You might be hearing about new developments in the world of esports. From disruptive technologies like AI assistants, Machine Learning Practice Bots, and API-integrated chat rooms to million-dollar prize pools, esports has become a heavy buzzword in media.
Esports. Machine-Learning. AI Assistants. Athletics-Gaming organization crossovers. It’s the wild wild west.
Now, you came here to understand the Esports Ecosystem, and from 2018 when I wrote this post to 2021, quite a lot has changed. Let’s go over the basics and define esports.
Esports is a form of sports competition using video games.
- Associated Press
To begin, esports is a business and like any other business, there needs to be a sustainable model to produce revenue. That’s right, esports also starts with customers and consumers who originally start with Players/Fans/Enthusiasts who pay for in-game content, proactively evangelize new gamers or create engaged communities on Discord, Twitch, etc.
Enter the amateur scene. This stage is usually crowdfunded through devoted players and local businesses and is primarily fueled by a passion for the game. Starting from roughly 2011,
Publishers(Riot Games, ActivisionBlizzard, Valve) started to get involved with the proactive releases of new characters, increase in gameplay quality, and consistent fixes to patches. For a moment put yourself in the publisher’s shoes. You’ve successfully built out a game that is loved by millions of active monthly users and these fans are encouraging a pro scene to be built which costs quite a bit in production value and hosting.
To aid with the success of hosting an esports event, we bring in the help of an Esport Organizer/Production Company(PGL, ESL, Dreamhack) to organize the event. If there were to be a comparison to traditional sports, these organizers fit the logistics role of making the event run smoothly. The publishers will seek to give out their license to use these games to these companies unless the publishers are going to host their events with their production teams. To raise money and to also reach these interested fans, ESL would reach out to Platforms(Youtube, Twitch, ESPN, Facebook) that will optimize the viewing experience for these fans. Depending on the size of the event, media rights revenue will be split accordingly between the two entities.
Up until this point, the fans have seen zero gameplay. Everything above has been focused on the many logistical factors to even run an event. Because the events are held in physical locations, this offers a value proposition for advertising for Brands. Brands can be categorized into two categories: Endemic(AMD, HyperX, Scuf Gaming, SecretLabs) — of esports and Non-Endemic(Mercedes Benz, Louis Vuitton, Virgin Airlines, Gillette) — not of esports.
Finally, we have the Teams/Esports Organizations. This part has always been tricky to explain because every organization runs differently. There are unfortunately no parables to understanding how teams work but I will attempt to separate the differences.
Esports Organizations
An Esports Organization has a hierarchy of support staff as well as a roster of players. While maintaining a positive revenue is important, the premise for these organizations is to build a roster on their terms. This usually means that the funds are self-raised or crowdfunded through fans. Not all organizations stay independent as many seek capital to grow operations and offer more rosters in cross-platform gaming(mobile, tablet, console, pc).
Faze Gaming started as a trick shot gaming clan that focused on offering exciting montages of players who specialized in sniping, trick-shotting, and other special plays. In Dota 2, OG gaming was started by a roster of pro-gamers Johan “Notail” Sundstein and Tal “Fly” Aizik. During 2017, OG experienced a sudden withdrawal of members from their rosters and in an attempt to revive the team, OG strategically partnered with Red Bull that not only offered them a rebrand but the support and logistics for Notail to focus on winning the next two 2 Internationals at a prize pool value of USD 50 million.
Esports Organization with Venture Capital
As mentioned above, Faze Gaming and other esports organizations sought venture capital to expand their operations. Most notably was the addition of Offset, Jimmy Iovine to Faze as they brought in their specialty like music licensing and clout from other industries. 100T, an esports organization created by former player Matthew “NadeShot” Haag who received nearly USD 160 Million in a post-evaluation investment from investors like Drake, Scooter Braun, and SalesForce CEO Marc Benioff as well as VC firms like Sequoia Capital, Green Bay Ventures, and Artist Capital Management.
Esports Organization Franchise
Lastly, we enter the last major group of esports organizations, as their decisions are backed by corporate decisions. These organizations are focused on maintaining their brand image. Most notably in the space is the Call of Duty League Teams. While the rosters and immediate support staff around them are focused on winning the next event, the organizations behind them are focused on their media value and merchandise sales. Some of these owners also happen to be owners of traditional sports teams like Mark Cuban’s (Mavs Gaming), Philip Anschutz (LA Guerrillas, LA Gladiators), Tamim bin Hamad Al Thani (PSG-LGD)
