Is Esports Having its Big Moment?

June 26, 2020

Gamer or streamer girl at home in a dark room with a gamepad playing video games with friends online. Young man sits in front of a monitor

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Even before the COVID-19 pandemic began, esports was predicted to be a huge driver of growth for the video game industry in 2020 and beyond, according to Niko Partners. With mainstream sports around the world still on hold and many people continuing to stay home to help stop the spread of coronavirus, esports has become increasingly popular as a form of entertainment.

Some sports leagues such as the NBA have turned to the esports sector to find new ways of engaging with fans. NASCAR has been one of the most successful sports to augment cancelled events with its iRacing Series, with one event attracting 1.3 million viewers at its peak. Several esports competitions are also being shown on live TV, as broadcasters look to fill hours of scheduled sports content that were cancelled in the wake of the pandemic. Additionally, Twitch, the biggest live-streaming platform for games, has seen its hours watched jump 50 percent between March and April and a full 101 percent year over year.

So, is esports having a big moment? What’s happening and what will happen next?

To take on these questions, we recently brought together several esports insiders to give their perspectives on current trends in the industry, including:

Read what they had to say below (edited for length and clarity) or watch the discussion on YouTube. You can also check out Telstra Broadcast Services to learn more about how we support gaming and esports companies here.

 

What was your esports business like pre COVID-19, and how will it change in the future?

Todd Harris (TH): Skillshot Media is a mission-based esports solution provider with the goal of building esports communities with a positive social impact. It’s a fairly new company, created in January as an off-shoot of High-Rez Studios, which I used to run. Our business has had to pivot significantly. In the first quarter of 2020, our plan was to build a studio in Atlanta, Georgia, and host a few marquee esports events, including one at the NCAA Final Four and also a collegiate esports finals at a local festival with about 30,000 attendees. Obviously, that plan had to change, so our business shifted from being a combination of media and live events to 100 percent media and remote production. We’re busier than we anticipated, and right now we’re all about producing a virtual product.

Ricardo Rodrigues (RR): Many people know Telstra as an Australian telecommunications company, but many people don’t know that Telstra is a global business. We have a network of subsea cables, fiber and satellite all over the world that we use to move all types of companies’ data and content to and from different points globally. One of the major industries we support is broadcasting, particularly live sports, which have slowed down significantly during the COVID-19 pandemic, so that’s a big change. However, we also work with gaming companies and streaming platforms, and those industries have just exploded. Global internet traffic has grown by up to 40 percent since last year, and companies like Twitch have doubled their viewership in one year and Facebook traffic is growing as well. A lot of that traffic is being carried on our network. In just the last three months, some routes on our network in Asia are seeing more than triple the amount of traffic, and gaming and esports accounts for a big portion of that increase. Generally, it’s been very interesting for us to see how things have balanced out with live sports slowing down but esports, gaming, and overall internet traffic growing incredibly. As time goes on, broadcasting will move back closer to what it was before, but the proliferation of esports and gaming has accelerated and these industries will come out of this stronger than they were before. In terms of how that will affect broadcasting, we’ve been seeing a lot more broadcasters using remote production during the pandemic and it’s going to stick around because it works – it’s easier, it’s more flexible, and more cost-efficient.

Nikita Buffee (NB): Allied Esports is a global esports property network and we run a number of high-end esports arenas around the world and produce proprietary content and third-party content for brands. Prior to COVID-19 we were doing very well. We had some good year over year growth – we announced partnerships with property developers like Simon Property Group and Brookfield Property Partners, the development of a new arena in Atlanta, and the opening of new arena in Melbourne with Fortress Esports, which joined our global property network. It was all very exciting and then suddenly COVID-19 came in and forced us to take that step back and slow down. As an events and venue company, it’s impacted us quite a lot, but there is a silver lining in that our production has stepped up and we started producing more proprietary content from Europe. We’re also working with a number of non-endemic and endemic partners to produce third-party content remotely. That has been very well received and it’s been a new revenue stream that were aware of but hadn’t necessarily focused on. The result is that once COVID-19 goes away (hopefully soon) we’ll continue to develop that business line.

