Publishers are dictating what esports will be

In 2013, I wrote about the differences of publisher involvement in esports mainly regarding Riot Games, Valve and Blizzard Entertainment. I wrote the following consideration:

On the one hand, publishers’ want to ensure the longevity of their game through keeping eSports alive, as it is an emblem of new generation values and the long-standing human nature of competition. On the other hand, event organizations have been surviving on their own alongside teams and players for quite some time now. While a publishers’ blessing can help advertising and marketing for these event organizers’, their demands can sometimes be detrimental to overall business interest or severely limiting in terms of actual growth in that specific eSports title. As time moves forward, it would not be a surprise to see companies be more hands-on with their games and the direction of the eSports sector, but will it be for the better?

November 2, 2013 – Michael Cohen (GLHF Magazine)

Back then it was mostly regarding the title StarCraft II (Blizzard), League of Legends (Riot Games) and Dota 2 (Valve) where Riot Games was completely hands-on, Valve was completely hands-off except for The International and Blizzard was in this transitioning phase of involving their own WCS structure but with third-party help.

The current Major model leaves small pockets for third-party tournaments to join in the Dota 2 esports scene, but otherwise – Major and Minor titles are mostly determined at the decision of the publisher.

Though the title of this piece may appear as a sort of impending doom, the years of developer involvement is more of a ‘point-of-no-return’ direction of where esports is going. As predicted, the hands-on involvement of developers in their game-to-esports products has grown larger, sometimes completely cutting out middle-men production companies that have been in esports since its [many] starts. Though that is a threat to the livelihood of these businesses, it also puts into question the definition of esports – either as a marketing attachment and new source of revenue for developers or as a separate division of entertainment and business akin to traditional sports spectating and its assorted diverse revenue streams.

The Consequence of Developer-Controlled Esports Scenes

As more esports titles become largely dictated by their publishers, the fewer opportunities there are for tournament organizers to create events. Tournament organizers not only compete with one another for calendar dates and territorial positioning but they also compete for esports titles. In the past, brands like MLG, ESL and DreamHack announced events for StarCraft II or Dota 2 with near overlapping dates. This is no longer occurring thanks to the involvement of developers ensuring that there is no overcrowdedness. On the other side of the spectrum, for games like League of Legends or Overwatch, as tournament organizers were readily involved with the scene, to have that entire license lost meant that multi-game title events were no longer as easy as possible.

Traditionally in February, IEM Katwoice has been a staple of major tournament production for the major esports titles: League of Legends, Counter-Strike, StarCraft II and Dota 2. Over time, the IEM brand and its associated games have been reduced to just Counter-Strike and StarCraft II.

Developer involvement means that tournament organizations are aiming more and more to be production services for publishers that cannot afford (or do not think it is a worthy investment) to host their own esports leagues and tournaments. With less tier 1 games being available for tournament organizations to host multiple or multi-title events, tournaments orgs are now stepping over each other to reach those contractual jobs such as with Gears of War, Supercell Titles (Brawl Stars) and PUBG Mobile.

Speaking of stepping over each other, let’s also consider the number of Western tournament organizations involved in Counter-Strike, which has a much more open calendar (and appeal to Western audiences) than Dota 2 (who has more popularity in the East and a very tight schedule of Majors and Minors). As more esports titles become closed-off, current businesses get squeezed and new businesses are less likely to prop up since there’s less opportunity to do so.

Including Majors and Minors, there has been over 35 tournaments and leagues for the 2019 calendar in Counter-Strike. For Dota 2, including Minors and smaller tournaments: approximately 24.

For teams and players, they are caught between the expected investment that publishers can comfortably afford to get involved on the newest and latest titles. To invest in Overwatch or Call of Duty for a team means that there is heavy trust in the publisher to lead and follow-through on reaching a shared profitability in the long-term, which is difficult to guarantee. Ultimately, teams are start-up investments but start-ups investing 20 to 30% of their value into one game removes that start-up agility that a lot of growing orgs and business sectors rely on to ensure long-term viability.

The Duality of Esports

The duality of esports references the contrasting, but sometimes overlapping, perspective of how to treat esports according to the actions of the publisher. As previously noted, developers are taking a very strong approach in how the shape of their esports scenes are developed and more importantly, who has the rights to be involved with its growth and success.

