Note: these are not written in any particular order)
Collegiate eSports
Is “collegiate eSports, even a real thing?.” Well yes it is, the folks over at TNL Media wrote a terrific report on this exact issue, which we advise you all to read. Here are some highlights:
- At the moment, there are 15 schools in the US that offer eSports scholarships.
- That number, is almost double of what it was last year.
- Brands like Twitch, Quest Nutrition, Coca-Cola and Lenovo have either sponsored or hosted a collegiate eSports event.
- Since this is not a regulated NCAA sport, it falls under a club sports and activities, the barrier for PAID endorsements is wide open right now, as are the rules as to who can engage…grad students, undergrads etc. Much like emerging sports like rugby on the college level, there is no real way to quantify success, and therefore it is hard to fully understand what the value of eSports in college is. What we hope it is NOT is a money grab by schools looking to pull in tuition with the hopes of developing gamers into an unregulated and volatile world with no successful plan mapped out.
If this trend continues, eSports can play a role on the collegiate level, although it will be years for it to be a significant revenue driver in the sense of a traditional sport. Can college coaches use eSports players to improve strategy and even help with a recruiting base? We are seeing that with games like Madden and FIFA so it is a growing possibility. What is more possible is that successful collegiate club eSports teams, can be spawned from League of Legends teams or even Hearthstone teams in high-schools.
Mobile ESports
One misunderstanding is with how eSports are played, which right now is largely console based. Playing in the mobile environment, especially with complex games, is not nearly the same experience…yet.
With Amazon recently announcing a $100,000 mobile gaming tournament in Vegas, the company has set the bar for a previously underrated eSports genre, mobile gaming. With casual games like Fruit Ninja, Clash of Clans, Clash Royal and Critical Ops garnering millions of monthly users it’s a logical step to try to convert these casual gamers into eSports fans. Not only will this allow these game franchises to grow, it will also introduce these mainstream video gamers to the world of eSports. With Hearthstone consistently staying at the top 3 most streamed video games on Twitch, it is clear that mobile eSports titles are a force to be reckoned with. The multi-million dollar question just is, who will be the first to successfully create a mobile eSports league? (IMO YouTube failed with their Kings Cup tournament). Advice for any video game creator that wants to create a game that could succeed as an eSports title, create a game that is playable on PC as well as mobile, because you might end up cracking the Twitch top 3.
Gambling
Last month, the state of Nevada legalized eSports betting, as part of their plan on becoming the prime location of eSports. Only two weeks later, William Hill, in collaboration with the Downtown Grand, became the first sportsbook to offer eSports betting. I believe betting is a logical step for the eSports industry. With the NFL showing no signs of accepting betting in the near future, betting can become a major revenue generator for eSports companies. After all, with eSports being a digitally-native sport it is the perfect partner for betting companies. Potential betting ideas could range from Faker’s CPM (clicks per minute) all the way to Team Liquid’s tournament run. While the rest of the sports world is trailing behind on this issue, the time is ripe for eSports to take the lead.
Agencies
So far, no mainstream representation agency has stepped up to become a key player in eSports. WME-IMG is probably the closest in North-America, with their work with ELEAGUE and their eSports program at their IMG academy. We believe that 2017 will be the year that more and more eSports veterans will create niche eSports agencies. Which, if successful, will either grow into a key player in the industry or will be bought out by the Wassermans and the UTAs. One to watch? It would have to be the recently founded Evolved Talent Agency, with Ryan Morrison and Barry Lee on their team.
Non-Endemic Brands
Anyone in eSports is probably sick of the word non-endemic by now. However, it is more than a buzzword, non-endemic advertisement will probably be the biggest revenue driver for eSports in the near-future. In an environment where the broadcasting of live events is free, the main source of monetization is advertisement. With over 45 non-endemic brand partnerships so far, we expect this trend to explode over the next couple of years. Monster Energy just paid NASCAR $20 million a year to be their main sponsor, we can only start to imagine what that kind of money is possible in eSports as the property and the ROI develops more clearly. In 2017, more brands will understand the bang for their buck that they can get with eSports advertisements and will invest in eSports advertising campaigns. The first few brands will probably get the deal of a lifetime but expect those prizes to skyrocket as demand increases.