Dave Harris (DH): Back in the day, esports events were being held entirely online, but over the last few years, the industry has evolved incredibly quickly to the point where most of our events have been taking place in studios or stadiums. When COVID-19 hit, the leagues were down for about two weeks, but we rapidly pivoted back to the old-school, remotely-produced model, even though it was a bit of a learning experience. For example, for League of Legends European Championships Excel competed out of Berlin with the production being done out of 14 venues, mostly people’s homes. With the German internet not as strong as we would have liked, there were some problems, but it was amazing how quickly we got the league back online. From a commercial point of view, it didn’t disrupt things too much. Without the studio, some sponsors didn’t get as much exposure as they normally would have, but esports hasn’t been as commercially affected as live sports. Additionally, viewership has skyrocketed. You don’t want to be gloating about it with a horrendous backdrop at the moment, but time will tell how sticky these numbers are for viewership when the world returns to normal.

We’ve talked a little bit about how esports events have evolved over the last few months. How are you developing these events and how are they different?

TH: They’ve changed in a big way. Before COVID-19, in-venue events would normally have 40,000 attendees and the energy and excitement of an EDM concert or sporting event. With the shift to online, we had to execute more digital events, and we did one on May 5 that had a non-profit charity component for COVID-19 relief called COV-AID. It benefitted two great partners, the Boys and Girls Club of America and Americares, which is a global organization providing personal protective equipment (PPE) around the world. The event leaned into live sports being on pause and live music being on pause. Athletes, musicians, and entertainers wanted to be able to connect with their audiences, and gaming and esports were the only platforms that still existed to enable that. We hosted a 13-hour-long livestream where we partnered with six different games – Super Smash Bros., iRacing, Fortnite, Call of Duty: Warzone, Madden, and NBA 2K – and had about 100 celebrities involved. Football player Rob Gronkowski challenged both Ninja in Call of Duty: Warzone and Lil’ Jon in Madden, which was remarkable. It was a great event with lots of partners and people coming together to give back, but certainly for Skillshot as a producer and an esports operator it was great experience. It opened up production challenges that we hadn’t had to solve for before, and we’re a better company because of it. It wasn’t the first event like this and it won’t be last, as more companies explore the virtual space this way.

What have you learned as your esports business has grown in the past year or two? Have there been any surprises?

RR: The main lesson here – although not a really a surprise – was how quickly the esports industry adapted to the situation. If there was any industry that was prepared to do at-home or remote production to help keep people entertained, it was going to be gaming and esports. Look at all the streamers and gamers out there creating content from their own homes or teams from their own studios. That, for me and for the overall sports industry, is the lesson – how esports was so well prepared and flexible to quickly shift or accelerate some the things they were doing and keep pumping out great content. This would be really difficult to replicate in other industries.

To many people observing the industry, esports is looked at as this grand tournament in a venue with lots of spectators like a concert. You watch the famous people play and then they stream everything online, but in the future that’s going to change. We’re watching the emergence of some key user segments in esports – one of them is women and the other is amateurs via mobile esports or PC. What do you think about that?

NB: Everyone in the industry is trying to figure this out. There’s no quick, easy answer, and it will be a multistep process. A lot of women and girls love to game, but how they game and the games they choose to play are different from men, so that has implications for esports because many of the popular esports games are dominated by men. Additionally, we must encourage open discussion and the acceptance and normalization of female gamers, especially young girls. A friend once explained to me that when she was growing up she was very interested in soccer, but didn’t pursue it because she didn’t believe she could do it. Women’s soccer wasn’t as big as it is now, but then it exploded in popularity in North America. She said that if she had had those role models to look up to when she was younger, it might have encouraged her to make a career out of playing soccer. That conversation made me think about the esports industry. We need to champion the women involved in esports and gaming so that girls growing up can say, "I want to be like her one day." Over time that will happen.

DH: Esports is unique in that it’s a level playing field, especially when you compare it to traditional sports where there are few competitions out there where men and women can compete against each other without taking into account physiological differences. Guinevere Capital supports all-female teams like Supa Stellar because we think it’s important to encourage participation. While there aren’t any physical limitations in esports, it does skew male on the participation front. There’s a huge opportunity in esports for diversity and inclusiveness, and the industry just has to do more to address that balance. It varies a lot from game to game, as some of the first-person shooters are incredibly male dominated, but when you look at the live audiences at some of these big stadium events for games like League of Legends it’s a very mixed crowd. Part of it comes down to the game publishers. It’s not easy to monitor the sometimes toxic in-game behavior coming particularly from young males, but that behavior is often what puts off a lot of females. Furthermore, diversity and inclusion in gaming also goes beyond just gender. You don’t need to be a six-foot, muscled athlete to compete in esports. However, as much as we try to say that anyone can become an esports star, and that’s the dream you try to sell, most of the elite players have something cognitively different that helps them get to that level. That’s supported by an esports study that came out from the University of Technology in Sydney. The great thing is that anyone can participate and there are amazing case studies of people with certain challenges and disabilities who are competing at quite a high level.