We separate the identity of esports into two camps: An Ecosystem or Marketing Outlet but to say that if one developer is in one camp does not necessarily mean they not of the other, it’s that their intent or focus is on either side. The main differences between each side is how involved and what do brands get in return for their involvement. For an ecosystem identity: the goal is long-term value and cooperation for an enriched profitability in exchange for immediate investment/input. For esports as a marketing outlet: esports is an extension to push product and immediate sales, pushing players to the game title as well as also converting esports fans into routine paying in-game consumers.

An Ecosystem

Esports as an ecosystem is the perception that esports will become a separate avenue of revenue on top of its immediate marketing framing. It’s the idea that if invested and developed properly, it can generate strong return of investment in the long-term.

Over 20 teams were formed to create the Overwatch League. Starting in February 2019, these teams will compete in over 70 matches across 4 stages of the year.

With franchising from Riot Games and Blizzard Entertainment, both brands have invested heavily into their infrastructure and esports development to ensure it is at its maximum quality in terms of production for immediate sponsorship and viewership. For Blizzard specifically, by tying their company’s own involvement into the brand, they signaled to other investors at conventions such as MIT Sloan Sports Analytics Conference to also invest in what they believe to be the future and in imitation to what most sports teams investors know (traditional sports spectating). Another clear sign of tying themselves to the scene is through their shared revenue model, where franchised brands, like in Riot Games’ League of Legends, share a % of earnings to a collective pot and is distributed proportionately to all parties involved. The exclusivity Overwatch deal from Twitch to Blizzard will likely go to all parties involved.

The challenge right now is to follow and adapt their year-to-year plan as they expand to both physical inner-country audiences and events as well as to ramp up sponsorship, viewership and appeal. What we may see in the coming years is Overwatch, as a brand, expand to future spin-offs and titles and franchised teams being utilized as marketing assets or already inducted brands should there also be a tournament circuit there. Likewise for Call of Duty, it would be no surprise to see that the release of a new game does not affect franchised teams’ involvement in the League.

PS: It’s important to note that these publishers companies may have considered going in-house due to the businesses, productions and services that third-party esports companies offer may not be sufficiently up to the level of expectation that the developer expects and thus have chosen to invest internally for current and future esports or broadcast-related works. Both Riot Games and Blizzard have previously or currently (Blizzard) work with third-party brands such as ESL, DreamHack and/or StarLadder.

A Marketing Outlet

Image result for rainbow six league team skins
Akin to the stickers in Counter-Strike or the Battlepass in Dota 2, Rainbow Six: Siege adds in digital monetization to convert esports viewers and fans into purchasers, tying in a split monetization value for both the teams involved as well as the developers. PUBG originally had announced plans to do similar, but ultimately backed out of the idea.

The assumption that if a developer is not handling an esports scene as an ‘ecosystem’ then they must not be seeking long-term viability is simply untrue (but understandable). It’s more of an emphasis on making esports fans also purchasing consumers and allowing the scene to develop and manage on its own.

Another facet of treating it as a marketing outlet is being relatively ‘hands-off’ in its process and esports development. However, companies like Valve, Ubisoft, Capcom and some mobile game companies are not entirely hands-off but rather dictate how the scene will be and permit other brands to create licensed broadcasts and events around their product. Companies like PUBG Corp. delegate specific regions of their esports leagues to esports veteran companies like StarLadder and OGN.

By treating it like a marketing outlet, developers can focus more on how to integrate esports fans into consumers and purchasers and worry less on how to monetize the esports scene as a whole, with all of its costs, inexperience and brands coming in (and out). For CS:GO, Valve’s involvement is relatively small, only dictating which tournaments organizations are granted a Major title (and ensuring that no other events are scheduled at the same time) as well as disputing any misinterpretations regarding broadcast rights or legal concerns (is betting sponsors permitted?). For Dota 2, Valve is a little more hands-on and dictates not only which companies are granted rights to broadcast a Major or Minor event but also produced their annual The International tournament alongside PGL.

Conclusion

Regardless of how esports transforms, publishers will survive. The key point to realize is that as esports, as a business sector, gets pulled to either identity definition, mainstream game developers and publishers will survive and move on to the next marketing trend. That cannot be said for some esports businesses that have sought investment to keep up with the latest franchising model in esports or tournament companies who looked under every rock and multiplayer title for contractual work and esports development.