The disproportion of eSports: Lots of fans, but not a lot of the economic picture
To say that eSports is growing at an exponential level isn’t all that crazy of a statement. It seems that every year, each split of the LCS, each Major in CSGO, every International we find ourselves saying the same things: “this is it, this is the most competitive it’s ever been, this is going to be bigger and better than ever.” Rarely does it seem to disappoint, whether it be huge moneyed investors buying into the LCS, or bigger prize pools for the Majors in CS:GO or another record high level for the International, eSports seems to keep compounding on itself and getting bigger. But what we’ll be looking at here is whether this impact is really all that big compared to traditional sports. Sadly, according to a report published by Deloitte Global, while eSports is growing well, it seems to both be much smaller (economically) than it should be and much smaller compared to traditional sports than eSports enthusiasts want to admit.
While rather materialistic, one way to legitimize eSports is to have it compete economically with traditional sports, that is, for it make as much money as sports and have more fans. While it really depends on who you ask, some say eSports is here to stay and to grow exponentially while others think it just a flash in the pan. I believe that eSports is here to stay and will grow greatly in the years to come. But this will not come without massive changes to eSports across the board, and serious commitments from not only the developers of these games, but also of non-gaming industry’s perception of it. This is part one of a three part series I will be running on eSports future growth and problems that impede it, where we will be focusing on trying to understand what the current problem is with eSports, namely, that it’s fan size doesn’t translate into what it’s perceived economic impact should be.
We will be using the recently published study by financial and business firm Deloitte Global as the basis for this article. There are a lot of figures thrown around in the eSports scene, of its economic growth being in the big ol’ billions of dollars to a measly couple hundred million. However, “Deloitte Global predicts that eSports will generate global revenues of $500 million in 2016, up 25 percent from about $400 million in 2015, and will likely have an audience of regular and occasional viewers of close to 150 million people.” (Deloitte Global.) 100 Million growth is pretty good, but the report also says that this is still a relatively small growth, given how young the scene is. It’s a bigger growth than traditional sports, but those have largely already established themselves, and growth can be slower in those kind of situations. ESports, it appears to say, seems to be lagging behind what it should be at.
But 150 Million people is a lot! Even by sports standards, that’s pretty huge. Surely, then, eSports must be in some way comparable to some of the big boys, right? Well, not really. 500 Million sure sounds like a lot, but compared to the other sports’ economic impact, it’s quite small. The ‘smallest’ sport given as an example, the NHL, weighs in as a lightweight at only 4 Billion. That’s 8 times the amount of eSports, even all eSports combined. The NHL only represents hockey in North America. What is sadly lacking in the report, too, is the amount of economic impact of each individual eSport, as this could be useful data when evaluating ‘who is doing it right.’ In contrast to the highest level, in European Football Leagues, eSports doesn’t even fit to scale, as Football is bringing 30 Billion. I don’t even want to calculate the difference there folks. But, of course, a lot of this shouldn’t surprise us. These leagues have been in formation for decades, sometimes even centuries, and the sports themselves have been in existence even longer (thinking European Football here.) But remember, even the growth rate of eSports in contrast to these bigger, older leagues doesn’t seem to add up to Deloitte.
In the words of the report itself, eSports is gaining on traditional sports, but, “That may be true, when measured by audience size for an individual event, but in dollar terms, eSports is not yet playing in the big leagues.” So what is going on here? Well, there obviously seems to be some form of a gap between the fan growth and dedication and the actual monetary position eSports finds itself in. Why is this the case then? Well, my educated guess here is that big(er) money advertisements, sponsors, merchandise (!!) haven’t quite kept up with the demand. 150 Million people is a lot of viewers, but these are viewers that are scattered, and I believe that a lot of big money players are still waiting to see whether this is a fire that’ll last or just be a flash in the pan. But right now, eSports seems to be lagging behind where it should be based on this study.
To highlight some of the interesting contrasts between eSports and traditional sports, we’ll highlight some of the biggest expansion/acquisition news between these two: the NHL’s expansion bids and Splyce’s released acquisition figures for Dignitas EU’s team. Fans of the scene will remember when Splyce made headlines by acquiring their EU LCS team for 1 Million dollars. That was huge, those numbers just didn’t seem normal, the scene was shocked. Now, the NHL is taking bids for expansion of their league, and one of the top contenders is the new (old?) Quebec Nordiques. We’ll not get into the details of this process, but essentially they have to prove themselves to be financially stable to enter the biggest hockey league in the world. How much does this cost? Well, the application process costs a whopping 10 Million dollars. 2 Million of that is non-refundable. So, the non-refundable portion is double the Splyce acquisition, with the overall cost being five times higher. And that isn’t even including all the other costs of doing this venture, like building a stadium for the team! In contrast, Splyce looks like a small drop in a very big pond.
Does this mean eSports is doomed to be forever small fish in a big pond? I don’t think so. But it’s important that the industry starts to consider itself seriously, that is, starts to look to model itself in ways off of traditional sports. In other words, eSports as a whole desperately needs to look within itself, to reflect and attempt to understand the barriers it is experiencing. The bigger the scene gets, the better it is for everyone involved, from bigger player salaries (or salaries being given at all,) to management positions, proper infrastructure and increased fan engagement. We’ve seen increased ‘sportisms’ popping up in eSports already. Prime Time League, a kind of ‘talk show’ of the LCS, fantasy leagues, increased support staff within eSports organizations are all things that are pointing towards eSports maturation, and not simply its growth. Sure, according to the report, there is a study that predicts eSports will have as many viewers as the NFL. Heck, even ESPN, whose slightly antiquated interactions with eSports need little introduction, has opened up an eSports division. The problem that is facing eSports now is not how best to grow it, but how best to mature it into a respectable enterprise. In my next two parts I will go into how I believe eSports can go about this, namely by moving towards a more franchise-sensitive environment and the consideration of Leagues as opposed to Major tournament formats.