In my very first blog, I introduced what I call the ECEsports Stakeholder Relationship Diamond. It is a visual representation of the four major stakeholders represented in the world of esports. Those stakeholders are the Athletes themselves, the Game Developers, Intellectual Property and Labour Relations or Player Associations. All four of these entities are in a constant and delicate dance with each other and around each other.
It looks like this…
As we have seen, the relationships within the diamond mean certain entities exercise more power than others, some are called upon to make more concessions than others, some seem to be impervious to all that goes on around them.
Each of these entities needs to take care of itself, each is out to make the best deal possible with respect to their own interests and each communicates their own agendas in a way that benefits them. There is no governing body over any of these activities so is it any wonder that we receive the level of conflicting information that we do?
So, what in the world is really happening in the wild and wonderful world that is esports? Who do we listen to? Who are the voices? Who is telling the truth? And, given the size and scope of global esports, is there a ‘single truth’ or just variations based on location and legislation?
Two Prominent Voices
Two of the most prominent voices in and around the industry are Ryan Morrison and Bryce Blum. Both are lawyers. Morrison has worked with developers and esports athletes over his career, while Blum was one of the first individuals to focus on providing legal advice to esports organizations.
Both have been involved in the industry for years and they have been present for much of esports’ evolution and growth. They are two very well-connected individuals in the industry.
The problem is simple. These two individuals work in the world of esports every single day, and yet, they cannot agree on anything when it comes to the economics of competitive esports.
The following examples are taken from a Washington Post article where they opened up a ‘debate’ allowing the attorneys to make their cases in regards to specific questions and issues within the esport landscape.
On Athletes, Teams and Sponsorships
Ryan Morrison’s comments zeroed in on the fact that, in his opinion, the main issue currently facing the esport industry is that teams and organizations continuously demand that the athletes give up more…more control over their careers, more profit avenues and so on. In his mind, asking players to continue to yield is not a sustainable model. This is something I also commented on recently in this blog.
Bryce Blum, in response, reminds Morrison of the average salary for a player in the League of Legends Championship Series (LCS), is ‘more than $300,000 per year’ – and goes on to state that ‘compensation in virtually every game has mirrored this trend.’
The ECE Takeaway
Needless to say, these are two very different opinions. What’s interesting to note though, is that the average salary for the LCS was reported by the Commissioner of the LCS – Chris Greely. There is no independent way to verify this statement by the LCS Commissioner. No public financial reports from the LCS have been provided, no public financial reports from LCS teams – you get the picture. And yet, it seems to be taken as truth. It highlights the lack of transparency within the esports industry and the maturation that still needs to occur.
On Revenue Streams
Morrison’s thoughts here focus on what he describes as a ‘downward look’, saying that teams and organizations are always asking what else they can take from players rather than looking upward and trying to negotiate better media and sponsorship deals. He says that players are more than willing to share profits from things like streaming but want teams to share as well.
Morrison also mentions how sponsorship landscape has ‘changed’ – sponsors are now focusing on the individual instead of the team and that the contracts these individuals are trapped under or being told are industry standard, no longer reflects that.
Blum responds by calling Morrison’s statements ‘inaccurate’. He points to a lack of evidence surrounding sponsorship and revenue generation from media platforms. Blum also points to the large amount of non-endemic sponsors that have attached themselves to esports organizations in the last year, and how esports teams have “helped establish an array of franchised leagues whereby league revenues are shared.”
In Blum’s opinion, Morrison’s issues stem from his own clients and that athletes have the power to secure deals that scale up or down with their success. Blum believes that inside the ‘free market’ of the esport industry, players have chosen guaranteed compensation over everything else, which ends up restricting their earning and sponsorship potential.
The ECE Takeaways
It is unclear whether any kind of revenue sharing is happening in any esports league. The OWL, for example, indicated a form of revenue sharing would be introduced when the league was announced in 2017. But reports indicated that revenue sharing structure would not be implemented until 2021. Regardless, even if revenue sharing is happening, it’s unclear what sources of revenue are being split and what percentage of revenue is going to each party involved (developer, teams, athletes etc). Again, because of the lack of transparency from the entities and individuals at the top of these leagues.
Blum’s comment on the ‘free market’ of the esports industry is also interesting. A key feature of a ‘free market’ is the absence of coerced (forced) transactions or conditions on transactions. And we’ve already discussed how in the world of esports – everything is owned by someone. The ‘free market’ in competitive esports consists of many power imbalances that arguably create unfair outcomes from most athletes. Similarly, there are many top-down restrictions that are put in place by IP owners that limit how esports organizations and athletes create their sources of revenue and their pursuit forms of compensation. It’s not that the ‘free market’ does not exist in competitive esports – but it does seem there are far more obstacles and conditions within the market than Blum suggests.
Missing the Point – A Lot of Talk, A Lack of Evidence
So, what’s the big deal here? Why all the fuss?
