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Volume 25 No. 62

Esports Rising

Lagardere Sports Germany Managing Dir Robert Muller von Vultejus kicked off the ’17 esports Rising conference on Thursday by outlining the challenges and opportunities around the industry. He started by asking the audience of 300-plus how many are actively playing, and about 20% raised their hand. Then he asked how many are watching esports competitions, about 35% of the hands went up. “The rest of you are stuck with traditional sports,” he said, with a laugh. Muller outlined data points around esports, and laid out the ecosystem of publishers (Riot), operators (ESL), teams, players/influencers, broadcasters, streaming platforms (Twitch), brands and agencies. “For the brands, it’s quite a complex market,” he said. “Far more complex than any other sports. The audience is very open, but on the other side, can be fairly critical. The esports community requires that a brand has to add value.”  He outlined the challenges of figuring out where sponsors should invest in the space -- across events, teams, media platforms or a combination. 

WHAT’S NEXT: He concluded with opportunities and challenges, and predicted that more non-endemics will enter the space. “That’s a marked shift from 18 months ago,” he said, adding that brands must have a thorough understanding of the esports community if they hope to capitalize on their investment. Muller said it would help the esports ecosystem if there was more structure and overall professionalism, and that there needs to be more transparency and orientation to provide industry standards in terms of KPIs, compliance and offering measureable deliveries. Muller: “If these are fulfilled, esports has the ability to become one of the leading sports industries in the world, and will be sustainable.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.

When the Overwatch League officially begins preseason play next month, it will mark the first foray for some traditional sports ownership groups into the realm of esports. Longtime stick-and-ball owners like the Krafts, Wilpons and Kroenkes, among others, will field teams, and experts at the inaugural Lagardere Sports esports Rising conference are keeping a close eye on how it plays out. Foundry IV co-Founder & CEO Tobias Sherman, IMG’s former head of esports, said that, depending on appetite and patience, it “could go either way. You’ve got a large conglomerate of professional sports organizations making Overwatch their first foray for a considerable amount of money.” Sherman: “It could be a negative experience because they’re too impatient … or they could give it a long enough runway.” Sherman said that, in his view, the most important barometer for Overwatch will be whether teams “can sell out stadiums.” Sherman: “Not just for Overwatch, for any title, that should be the goal, because not only are people watching at home, they want to go celebrate that experience with others. I think we all have to root for Overwatch to get there, because it’s very important that the [owners] that came in are not just willing but excited to help grow this industry.” Catalyst Sports & Media Exec VP Bryce Blum said there is a “period of transition” with Overwatch because the game itself has been around for nearly a year, but there has “never really been a full, tier 1 ecosystem around the game.” Blum: “There were questions about: Are we prepared to make that kind of investment in a game that hasn’t had the opportunity to prove itself? … The biggest point of differentiation between the teams that got in and the ones that didn’t were the ones that were prepared to bet on the kind of collective brain power of Blizzard Activision.” ESL North America CEO Craig Levine: “Lots of innovation happens when you create the right environment and incentives for other stakeholders to apply their expertise to that ecosystem.”

PLEASANT SURPRISE: Cloud9 CEO Jack Etienne, who owns the Overwatch team London Spitfire, said he was “really surprised” at the early enthusiasm from fans about the league. Deviating from the traditional esports model, each Overwatch team will have a home city. Etienne said Chicago, Toronto and Seattle came up in discussions as possibilities for his team, but he eventually settled on London because of its strong esports fan base. Etienne: “There are few cities that are really set up correctly to bring in tons of fans to a venue. London has fantastic transportation to be able to get those fans into the location. The U.K. in general was just really strong on esports.”

ONE MODEL TO RULE THEM ALL? With the Overwatch League forming under a franchise model, Intel Client Compute Group Global Dir, Strategy & Planning, VR, esports & Gaming Jeffrey Clark said many brands and esports organizations are “at an inflection point.” Clark: “It takes time and history before you can go back and say, that was an inflection point. But I think we certainly could be now.” Clark, whose company just signed as an Overwatch sponsor last week, said Intel views the change as a positive, as esports now has become a “major, global, cultural phenomenon.” Clark: “You’re seeing different models thought about and employed. I don’t know that there’s going to be one model that rules them all. Ultimately, the ones that stick are going to be the ones that bring the most value.”

