eSports, or competitive gaming, refers to organized multiplayer video game competitions, and it’s kind of a big deal.
Globally, as of 2014, more than 70 million people watch eSports. Almost half – 31.4 million – of these come from the U.S., where 70% of frequent viewers and participants are males.
With numbers this high (to put it in some kind of perspective, the NHL has 58 million fans in the U.S.) it seems that there’s an awful lot of money to be made. In fact, a recent whitepaper published by Newzoo reported that the industry is now worth $200 million – and that this will likely double by 2017.
However, although this may sound like a high figure, there’s actually a huge imbalance between sports and eSports in terms of revenue. Again, looking to the NHL for a comparison, the amount of revenue that that league generates is in excess of 3.7 billion.
It’s clear that there’s a huge incentive for eSports broadcasters to try and close this gap. But is it possible? And what sorts of problems do eSports broadcasters face?
Currently over one third of eSports revenue comes from online advertisement, and the industry depends on investment from games publishers to make up the rest. Fan contributions are growing, but are still almost 90% less than what the average traditional sports fan contributes ($2.20 to $20, respectively). Similarly, while sponsorship is increasing, it doesn’t even come close to the amount that the most popular traditional sports attract.
It’s obvious, then, that there is an over-reliance on advertising in the eSports industry. So why isn’t the industry looking toward making fans pay (or pay more) to view?
It’s an argument that’s been made before: people won’t pay to watch content when there’s so much free stuff to watch instead – on the TV and on the Internet. Indeed, BSkyB’s launch in 1990 was heavily criticized on this basis – as was their winning the broadcasting rights to the Premiership in 1992.
But these objections turned out to be misguided. Viewers flocked to the platform, driven largely by the promise of quality, relevance and exclusivity. And the record-setting recent Floyd Mayweather/Manny Pacquaio fight similarly proves that viewers are more than willing to cough up if they perceive enough value in doing so. And if paying leads to the removal of ads, viewers are very likely to see that value.
Netflix, Hulu, and the like, who’ve largely introduced viewers to this idea, have benefitted hugely from this approach, and they continue to promote their companies with this message to this day.
The gamers as a segment have become harder to reach by conventional TV providers, so the online streaming sites see a great potential here. Even though the industry will need more time to overcome some stereotypes on games as a sport, sports channels like ESPN are already experimenting with broadcasting eSports tournaments (Dota 2 tournament in July 2014). We expect that state-of-the-art broadcasters (pay TV, OTT) will try to integrate eSports in their service offerings, which will undoubtedly stimulate its growth.
There’s only a handful of successful eSports broadcasters, and competition between them is fierce. This means that the biggest problem many of them have with erecting a paywall is fear. But some of these broadcasters could be on the cusp of something huge.
Monetization could lead to a better experience for viewers, competitors and companies. Now we just need one company to go out on a limb and adopt an alternative pricing model. The question is, who will it be?