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eSports: The Next Big Thing??

Early 1970s competitions were founded back in the with the upsurge of arcade gaming, but tournament quality at the time was amateurish and tournaments were usually considered a supplementary feature of a larger exhibition. In the United States and in some Western European countries, one can even be granted a visa for joining an e-Sports team/franchise.  When choosing gaming as a profession nowadays, you could earn millions of dollars every year. Although it has been in existence for almost two decades now, no one could have anticipated how would the industry actually turn out to be: a potential commercial and profitable business.

A life-changing story

Soren Bjerg, or more commonly known by his in-game identity as “Bjergsen”, was born and raised in Denmark. As a teenager, he used to join local football teams but later withdrew owing to his severe health issues. He later turned to video gaming and that was when his gifted talent was discovered. His skills and dominance were presented throughout regional tournaments that caught the eyes of professional teams. He was individually impressive during his tenure with European teams but failed to win tournaments with any of them. Fortunately, his talent did not go unnoticed. At 17, he was determined to pursue a career in professional gaming when he left his hometown for the United States, joining Team SoloMid (TSM) and was immediately  inserted into the official starting roster. Little did anyone expect that the Danish prodigy would transform into the most renowned Western player, widely idolized by the League community. Not only has Bjergsen brought four silverwares for TSM, he also pocketed three individual achievements for winning the award for the best player in North America.

So, how does professional gamers usually get their income? In Bjergsen’s case, his permanent income will be added from his salary from the team (which is currently undisclosed) and his fixed income from participating in the three-month-long seasonal championship provided by the league organizer (up to summer 2016, this amount is accounted to $12,500 per player each season). The majority of his monthly earnings, however, is taken from a rather unstable source: streaming. Basically, these activities could be split into three minor parts: advertising revenue, subscription/donation, and associated sales. Advertising revenue of gamers is similar to that of a YouTuber, where one will be compensated on the basis of a number of distinct adverts shown. In an ideal world, this amount should be equivalent to the number of views. However, since many Internet users utilize their ad-block features, on average, streamers are reported to lose about 50 percent from what they should have earned. Fortunately, Bjergsen also receives money from users’ monthly subscription and direct donations: the split between the streaming website and the streamer himself from subscription and donation will be discussed privately, but usually it is at 50/50. Finally, associated sales could be seen as the adverts that the streamer promote live on his stream or attaches them to an on-screen frame of the video.

Gaming competitions

Riot Games, founded in 2006, was the birthplace of League of Legends. With sensible marketing strategy, the game quickly gained global recognition and it only took the game less than three years for League to organize its inaugural Riot-held World Championship (Worlds) annual event. In the early stages of League competitive gaming, most tournaments were mainly held independently and were mostly sponsored by companies with a specialized division in gaming equipment. Since 2013, however, recognizing the long-lasting appetite of the global audience for League competitive gaming, Riot Games decided to establish a league format to their competitions in Europe and North America (dubbed EULCS and NALCS), with its extended administration in other significant regional competitions (i.e. China and South Korea). Their increasing influence and supervision on these competitions, consequently, attracted one of the most popularized household names in the entire world, Coca-Cola, for its coverage of their fourth edition of World Championship.

However, despite the increasing viewership of Worlds every year, many commentators and analysts of League, have been mainly critical of how tournaments are financially operated. Firstly, there exists an inequity in terms of the magnitude of the prize pool for teams. They pointed out how the prize pool had remained unchanged for years, while the audience increased by more than tenfold during that span. The concern was partly addressed as Riot announced to include a portion of in-game purchases accounted to the total prize pool in the latest Worlds edition, but the increase of it is much less equivalent if compared to the increase in reputation of the tournament. Similar concerns frustrated team owners in the Riot league system where teams had received little monetary support from the league organizer. Strangely enough, despite the lack of one organization’s income, gaming organizations are disallowed to feature their individual sponsorship on on-stage Riot competitions, a questionable strategy that is accused of damaging team’s ability to be financially viable, especially because of increased players’ salaries.

The general scene of eSports, however, is definitely not as daunting. Other titles such as CS: GO or DotA 2 are presenting much more of an exciting outlook of competitive gaming. Most competitions are still formatted as tournaments in a short period (usually a matter of days) and are usually independently organized. The largest offline tournament, DotA 2’s The International (TI), attracted as much as 20 million unique viewers. In contrast to League, its prize pool is largely contributed by the community, by which a separated funding event is created prior to the initiation of the tournament. The accumulated prize pool that the tournament received last year exceeded as much as four times compared to Worlds, which provided lucrative earnings for any participating team. The advertising regulations are also more lenient as well in these tournaments since competing teams have the freedom to select any sponsors that they would prefer. The only requirement that teams need to adhere to is that these adverts should not present any inappropriate content to viewing audience.