ESPORTS ON LINEAR TV: Turner’s Eleague airs on linear television, but other esports leagues have yet to make the move, and that could be because of the average age of the television viewer, said Major League Gaming President & CEO Pete Vlastelica. He said the average age of NFL and MLB fans is over 40, while the average age of esports fans is likely in the 20s. Vlastelica: “So literally half the age of the next youngest traditional professional sport. … The reason those ages are so high is because kids don’t watch TV. All of that content is trapped behind a pay-TV ecosystem that people don’t subscribe to. So if your content is trapped in an environment that young people don’t have access to, your content is becoming less and less relevant every day.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.

NBA 2K League Managing Dir Brendan Donohue on Thursday said the 17-team league is in discussions with three to five more NBA franchises about joining the video game circuit for its second season in ’19. The inaugural regular season starts next May, preceded by player tryouts in February and a draft in March, Donohue said during an interview at the inaugural Lagardere Sports esports Rising conference. Eighty-five players from around the world will make up the league, Donohue said, competing as their own avatars on respective NBA teams. The 2K league decided to go that route to level out the competition. “There will be no LeBron against Steph,” Donohue said. NBA owners backing the 2K league include the Wizards’ Ted Leonsis and 76ers’ Josh Harris, among others, and Donohue said their support has been important to the success in generating early interest in the fledgling league. “A lot of our owners led us to this, a lot of them were involved in esports before this league ever came up,” Donohue said. “They pushed us to this.” Donohue has previous job experience working for NBA TMBO, and said the 2K league will lean on the basketball league for advice in certain areas. But that does not mean it won’t have its own unique business model. “It would be a mistake if we took the NBA’s business model and just placed it on top of esports,” he said. “We’re very self-aware and there are a lot of things we bring to the table that are beneficial.”

PARTNER UP: Donohue said games are “definitely going to be broadcast, it’s just a question of where.” He expects a decision on that soon. The league’s draft also will be a public event and decisions on distribution are still being determined. In terms of sponsorship for the league, Donohue said it opens up doors for both the esports organization, as well as the basketball league. He said some of the 2K sponsors, which have not been revealed, “are actually going to be new to the NBA.” Donohue: “It really kind of speaks to the opportunity the league presents.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.

EA Sports and the NFL in August announced the launch of the Madden NFL Club Championship, and EA’s Todd Sitrin said it is “driving a lot of new business for us.” Speaking at the Lagardere Sports esports Rising conference, Sitrin, Senior VP & GM of EA’s Competitive Gaming Division, said engagement has been “very, very high” without disclosing specific numbers. The Club Championship involves all 32 NFL teams, which will market and organize their own tournaments, which in turn may be held at stadiums or other team facilities. Semifinals for the event are being held at the Pro Bowl in Orlando, while the finals will be in Minneapolis during Super Bowl week. While the NBA 2K League, launching in May, will pit the 85 best players from around the world against each other, Sitrin said EA and the NFL are taking a different route, allowing any fan the chance to compete. “We have a much more open model (than a franchise model),” Sitrin said. “We want to bring people into that ecosystem and allow players to literally be on their couch one day, and three months from now be a super star. We can do that by having this open competition.” He added of the different models gaming leagues will test out over time: “This is the first inning of a nine-inning game. There are different ways of approaching the sport for the industry as a whole.”

FAN APPEAL
: Sitrin thinks traditional stick-and-ball sports as video games can draw in more viewers and potential fans than a traditional first-person shooter esports game would. He thinks sports games offer fans the opportunity for a more special connection. Sitrin: “I don’t know why I want to watch a person play as a non-descript player in a particular game … when I could just as well watch that very same person play in a game that I already have an emotional connection to. To the team they’re playing, I already know the player. That I think makes a stronger connection.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.

