SBJ All-Access: Esports Industry Showing Sophisticated Growth
The growing sophistication of the esports industry was on full display at this year’s Lagardère Sports Esports Rising conference in Marina Del Rey, Calif. Many panels on Thursday touched on franchise valuations and what those numbers being tossed around means for the industry, particularly as there continues to be consolidation. Organizations and teams from across esports talked about creating sustainable business models and how that will be crucial to maintaining these rising team values. Franchising was also a key topic, as we heard from a number of teams taking part in Overwatch League, League of Legends and the upcoming Call of Duty League. Within that topic, a shift for OWL and CDL to a local-team model was also heavily debated.
- One brand activation that had everyone buzzing at the conference was Louis Vuitton's deal with Riot Games for the LoL World Championship, which was held in Paris last weekend. The fashion brand created a custom trophy case -- similar to what it does for the FIFA World Cup -- that housed the Summoner’s Cup, the LoL hardware given to the world champ. The French fashion brand also worked with Riot to produce in-game costumes designed by Luis Vuitton Artistic Director of Women’s Collections Nicolas Ghesquière. It's another step forward in bringing a high-end, non-endemic global brand into the space.
- Riot Head of Esports Partnerships Matt Archambault said of the deal during a panel session: “Seeing the trophy case in person blew my mind. .. (Louis Vuitton) drove the product and unique experience. We started with something they’d done in traditional sports and thought about how we can drive this in a way that will be positive." The data was also there to support the success of the deal. Fans who clicked through or liked the Louis Vuitton Instagram content around LoL Worlds are “six times” more likely to enjoy luxury goods in general, said Zoomph President & co-Founder Amir Zonozi.
WHAT'S IT ALL WORTH?
- "It only matters if it can be sold there." That quote from New Meta Entertainment's David Abrams encapsulated rising esports franchise valuations. Teams still have a journey ahead in creating long-term sustainable business models, and that was noted on a panel discussing the state of valuations and franchising. There was some pushback from Gen.G Esports' Kent Wakeford, who noted reported franchise prices have risen for OWL and LoL teams. “You’re seeing appreciation of underlying assets,” he said. Complexity Gaming's Jason Lake said, “We’re trying to build generational sports properties. Many of the properties will probably be worth north of a billion dollars."
- OverActive Media's Chris Overholt agreed on the lack of franchise valuation transparency. "They’re worth what someone is willing to pay for them," he said. "Trying to peg them, you’re worth your latest round of financing. Until companies are public or we’re in a place where there’s need of greater transparency, it’s our job to take the theory and monetize the vision." Team Liquid's Steve Arhancet believes team valuations have little bearing on success or longevity. "There’s going to be a lot of esports teams that don’t make it," he said. "They take money from the wrong place (and) are not able to monetize their assets and create a fan base."
GROWING SPONSOR ROSTERS
- Growing non-endemic sponsorships is a major goal of esports properties. But how do those non-endemics judge success? Bud Light Director of Sports Marketing Joe Barnes talked about creating a presence in the space beyond logo exposure, such as creating Bud Light-sponsored esports events and airing them on the brand's Twitch channel. Bud Light also is starting to use its Twitch channel to bring in NFL players and stream them as they watch football games. Adidas' Milos Ribic said that his brand views esports like soccer in that it’s a global sport with cultural relevance.
- This is the third year of Jack in the Box’s deal with Envy Gaming, and Sheena Dougher said that her QSR brand has learned more each year, culminating this year with a digital animated series called "Fuel House" that involved both the “Jack” mascot and the team’s players. Dougher said animation is esports fans' "love language." T1 Entertainment & Sports CEO Joe Marsh added, “You can take dollars once, but if you don’t make them feel the love in that first year, they’re not coming back."
- Adding non-endemic sponsors isn't just for teams, as media brands are seeing solid results as well. Twitch Director of Sponsorships Chad De Luca said, “We have a lot of people that want to give us money. … Brands have seen success and are re-upping and that’s a true testament to success.” De Luca noted Twitch is looking to tap into another area largely untouched by esports -- healthcare.
FOLLOW THE NUMBERS
- The Esports Observer and law firm Foley & Lardner during the conference released results of the 2019 Esports Survey. Some of the key takeaways:
- There has been a rise in esports investments expected from private equity and venture capital firms over the next year.
- Advertising and sponsorships are expected to be esports' primary revenue driver.
- In-game purchases have moved past media rights as the second-largest expected revenue source.
- Increased M&A activity across several categories, including streaming and broadcasting, events and tournaments and franchised teams.
- The U.S. and China are considered to be the most promising esports investment opportunities over the next five years.
- Check out the full report at Esportsobserver.com.
SEEN & HEARD
- Riot Games’ Whalen Rozelle gave us fair warning he might have to bolt his panel quickly on Thursday. His wife is around two weeks away from having their second child, and you never know when that call might come.
- Issues related to China these days can be complex and take time to discuss, so when SBJ’s Ben Fischer tried to close out the opening panel with that topic, Complexity’s Jason Lake immediately jumped in and joked to the crowd: “You’re gonna bring up China with 1 minute, 40 seconds left!?!”