Successful franchises and their stories

Evil Geniuses (EG) and Fnatic could be considered two of the most popular franchises in the history of eSports. While EG tops the earnings chart for its accumulated earnings from eSports competitions, Fnatic is considered to be the most successful organization because of the number of silverwares that they have achieved throughout the years.

Fnatic guarantees their success on the international stage by paying attention to little detail – and taking great care of their players. For example, in their League personnel, besides the players, the organization also recruited multiple strategic coaches and analysts. The 12-people personnel is directed by a manager who is responsible for ensuring a “healthy environment” in the team. This criterion is ensured by the manager’s ability to coordinate business operations including handling sponsorships, press relations and branding, along with other in-game aspects such as executing rosters changes and publication of game-related information to the public.

As a diversified organization with its involvement in various eSports titles, Fnatic’s top management team is constructed upon the foundation of gaming with some of the unique positions that undertake the most pivotal role in the organization. Streaming is a distinctive feature of gaming operations – this is virtually the only mean of communication that the players can interact with the targeted audience outside of competitions; therefore, a managerial team in charge of streaming activities is highly essential in maintaining its relationships with hardcore supporters. Other two primary operations of Fnatic resembles other models of professional sports teams: a chief gaming officer who handles other business and players’ negotiations, and an e-commerce manager who is devoted to retail and distribution of merchandises.

Although not as well-decorated as Fnatic, EG has found themselves in the position of the wealthiest gaming organization, mostly coming out of its prize pool from its team’s winnings at The International in 2015. Technically speaking, their success has little to do with the organization structure, as in the case of Fnatic. However, it’s important to highlight the success story of the moment of decisiveness of the organization. Only two months before the tournament, two long-standing members of the roster departed the team. This forced the organization to complete two abrupt acquisitions of inexperienced talents, which turned out to be one of the most successful decisions in the history of eSports. Their profoundly established scouting department played an essential role in driving the team’s success in the tournament. EG gambled with their choices and ultimately earned their paycheck.

The uprising of eSports industry has caught the eyes of various investors and there is no surprise that new eSports organizations are now receiving a lot of attention from venture capital funds. This trend is the most evident in League, where 5 out of 10 teams are (partly) financed by NBA teams. These teams, despite receiving substantial cash injection, have not yet outperformed the established franchises, such as TSM.

South Korean eSports

The public attention of competitive gaming in Korea began when the Korean eSports Players’ Association (KeSPA) was founded in 2000, under the approval of the Minister of Culture and Sports. The existence of this organization means that eSports in South Korea being equally recognized and fairly treated among other household events such as the K-League (football) or KBO League (baseball). The appropriate response to answer why eSports had such a head start in Korea compared to other countries remained debatable, but one interpretation is particularly interesting. Dating back to the 1990s, as Korea found itself under the continental financial crisis, a significant portion of the workforce was unemployed. While desperately trying to look for a job, many people, especially the youth (young workforce), looked out for something that could interest them during their leisure time. That was when gaming transformed to be one of the common activities and slowly became popularized among these demographics. Furthermore, technological infrastructure and telecommunications across the southern region of Korean Peninsula continued to improve significantly with financial assistance from the government. These massive investment packages indirectly spurred the development of eSports all over the country.

Gaming started to get competitive among the youths as the number of gamers increased. From PC Bangs, local tournaments quickly evolved into national competitions. The growing popularity of tournaments also encouraged the existence of TV programs/new stations that actually devoted their coverage to eSports programs. Currently, Korea is the only geographical region in the world that is successful in bringing gaming content to mainstream media.

Korean eSports industry has grown so much that large corporations actually recruited players to play competitively under their brand. This is also the striking difference of Korean eSports organizations compared to Western ones, which usually operates independently. Since the players are supported by financially stable entities, they are usually paid relatively much more compared to Western players, but at the cost of losing most of their personal freedom. Typically, eSports players in Korea usually have to devote 12 to 14 hours per day for practice. That’s why Korean teams are considered the powerhouses of the industry that any other team would want to dethrone.

The future of eSports

The discussion of how eSports will evolve in the future remains a question mark. With regards to South Korea, the most developed eSports nation, it is highly unlikely that the scene would massive differs from the current situation, as players are quite satisfied with the position they are in right now. However, in other regions, teams and franchises are operating with consideration to business factors, so it is to be expected that these teams will be more flexible in terms of coping with their owners’ needs, especially with new venture-capital teams. Not every game title is as sustained as what DotA or League has accomplished for its competitive gaming progress (historically one should last from three to five years), but with the increasing frequency of audience reach, it is safe to say that the longevity of an eSports title is increasing. This development would promise a more solid career choice for anyone who aspires to follow professional gaming.

Gaming has travelled a long way to be in the position where it is now. Back in the days, you could see established teams starting with zero capital. Now, it is almost impossible to do so. Personally, I believe that eSports has only stayed in the expansion phase of the business cycle, so there is definitely a lot of room for improvement. I don’t have any doubt that if eSports is growing as it is now, we might be seeing it been featured in the Olympics very, very soon.


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