Esports has had little impact on TV so far. Photo by Matthew Hamilton on Unsplash.
The exponential growth of eSports as a spectator activity has hit home through success of major events such as the North America League of Legends Championship Series (NA LCS) running through the summer of 2019 and the Intel Extreme Masters series staged in various countries.
Not surprisingly, broadcasters and pay TV operators have been pining to get in on the act in anticipation of new revenues to atone for loss of traditional viewers in some cases, but it is now becoming clear this is a two-way street. Esports also needs TV, not in the sense of legacy distribution but for presence on the big screen rather than just PCs and smartphones in order to gain a wider audience.
The phenomenal rise of eSports over the last few years has disguised some of its limitations as male Millennial dominated with a tinge of violence that discourages wider participation among many females and non-white ethnic groups. It has become an extremely large niche that will run out of road for further growth unless it can break out of its cocoon and TV can help it achieve that and fully realize its potential as a huge global cultural phenomenon.
But there are hurdles to be overcome on both sides, perhaps the first being to clarify the distinction from gaming. The latter comprises interactive graphics-based games played either individually or between multiple players, on dedicated consoles, PCs or smartphones, with or without access to the Internet. There is also a differentiation between casual gaming and dedicated hardcore gaming where people spend a lot of time.
Esports has evolved from dedicated hardcore multiplayer gaming with Internet access, played competitively for spectators. It is that spectator element which distinguishes eSports from gaming above all and of course that has attracted broadcasters. But to date most video service providers have been deterred or played a waiting game before jumping in, with an obvious hurdle being monetization. Esports is still in its relative infancy as most of the leagues are only around three years old and revenue generating models remain in a state of flux with new ones emerging and the balance constantly changing. For example the NA LCS became franchised in 2018 to encourage longer term investments from owners of clubs, which allowed the league to implement revenue sharing. This provided a sounder foundation for both teams and professional players.
More generally, the eSports monetization model is increasingly resembling sports broadcasting. So the main revenue sources are advertising, sponsorship, merchandising, ticket sales, concessions at events, media rights, streaming, and prize money. For the leagues themselves, media rights is the main revenue source, while for teams within the leagues it is sponsorship, noting that unlike for many premium traditional sports viewing is free.
Esports does have one other significant source of revenue not found in traditional sports that is associated with its particular culture, tipping. This reflects the more intimate bond that can be established between spectators and performers in eSports, which is sometimes also defined as eEntertainment. This has led anonymous viewers to part spontaneously with tips to stars when they perform some feat within a game or set some record, or just for entertainment value. As a result esports tipping has grown rapidly and will generate $372 million income for performers in 2020, according to research from gaming technology company Streamlabs and Goldman Sachs.
Amazon has gained dominant position in eSports streaming through its 2014 purchase of Twitch for $970 million. Photo By Avery Wong / Courtesy Of Twitch.
The other obvious hurdle for broadcasters is that eSports is entirely an interactive streaming phenomenon heavily dominated by two players, with Amazon’s Twitch in the lead, followed by YouTube Gaming. There are some smaller specialist streaming service providers, such as MLG.tv and StreamMe, but these are tiny by comparison, most already having been engulfed by bigger players including Twitch and YouTube themselves.
Among traditional video service providers the biggest splash in eSports has been made by Sweden’s Modern Times Group (MTG), which around 2015 reinvented itself as a streaming company with particular focus on gaming and eSports. As was noted by the UK’s video and technology analyst and forecasting group Rethink Technology Research, MTG stole in front of its peers by acquiring leading players such as Swedish eSports production company DreamHack in November 2015 for $25.8 million. This was followed by MTG’s acquisition of 74% of Germany’s ESL brand from Turtle Entertainment. It also invested around that time in Zoomin.TV, then Europe’s largest multi-channel network, and Splay Networks, the leading multi-channel network in Scandinavia.
In the UK, Sky in 2016 teamed up with the country’s leading commercial Free To Air (FTA) broadcaster ITV and sports channel Ginx to launch Ginx Esports TV, an international, 24-hour station. TBS, the BBC and BT Sport are among others to have broadcast eSports games, while Disney’s ESPN+ landed a major coup by securing broadcast rights to the NA LCS itself. The latter is non-exclusive so that LCS content is still broadcast on Twitch and YouTube Gaming, but is a multi-year deal that allows ESPN+ to broadcast all North American League of Legends competitions including the World Championships, North American Academy League, and Rift Rivals.
But to make a distinctive impact, traditional TV service providers must play the card that eSports has largely lacked so far, the narrative or story telling capability. Esports with its engagement and certain intimacy with stars and potential for greater feedback from the players relating to this tipping culture is ripe for storytelling and there is a strengthening conviction that if it is to continue growing audiences at their current rate it must attract people beyond the current dedicated viewers and become more outward reaching rather than recruiting within the confines of casual gaming players.
There is also scope for bringing TV standards of production and studio quality into the equation, given that eSports has been relatively backward on that front, noting issues establishing High Dynamic Range (HDR) for example in gaming streaming. For gaming, a major focus has been on low latency streaming but that has not been a concern for eSports without active participation, almost precisely because it has not been broadcast much by traditional players. As a result there has been no eSports equivalent to date of hearing a goal celebrated by neighbors viewing on lower latency broadcast services before reaching a screen served by streaming.
That however will change as eSports does become mainstream and transmitted on social media as well, so low latency could become just as critical there as for conventional sports.
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