- Everyone has that favorite first video game, and the topic came up on one of our panels. Overwatch League's Pete Emminger said he got his start playing "Pong" with his grandparents, while Mobalytics' Amine Issa went for "Super Mario Bros." on Nintendo. Zoomph's Amir Zonosi said Mario was one of his early favorites, but it was "Halo" that really sparked his interest in gaming. What do they all play at home these days? Emminger and Zonosi both with "Call of Duty Mobile" and Issa went with "Legends of Runeterra."
- The end of the conference was perfectly timed up with the start of the Steelers-Browns “Thursday Night Football” game. Several attendees quickly gathered outside the ballroom, where a TV was waiting tuned to Fox to show the game (and what turned out to an interesting end).
- The Pac-Man machine set up outside the conference ballroom by Lagardère Sports was a big hit among attendees, with the arcade game often having a line 4-5 people deep. The high score? That belonged to RG Sports Consulting's Renee Gomila. No. 2 was The Adjency's Ben Bueno, followed by Foley & Lardner Associate Kadmiel Perez.
- Chris Overholt had a long run in traditional sports before taking the reins at OverActive Media, which runs Toronto-based teams in OWL, CDL and European LoL. Overholt, who has had stints with MLSE, the Dolphins and NHL Panthers, spoke with us about the last 13 months, which has seen him take on a new segment of sports business.
THEY SAID IT
- New Meta Entertainment Chair David Abrams made an interesting reference when noting how big personalities can change the trajectory of a sport: “A lot of people in this industry and in here weren’t born by 1979, but the NBA was in a very different place then. The NBA was on its ass. Two people changed that -- Larry Bird and Magic Johnson. … Find someone who’s an influencer or someone who’s good at it and that changes the landscape and that’s where the money flows. I hope there are more people like Faker, across the board."
- 100 Thieves Head of Partnerships Matty Lee: “Pop culture is recognizing what’s going on in this little corner of the universe. Brands are seeing long-term value creation by these partnerships."
- Riot Games Dir of Esports Research & Development Whalen Rozelle on the growth of esports: “There will be challenges just like traditional sports, just like the NBA setting fire to themselves for a brief second in China.”
- Team Liquid co-Owner Steve Arhancet: “There will be a lot (job) recruiters who say, ‘Hey, you played esports at college, you must be pretty smart.’”
- The conference concluded Friday morning with a tour of Riot Games HQ in West L.A. Beyond the expected tech-company amenities like a coffee bar and open-work space area (no offices), gaming areas occupy plenty of space at the Gensler-designed Riot campus, which has eight buildings in total for 1,800 full-time employees. There are also artistic designs spread throughout the campus which recreate some of the 145 characters from the "LoL" game.
- Whereas North American gamers typically play from home, most gamers in Asia go to public café-style settings, so Riot recreated one of these areas at HQ to expose employees to this different customer dynamic. There is also an esports-style setup for employees, where one room of five players can practice against another up to five players in another room.
- Want that throwback feel? Riot has that covered as well for employees. There is one large lounge with older games like “Dance Dance Revolution” and spots for multiple older console-based games. Across the hall is a separate arcade setup -- and it's multiplayer games ONLY in order to encourage employee comradery. Gaming is so much a part of the DNA at Riot that employees receive $300 annually to spend on video games -- and not just Riot titles. The company wants employees checking out titles from other publishers to keep up with all the latest industry trends.
- Following the tour, conference attendees listened to a info session with Riot Head of Esports Insights & Data Doug Watson, Manager of Esports Events Adam Mackasek and Global Head of Communications David Higdon. Execs discussed last weekend’s LoL World Championship in Paris and the many executions and activations around the event (they even got some love from the Eiffel Tower account on Twitter).
- Lagardère Esports Germany’s André Fläckel: “Thank you @sbjsbd @esportsobserved for a fantastic 3rd edition of the Lagardère Sports Esports Rising Conference, Los Angeles. Also big thanks to @riotgames for introducing League of Legends #Esports @lolesports to attendees at its amazing Campus!"
- Charge's Ken Ungar: "Interesting panel on incremental revenue opps in #esports. Some takeaways include importance of data in #sponsor renewals, the rise in non-endemics and Brand’s growing recognition they need an esports strategy. #sbjesports @sbjsbd."
- Overwatch League's Kristin Connolly: "Always a great time at #EsportsRising2019, enjoyed sharing more about the @overwatchleague Grand Finals. Thanks @sbjsbd @LSports_us @Rooftop2NYC for having me!"
- Henderson Engineers' Kevin Butler: "Publisher and teams speaking about the reality of esports at @sbjsbd Esports Rising. Great insight on local and global market. #sbjesports #hendersonknowsesports."
- Thanks to everyone who attended both our Sports Media & Technology and Esports Rising events this week. Meet us on Dec. 4 in Manhattan for our next event -- Dealmakers in Sports -- where we'll bring together senior execs in sports and finance to discuss the sports economy and the opportunities and challenges of investing in our industry.