As esports continues to grow in popularity, prospective investors are keeping an eye on team valuations that can be vastly different across teams and leagues, said panelists at the inaugural Lagardere Sports esports Rising conference. Inner Circle Sports Associate Dylan Glendinning said many investors are still trying to understand what esports is, and see buying a team now as an “easy way to get into it.” Glendinning: “The reason why you could argue the valuations make sense is because you view the teams as a way to participate in the rising tide of the esports ecosystem. As esports evolve and new games come out, even if we move toward games that are AR and VR, there are going to be competitions around those ecosystems and teams -- the bigger brands especially -- can put together a group of players and apply their brand to that ecosystem.” O’Melveny & Myers Partner Irwin Raij said potential buyers will assess the risks in buying an esports franchise, but at this point and price entry, few risks exist. “There’s a lot of room to grow,” Raij said. “Right now, in terms of trying to identify a risk, what’s a team that’s failed? There aren’t a lot of them. There’s a really interesting ecosystem with this that’s evolving.” Raij said one angle investors could take, rather than buying in on the team level, is to “go the publisher route. It’s a really interesting market.”

DIFFERENT STROKES: Catalyst Sports & Media Exec VP/Esports Avi Bhuiyan said while many stick and ball sports teams might mirror one another in business models or the way they operate, esports teams tend to do things very differently from one another. He noted Optic Gaming as an example. The franchise has a competitive esports team, but its “anchor asset is their media company,” as they produce YouTube content and have social metrics “off the chart.” Bhuiyan: “They don’t think of themselves as a professional sports team. Up to this point they’ve sort of made their bonds as a media company that participates in competitions.” Bhuiyan noted the franchise Solo Mid is also competitive as an esports team in LoL, but also has a “network of gaming websites” that newcomers to esports can go to for advice on how to play the game. Bhuiyan: “The teams are very different, but there are a lot of ways to win.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.

More than a few attendees of the first Lagardere Sports esports Rising conference noted that esports are an overnight sensation -- decades in the making. But beyond the massive grassroots movement, esports team owners with properties in traditional sports are looking to expand the games to fans of their other teams. Delaware North CMO Todd Merry said, “Being a convert myself, I’m loving it." But he added that it hasn’t been as smooth as he thought it would be. “I thought this would be easy, selling it to my executives and other sponsors and folks looking to get into esports,” he said. “We’ve spent over half of every meeting educating. A team is more like an organization. No, it’s not one title. Do they live at home? It’s much easier being a fan at events. It’s not easy, but it’s worth it.” When it comes to reaching new fans, 76ers VP/Strategy Akshay Khanna said, “Social media is the easy answer. Players, streamers, people who own teams have massive followings; that overlap works well. In-person events are helpful. My ah-ha moment was going to an event, and I became a true evangelist and true believer. ... Events are a great place to get people who aren’t fully bought in, then you get to them using social and digital.”

CROSSOVER EFFECT: Monumental Sports & Entertainment Dir of esports Business & Team Operations Grant Paranjape said that while hardcore esports fans will know the company’s Team Liquid, they’re trying to reach more people by activating through their other sports teams, such as the Wizards or Capitals. Paranjape: “We want to show those fans if you’re a fan of the Caps, you can be a fan of the Team Liquid.” Merry said they are being careful not to “beat (hockey) fans over the head” with esports, but he pointed out that traditional sports team owners “should be worried about those esports fans who aren’t going to watch your team.” He added, “We did research about fans, and it was amazing the number of people who came to our building for esports and had never come to (Boston’s TD Garden) before.” In a similar vein, Rockets Dir of esports Development Sebastian Park said, somewhat tongue in cheek: “I went to Madison Square Garden for the first time for a basketball game; I had been there for esports before. I told someone at MSG that ‘you put on a good show on the basketball side, too.’”

