The Evolving Esports Ecosystem

April 24, 2018

From groups of friends getting together and connecting computers via LAN cables to play video games, a billion-dollar industry was born. Those humble origins were the foundation for the current esports industry where media giants manage tournaments and individual players can earn hundreds of thousands of dollars.

As the industry has evolved, a complex ecosystem has developed where a single company may slot into several different aspects of this system. Trying to grasp these inner workings may feel a little foreign to newcomers, especially those non-endemic sponsors who have not been part of the industry through its evolution.

The following look at the esports industry and its players will help illuminate how the various stakeholders fit into the current framework.

Game Developers/Publishers

Esports couldn’t exist without game developers and publishers because these folks create the games that become esports. However, the idea of publishers creating a title to become an esport is relatively new. For example, one of the earliest esports was StarCraft, a game designed for online multiplayer, but it also had a full single-player campaign. Compare that to Overwatch, which is a first-person shooter only designed for multiplayer that was clearly planned as an esport.

As the industry continues to flourish, there is a clear incentive for developers to focus on creating titles intended to become esports.

Currently, the biggest names in the business are Activision Blizzard (Overwatch, Hearthstone: Heroes of Warcraft, StarCraft I & II, World of Warcraft, Call of Duty), Riot Games (League of Legends), and Valve (Counter-Strike: Global Offensive [CS:GO], Defense of the Ancients 2 [Dota 2]).

Developers own the intellectual property (IP) regarding their games, which they can license out to external league organizers or control their own leagues. For example, Activision Blizzard operates leagues for Overwatch and Hearthstone, and Riot Games manages League of Legends tournaments that culminate in a World Series. Valve, on the other hand, organizes their own tournaments while also allowing independent associations to run events.

Competitive Events

Competitions are either run by the game publisher (such as Activision Blizzard ‘s Overwatch League) or run by a third party (like Electronic Sports League’s [ESL] ESL One). This is a relatively new development, as historically all events were managed by third parties. While some may see the developers managing the majority of events as a homogenization of the industry, the counterpoint is that it provides stability, which is attractive to new sponsors. Independent operators still host events, but they are often focused on specific events, such as Dreamhack’s LAN events.

Photo Credit: Modern Times Group

The right to broadcast these tournaments are occasionally sold to traditional broadcast networks, like TBS or ESPN, but typically to streaming platforms, like Twitch (currently the most popular online service for watching and streaming digital video broadcasts). Because these events are sponsored, they are free to watch and not locked behind a subscription or paywall. Tickets are available for sale to fans who wish to attend these events in person.

Streaming Platforms

These are online streaming networks and social media platforms.

The largest is currently Twitch, which was purchased by Amazon in 2014. Twitch was founded in 2011 as a category exclusively focused on video games live streamed via a service called Justin.tv. Twitch became so successful that it overshadowed its host service, and eventually Justin.tv was shut down and replaced by Twitch.

However, Twitch is facing competition from some big-name players. Facebook recently lured ESL away from Twitch in a deal to bring over 5,500 hours of esports events and other original programming to the social media giant. The platform also announced content partnerships with the esports teams Team Dignitas and Echo Fox. Facebook is trying to make its platform friendlier to live streamers by adding support for desktop streaming to user profiles, allowing gamers to more easily stream their gameplay.

Twitter has also entered the live streaming fray. The social networking service announced a partnership with ESL and DreamHack to bring over 15 events from the ESL One, Intel Extreme Masters, and DreamHack circuits to Twitter. These events will be available for live streaming on the web and directly through the Twitter app.

Teams

Teams compete in esports events (like traditional sports), and a typical esports team operates a number of rosters containing several players who are unified under a single team banner.

For example, one of the most well-known esports teams is Cloud9. This club has several different rosters that specialize in different games within the esports ecosystem. You will see Cloud9 at a variety of esports tournaments, including League of Legends, Overwatch, Counter-Strike: Global Offensive, Hearthstone, Super Smash Bros., Rocket League, and PlayerUnknown’s Battlegrounds.

In addition to Cloud9, other top-level teams are Dignitas, Team Liquid, Fnatic, and OpTic Gaming. Many of these larger teams have been around for over a decade, which has enabled them to develop relationships with several sponsors and investors. This gives them the ability to attract the better players and can leave smaller teams at a disadvantage.

Players

Esports players, just like other professional sports stars, attract a following and audience. Unlike traditional sports, esports players frequently engage with their community through online streams where they will chat and banter with their viewers as they play.

These streams are attractive to sponsors since players are able to brand their streaming space and even take the occasional commercial break.

Sponsors

The companies that were among the first to sponsor esports events and teams were brands used in the production of or to play esports, such as software and computer component manufacturers like Intel. These are known as endemic sponsors.

Non-endemic sponsors are brands that do not fit neatly in the esports scene, like Turtle Wax, Mercedes-Benz, and Coca-Cola.

Endemic and non-endemic alike have various methods of making their presence known: team sponsorships, platform ad runs, individual player partnerships, league and competition sponsorships, and more. Teams will wear brand logos on jerseys, use sponsored products and equipment, produce social media content around their sponsors, and streaming platforms will allot screen space or entire channels to specific brands.

Esports puts brands in front of an audience that is less likely to consume media “traditionally.” For this audience, heading to Twitch to watch an esports match is traditional.

Photo Credit: Esports Insider

The Audience

Fans who watch esports live and online. The Nielsen Esports Playbook recently took a look at esports fans and found they are predominately male (71 percent) with an average age of 26. Most were introduced to the scene through family and friends, although a fair number found it thanks to social media influencers.

Nielsen found that viewing audiences for esports are the strongest in the United States, where 66 percent of fans say they are likely to stream a live esports event and 42 percent are likely to watch live esports on television. Additionally, esports fans are among the most active viewers of broadcast programming in general. This audience spends an average of 4.5 hours watching television, 4.3 viewing Internet videos per week, and spend an average of 8.2 hours per week playing video games.

In short, esports is made up of a wide variety of evolving and changing games, each with its own community of teams, players, audiences, and sponsors. Like traditional professional sports, an esports audience for one game does not necessarily translate to other games (just like someone who watches basketball may not like watching baseball). There are opportunities throughout the flourishing esports ecosystem, for even mores insight into this scene, give us a call at 972-323-6354.