TH: When it comes to women, esports is in better shape than traditional sports, and that’s happened in just a few years. The fact that esports doesn’t require physicality and people don’t have to divide up into men’s and women’s leagues is an advantage. Soccer in the U.S. has come so far – 40 percent of soccer players are female (youth on up to professional). Comparatively, 50 percent of gamers are women. We often think esports is only a venue for the elite players in a certain set of games, but that’s just the visible part of an iceberg. Underneath the surface there are massive amounts of amateur and women gamers. Game genres also play a role. We talk about encouraging women to play traditional sports in general, not about specific sports like football. In the same way, there’s a small set of game genres that are getting the spotlight, but over time more genres will become popular. When you dig into the data, there are some genres are dominated with 70 percent women and there are others that have under five percent women (i.e., sports games). Women and girls are playing games, but as an industry we need to shine a light on those games and genres that are popular with that demographic.  

Many esports forecasts show media rights as the main source of revenue in the near future. What are your views on that and how do you see it happening?

RR: If I knew the answer to that I would go start my own business (haha), but it’s true that media rights will be a main revenue generator for esports, especially on TV. The pandemic accelerated that, as we’ve seen broadcasters like ESPN and FOX Sports more interested in broadcasting esports and buying rights for esports events. Additionally, publishers like Riot Games and Blizzard are launching their own platforms where they can create high-quality, exclusive experiences behind a paywall for engaged fans. This will also drive revenue.

DH: Everyone thinks esports is bigger than it is in the short term, but underestimates how big it will be in the long term. At the moment, revenues are skewed toward sponsorship, but our long-term investment thesis is going to follow traditional sports with a mix of sponsorship and media rights. Currently, the biggest deal by a long shot was media rights for the Overwatch League, which was formerly with Twitch and is now with YouTube. We’re going to see more of this and traditional sports should take note. Big companies are getting into the industry – Amazon owns Twitch, Google owns YouTube, and Facebook owns Facebook Live. So, longer term media rights are going to play a key part and that’s why we position ourselves in leagues and publishers to have a say in the distribution or own some of the media rights. If you look at the raw numbers of viewership it’s comparable to a lot of big sporting events, so those could be huge rights deals, but it comes down to data. Nielsen is developing more esports viewership metrics so we can get closer to an apples to apples comparison with traditional sports, so, hopefully, in the near future the media rights will go up significantly.

What is the role of TV for a digital first experience like esports?

RR: TV has to think differently about esports. It’s not just broadcasting an event or showing a final. For me, the main role of TV is storytelling. In traditional sports you have broadcasters telling the stories of the players, teams and fans, and creating more engagement between teams and fans. People love or love to hate traditional sports stars like Stephen Curry or LeBron James, but that kind of passion and fan engagement for professional esports players largely doesn’t exist right now. TV can help with this to create more of a connection between esports fans and players.

What advice would you give a consumer products company looking to sponsor or advertise in esports tournaments or teams, or even just in games played in esports?

TH: Don’t be scared. Sometimes there’s a lot of warning to brands that you’ve got to be authentic, you’ve got to get it just right. In my experience, esports fans love brands that are supporting their passion. This audience loves content, it loves value. They’re gamers who are used to getting rewards. Think about what kind of value you can bring as a partner to the audience. If brands do those things, they will see outsized returns because a lot of the sponsorship inventory for leagues, teams, publishers and events is very underpriced compared to other media formats. From a Skillshot standpoint, we’re big in the collegiate space because it gives us access to a very specific demographic where otherwise you may not know the age group or the geography that actually plays the game. So, brands should dig into the viewership numbers and try to determine more of the demographics and line those up with their goals.

NB: Create something custom. There are amazing opportunities for brands as a competitive price point, but esports also enables you to be creative. In the way that esports and gaming is able to engage with its fans, it’s not just a traditional TV spot. Brands trying to get a product out there have lots of ways to engage with fans at live events or online. That’s very exciting because brands have opportunities to flex their muscles at multiple levels, especially the non-endemic brands.

Many believe that Asia is the heart of global esports, but what region do you see the most demand and growth opportunity for esports?

TH: India

RR: Latin America

NB: Europe

DH: India