NBA AND ESPORTS: NBA owners and teams have been in the vanguard of adding esports teams. Khanna said, “The reason why the NBA is well-represented here: it’s one of the most progressive leagues. That starts with (Commissioner) Adam (Silver) and goes all the way down. Anecdotally, we have seen substantial pickup of fans who follow the Sixers and we’re now seeing more of them align with Team Digitas.” He added that the popular "NBA 2K" franchise is a good way to capture fans and casual gamers at the same time. “That is the perfect entrée into the game space,” he said. “Some may never play another game but 2K, but some will go on to play and watch other games.” The panel agreed that esports fans would likely watch, as they tend to follow gamers across titles and enjoy watching world-class competitors square off no matter what the game. Park said the NBA and esports can learn from each other when it comes to production values and data. “One thing esports can do more is more narrative explanation to make it easier to follow along,” he said. “If you haven’t played it’s hard to know who’s ahead. On the flip side, there’s something to say about the NBA having scoring available. The Rockets scored more 3’s than 2’s recently and it wasn’t known until the end of the game. It would’ve been useful to know that during the game but in Dota it would’ve been known and commented on.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.

The growth of esports, especially among the elusive millennial set, has made it attractive to more sponsors who may not traditionally operate in that world. At the first Lagardere Sports esports Rising conference, Jack in the Box Dir of Marketing Communications Adrienne Ingoldt discussed the company’s multi-million dollar deal this week with Team Envy. “We know the audience maps closely with our audience, they’re fans of the games and the category as a whole,” she said. “They’re playing in that space and buying those jerseys.” Envy Gaming Head of Marketing & Revenue Mark Coughlin added, “It was as close to a perfect match as you could get. They’re putting enough money aside to do something with it, more than just putting a logo on a jersey and hoping it will do something, because we know that doesn’t.” This is just the latest example of non-endemic brands getting into the game. Twitch Dir of Global Esports Sponsorships Nathan Lindberg: “It’s been interesting to watch brands see success. Comcast, Geico, and Pepsi made the early investments and have seen tremendous success.” He said advertisers who wouldn’t consider esports two years ago now “see possibilities of partnering with this space and having success with it -- driving that brand engagement with affluent millennials, that group they need as the next generation of customers.”

NOT A HARD SELL: Comcast Senior Dir of Sports Brand Marketing Matt Lederer said selling esports to his bosses was the easiest meeting he’s ever had, even though they don’t know the difference between DOTA and Mario Cart. The company sponsors the Evil Genius team and has a deal with esports event organizer ESL. “We are talking to a young, male, extremely diverse segment that’s crucial to our business, to our influencers,” he said. “We want them to talk about having Xfinity and how they do x, y, z to do this. It’s a marketer’s dream. Evil Geniuses play and live in a total branded environment (in their two houses). They’re in the (S.F.) Bay Area and Chicago, two of our markets. ESL side gives us breadth, agnostic to any game.” MGM Resorts Int'l Senior VP/Entertainment Rick Arpin notes the company’s unique position as someone who may host esports as well as sponsor them. The challenge, according to Arpin, is that esports are “growing from digital to physical, instead of vice-versa. The demographics are so good (and) it gets people exposed to us. Maybe it’s the first time they come to Las Vegas. Hopefully, it’s the first of many.”

PLAY THE GAME: As for where to find gamers on social, MVPindex co-Founder & CMO Kyle Nelson says, “The top platform is Instagram, identical to other pro sports. It’s 32% of engagement, but different from pro sports. Twitter is the second platform. YouTube is about the same as Twitter, but Facebook is further down. The reach is there on Facebook but the engagement is not. They may have fewer fans than LeBron (James) or (Jordan) Spieth and others, but the engagement rate is three or four or five times higher.” A few lessons for brands looking to break into esports. Coughlin notes: “The main attraction is these are the cord nevers, cord cutters, the unreachable demo. It’s understanding and recognizing there can be overselling, overcommercialization -- so make your brand mean something in the world of esports.” Twitch’s Lindberg: “I tell brands to think about credibility and getting it from the audience. Brands shouldn’t be shy about financially subsidizing teams to do better. Hashtag ad is actually a badge of honor. You’re helping my team create more content. You don’t have to hide the fact you’re sponsoring a team.” MGM Resorts’ Arpin added, “I don’t think most brands are doing a good enough job around activation. If we spend $1 on sponsorship, we need to save $1 to $2 for activation. We didn’t used to have a column for activation, but a tent and a table with a drape on it is not going to cut it anymore.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.