Investments by traditional sport owners
Reread the piece from a week ago, and expect traditional sports owners to increasingly invest in eSports teams or leagues. With Blizzard’s Overwatch league kicking off in next year you can expect some traditional sports owners to invest in a Overwatch team (Bob Kraft and Stan Kroenke were at Blizzcon this fall). They can fill arenas, connect with a young fan base, and control lots of conent for all their platforms. Plus right now it is a very cost efficient buy in which most owners will value (low risk, high reward). The successful ones will be well educated in their buys as well, and will also invest for the future, not just for 2017.
The rise of mainstream video games into successful eSports titles
When we look at the three biggest eSports titles (League of Legends, Dota and CS:GO), they all have an extremely loyal fan base but they are missing mainstream appeal. Titles such as FIFA and Call of Duty, could become eSports titles that appeal to a broader audience. After all, these titles are being played by a larger audience and could therefore introduce many to the world of eSports. Expect these mainstream titles to push more aggressively in 2017 for eSports dominance. Some notable examples include Major League Gaming and their work with Call of Duty this year in Vegas and the French Ligue 1 with their e-Ligue 1, which will be broadcasted on BeIN sports.
Exclusivity
With the Riot-MLBAM deal and the success of ELEAGUE, eSports is moving towards a traditional content distribution model. A big part of that model will be regional exclusivity. While executives at Riot have said that they will continue to distribute the actual tournament for free, they have said that additional, exclusive, content might be behind a paywall. With the rise of OTT platforms such as Monumental Sports and ESPN’s newly announced platform, and the increasing interest in live-sporting events by Facebook and Amazon, expect these companies to fight for exclusive distribution rights of the big eSports events. We are not expecting any of the main tournaments to be behind a paywall anytime soon, as the digitally-native eSports audience isn’t used to that. However, distributors will experiment with paid premium content and who knows, things might change in the near-future.
Players
Finally, there is one group in the eSports industry that has been notoriously underserved: the athletes. Much like the UFC, players are often under a non-traditional contract which prevents them from having any benefits. However, if the recent Overwatch league announcement is any indication, that is about to change. Overwatch will most likely be the first league to have standardized player contracts which will include benefits such as medical insurance and 401(k)s. With increased interest in eSports, good players are becoming a scarce commodity and they know it. The recent announcement of the Professional eSports association(PEA) is a good sign, as it splits the revenues 50/50 between the players and the organizations. However, we are not expecting things to radically change in a year, these structural changes will need time but player rights will definitely be on the agenda for any eSports organization!
Issues To Watch
The unregulated gambling industry has already given rise to potential threats to success such as game fixing. However with companies like Genius Sports investing in data integrity programs, high level gambling with established credible bettors can help alleviate what would be a huge issue.
There is also the issue of drug use, which will be watched carefully. PED’s in eGaming? Yes. Not steroids but attention medication which can help focus, and one of the discussions for mainstream acceptance, and even unionization, would include a clear drug testing policy in the future.
Oversaturation is another issue. Like the early days of MMA, there will be a rush and potential money grab for arenas, for teams and for players by those thinking they understand, but not doing the homework. There will also be less than well thought out attempts by media companies to try and force eSports into a traditional, and less than authentic, box. This is where financial pain will come in. Like any startup business or industry it should be expected, monitored and placed in the same perspective as the success that will come. Moderation in all things, and definitely buyer beware.
The numbers game will also be worth watching. There is lots of talk of brand investment, but at what price point? There is talk of massive engagement but how it is being monetized. There are pictures of massive crowds showing up at traditional arenas, but do they return, and if they do, what is the frequency for the casual fan? Gaming companies make money on selling games; much of the event marketing right now is a cost, and in some cases an expensive one. Will that evolve into a credible and lucrative consistent event business? Probably. When, will be worth the watch.
What Does It All Mean?
eSports won’t be going away. There will be growth, better understanding, better mainstream storytelling and a more mature and traditional model going forward and it will be a key driver on many fronts globally in 2017. Traditional sports will not be going away. If anything there will be roles carved amongst traditional to find how the fan, the data and the adoption of core eSports elements can nest help the whole pie grow, with a carve out now for a newer (keeping in mind gaming has been around for decades, sometimes we forget that) genre in a billion dollar sports AND entertainment pie.
Keep watching, trying and engaging, it is going to be a fun ride.