Well, as stated, Mr. Blum and Mr. Morrison are thought to have their fingers on the proverbial pulse of the industry…and yet their thoughts, ideas, opinions and conclusions couldn’t be further apart. Which leads to the question of…why?
It’s not that Mr. Morrison or Mr. Blum are inherently wrong with the opinions they each expressed in the above article. The answer, at least in part, is the lack of transparent, concrete information that is being used to measure and understand the size of the esports industry and how it operates.
So, what is the current reality of the esports industry?
While Blum and Morrison may not agree on a great many things they both echo the overall positive refrain that trumpets esports upward growth. The flip side of their perspective is expressed in this excellent Kotaku article. It is an unflinching look at whether the current esports landscape is all that it’s being made out to be.
At San Francisco’s Game Developers Conference last March, Corsair Sponsorship Manager Frank Fields said this to an uncomfortable crowd.
“I feel like esports is almost running a Ponzi scheme at this point, everyone I talk to in this industry kind of acknowledges the fact that there is value in esports, but it is not nearly the value that is getting hyped these days. As of now, that value is optimistic at best and fraudulent at worst.”
Many other esport experts share similar concerns describing the industry as ‘inflated’ and even ‘completely unsustainable’. Though they speak from a place of wanting esports to succeed in an organic and sustainable way, they are concerned that many are making decisions based on ‘unsubstantiated claims or blunt-force lies.’
The ‘Billion-Dollar’ Esports Industry
The Kotaku article also highlights an issue with the numbers and measurements being thrown around in various articles regarding the size of the esports industry. The article highlights the numbers from Newzoo – a research company focused on the esports industry. The issue is that Newzoo’s numbers are difficult to verify due to the lack of transparency in their data gathering and measurement process.
“According to data from Newzoo – which Kotaku cannot independently verify – the global esports market will reach $1.1 billion in 2019…several of (Kotaku’s) sources have issues with Newzoo’s numbers, with some saying Newzoo’s calculations are too opaque to be reliable.”
The problem here is that Newzoo is quoted by everybody…all the time, especially when it comes to financial performance and investment potential in the esports industry. Yahoo Finance, Forbes and CNBC all use Newzoo data when reporting on or forecasting esport news, along with many other credible news sources.
‘Off the Charts’ Viewership
Another place where numbers tend to be inflated is in the realm of viewership. Similar to financial data there is just no good way of calculating or tracking it currently. Because it is an entirely new ‘genre’ the traditional rating metrics aren’t capable of measuring viewership accurately. Nicole Pike is the Managing Director for Nielsen Esports, and she may have said it best,
“Esports viewership metrics are even messier (compared to television metrics). A television view won’t register for Nielsen unless the viewer has been watching a show for six minutes, but for esports…livestreams can be counted multiple times across multiple people if their browser gets closed or their session restarts. When there’s a standardization around esports viewership, those numbers will be brought down.”
As the esports and streaming industries continue to mature the viewership metrics will be resolved – this is inevitable. What happens when the ‘real’ numbers regarding esports livestream viewership begin to be reported is another story. Will investors stick around? Will they still trust the esports industry or the individuals within it? Time will tell.
Capitalizing on the ‘Hype’
It seems evident that there is a clear discrepancy in regards to the dissemination of vital information surrounding all of the stakeholders in the esports industry. What’s interesting though is that this has not stopped investors from throwing money at new ideas.
Activision recently announced that they will be creating a franchised league for their Call of Duty video game series – similar to what Blizzard (also a part of Activision) did with Overwatch and the Overwatch League – with the two newest franchises being announced yesterday. Reports indicate that the franchise slots in the new Call of Duty League are being sold for $25 million, though even that number has been disputed (which is hilarious given all of the other information in this blog). What’s more interesting, however, is that none of Activision’s Call of Duty games were even on the Top 10 Most Watched Twitch Content list in 2018.
It seemed as if Activision Blizzard was trying to positively impact the esports industry with the announcement of the Overwatch League. But after all that’s occurred in the Overwatch League since its inception, and the small competitive Call of Duty fan base (if hours watched on Twitch is any indication of that) the announcement of Activision Blizzard’s second franchised league should raise some eyebrows. Is Activision Blizzard really trying to further the esports industry or are they just cashing in on the hype?
The Future for Esports
It’s very evident that people enjoy watching other people play video games. Esports is a phenomenon that’s not going anywhere. Platforms like Twitch and Youtube Gaming continue to grow and attract the best gamers and their multitudes of followers.
What is visible is a shiny and successful exterior. What is invisible are the real answers to some pretty major questions. Claiming that esports is closing in on being a one-billion dollar industry is easy if no one knows what the real numbers are, or where they are, or what they actually mean.
My next four blogs will look at the future of the esports space, and what major stakeholders should be thinking about as the industry continues to mature. Stay tuned.
Thanks for reading my blog. The above content is not legal advice but observation about the vast esports field. If you have any questions or comments or would like to schedule me to speak at your event, head over to my website www.ecesports.gg