Stakeholders and advertisers were treated to a lively discussion that served as a focus group of sorts, consisting of motivated esports players and on-campus tournament organizers who sat on a fan panel at the inaugural Lagardere Sports esports Rising conference. The panelists ranged in age from 19-33 and were either undergraduate or graduate students at a range of universities representing both coasts. They all grew up gaming and now spend much of their time playing, watching, and interacting with esports and the gaming community. “I’m a lifelong lover of sports and video games,” said Justin Surber, who is pursuing his MBA at the Univ. of Oregon’s Warsaw Sports Marketing Center and is focusing on esports. “They were separate things before esports. Then one day my friend said these guys are playing video games for money and it’s competitive. I came to Oregon to study it even further.” UMass student Alexander Chin said he began playing esports in sixth grade and noticed that the older guys he played with got into MIT, Stanford and Harvard. “I thought, maybe if I play League of Legends as well as them, maybe I can get into a good school,” he said. Playing esports well may not necessarily get a student into Harvard, although there are now scholarships at some colleges. UC-Irvine student Damian Maciej Rosiak said his school was the first public university to offer esports scholarships. And now, he said, “70% of students self-identify as gamers. We have the largest gaming club at a public university and the president is more than happy to connect us to sponsors.”

SWIMMING IN THE STREAM: These young gamers highlighted notable differences between traditional sports and esports. UC-Irvine student Jessamyn Delarmente Acebes: “The loyalty is more closely tied to the player than the team. You follow (a player’s) stream schedule, follow them on Twitch. Instead of watching an episode of Riverdale, you watch an (esports) stream. It eats into some of my other hobbies I guess.” Chin chimed in: “League of Legends is a part of our life, so instead of watching the basketball game at 8 p.m., we watch the League of Legends tournament at 4 a.m.”

PRICELESS EXPERIENCE, BUT KEEP THE STREAMS FREE: The gamers across the board said paying to see live events is generally a great value since tickets are priced below other pro sports contests and, as Orange Coast College student Adam Nelson said, gamers “want to meet the rest of their community they love.” Univ. of Oregon student Will McGirl added, “Watching League of Legends live in Madison Square Garden is one of the best sports experiences I’ve had. It blows the traditional sports experience out of the water sometimes.” But McGirl and the rest of the panel were unanimous in their adamant opposition to seeing streaming and gaming services creating pay walls or PPV of big events. They said paying for live events is worth it, but not so much for online viewing. Surber: “My spending habits are all in the game. I don’t pay to watch on Twitch, I may pay to go to a live tournament… I’m okay with sponsors that make it a better experience and make it more fun for me to watch. As far as me shelling out $10-$15 to watch, I’m not going to do that.” Nelson agreed: “The mistake is barring it up after it’s been free so long. The moment you create a barrier and have your name behind it, that’s not good. Everyone in the community will remember that name. The internet is not forgiving and neither are the players.”

THE DARK SIDE: The panel also touched on the “dark side” of esports: cyber bullying. Orange Coast College student Jonathan Barajas said, “Because the (esports) community is violent -- not physically, but keyboard warriors -- (women gamers) shy away from tournaments because they fear when they go to an event that will be the same situation (getting bullied in person).” Acebes, the lone female on the panel, added, “Gatekeeping is the biggest issue. You join a game and someone finds out you’re a female, and then everything you do is criticized. ... Online and in person I’ve seen people trash talk not because of skill but because of whatever you identify as. For branding, having an ambassador reaching out to me made a difference. The biggest thing brands can do is seek out people at tournaments who are being left alone.”

For more coverage of the business of esports, visit our partners, esportsobserver.com.