The Reality Of eSports vs. Sports Revenues | THE NEXT LEVEL 004

Exclusive: eSports vs. Sports Revenues

Story of the Week: It seems you can’t go a week without a new eSports Market research study. In the last 6 months alone, we’ve seen 5 studies from SuperData, Newzoo, Technavio, Deloitte and PWC.

My Take: As the eSports market is new, global, with a fractured infrastructure run by private companies, any estimates become difficult. I’ve aggregated all 5 studies below to provide an overview:

• It’s not only challenging to get consistent yearly data but the estimates vary greatly. In 2016 SuperData is predicting almost 2.5X of Newzoo.
• Deloitte references two other estimates noting they are “below the Midpoint of SuperData’s and Newzoo’s own research”.
• I did not include PWC as they used Newzoo’s revenue estimates

Using Deloitte’s middle ground of $500M for 2016, how does this compare to other Sports League revenues?

You hear the comparison’s all the time — “eSports As Big as NFL by 2017” or “Activision Blizzard Gunning for NFL Scale eSports Revenue”. Or the perennial punching bag the NHL:

2013: “MLG Claims It Will Be Bigger Than NHL in 2 Years”

2014: “ESL CEO: eSports Will Be Bigger Than Hockey”

2016: “Rick Fox: eSports Will Overtake NHL in 2 Years”

Starting to see a pattern? Unfortunately we’re not close yet:

• In 2016, eSports is equivalent to the largest Boxing prize fight ever and MLS’s 2015 revenue at $500M.
• Taking the highest research estimate with a 400% increase in just 2 years; eSports in 2018 is still half that of the NHL and not even close to the NFL — further assuming no growth for the NHL/NFL.
• Additionally, this is also taking into account the Global eSports market. As the MLS, NHL, NBA, MLB, and NFL make the majority of their revenue in the US, a similar comparison would reduce the baseline significantly.

So is it just noise in the marketplace? No. Maybe just some irrational exuberance. If we continue to support the eSports community, build the infrastructure, and provide teams/players a viable professional life; we will see longevity. The first NFL game was almost 100 years ago. We’ve had 50 years of Super Bowls. Let’s give eSports the time it needs to be successful.

This only addresses revenue, what about comparing viewership? That’s coming up.

Kamcord Raises Another $10M and Launches App Live Streaming
Kamcord was one of the early entrants to the Mobile live streaming space along with Mobcrush aiming to become the “Twitch for Mobile Games”. Kamcord has now expanded to “appcasting” with $10M in additional funding led by Time Warner. Appcasting allows someone to broadcast their entire phone screen and engage their audience via live video and chat.

My Take: This is surprising to me for a few reasons:

• In just under 2 years, Kamcord has raised $32M+ via Series A-C at a $100M valuation. That’s sizable considering just last June, the company was not generating revenue. The funding has also come from big names like Andreesen-Horowitz, YC, Tencent, and now Time-Warner.
• What does this say about the current market for Mobile Gaming live streaming? Were they disrupted when Google launched an Android clone and said they would work with developers directly going forward?If it were more successful I would imagine a deeper push into Asia and infrastructure vs. a semi-pivot.
• Kamcord currently makes money by selling virtual gifts that viewers purchase to send to the broadcasters. This business model is closer to a Mobile Game than Twitch. While Twitch also offers something similar in Donations, the majority of revenue comes from Advertising and Subscriptions — of which Kamcord currently has neither.
• Finally, the biggest questions for me are — Do I really want to watch someone using Tinder and is this defensible on the OS level just as Google did earlier?

I watched one of the first live streams done by YC President Sam Altman who tweeted this to his 150,000+ followers:

While Sam was amazing as always, I saw that only about 2800 “viewers” watched the 40minute stream.

Further, would I find this compelling more than once; and then only for techies and celebrities? I guess as everyone from Facebook, Twitter, and Google move into the live streaming space, if you’re going to take a swing, you might as well go for it.

VREAL: The Twitch For VR
2016 is Year Zero for VR and VREAL wants to to launch the first live streaming platform for this new medium.

My Take: I’ve just begun to scratch the surface of VR/AR/MR but if the predictions are only 20% true, it will still be a transformative technology (Read this Wired piece on Magic Leap for a great overview). While it’s still very, very early, the effect on eSports either via playing, live-streaming, or watching an event could see a fundamental shift. The scale may be small this year but research by Newzoo shows that the eSports enthusiast could be the #1 target for VR products.

While I’d be shocked if Twitch/YouTube/others weren’t already working on similar VR platforms, there is other near term potential for VR: Why not watch League of Legends or Counter:Strike from inside the game? What about attending an eSports event virtually with your friends and thousands of others?

Until VR hardware and software hit scale, those early opportunities are up for grabs.

ESL Launches 24/7 eSports Satellite Channel
This May ESL will launch a 24/7 eSports Channel on parent company MTG’s Viasat Satellite Channel in the Nordic and Baltic regions.

My Take: While “World’s First” was touted in the press release, South Korea already had existing 24/7 eSports TV Channels via OGN and others. The bigger hurdle is this: eSports does not need TV, TV needs eSports. The industry grew on digital platforms with an audience that has fled traditional TV outlets.

While some point to Turner’s E-League as an example of TV’s potential, ~80% of Turner’s E-League programming will be on digital platforms. The Friday TV slot is needed to get the $2M Category Exclusive Ad deals they are charging (If they’re able to sell-out all 8 Categories that’s a huge success for Season 1 but will be challenging based on Counter-Strike’s violent tone).

Coincidentally, MTG’s CEO was speaking at a conference in London on the same day as the announcement and said “younger people are leaving free TV and they’re not coming back”. So why would this drive satellite subscriptions?

I’ll be interested in seeing the viewers numbers 3 and 6 months post launch.

French Government Creates eSports Federation
This week in France, many of those involved in the French eSports scene launched a Federation in conjunction with the government, led by Secretary of State Axelle Lemaire.

My Take: This is a very important move. Outside of KeSPA in South Korea, I don’t believe any government organizations have formally gotten involved within the industry.

For those not familiar, the majority of the top teams and players across a wide variety of eSports genre’s are from outside the US. This has led to many issues with teams/players not being able to compete because they can’t get a Visa — or even being deported from the US after failing to be granted a P1 Athlete Visa because eSports is not recognized as a Sport. With France’s move, hopefully a similar type of partnership could happen in the US. Coincidentally, a petition for this just launched and garnered 12,000+ votes in less than a day. It’s currently at 17,000 with 100,000 being the goal and you can sign up here.

SPONSOR SPOTLIGHT: BUD LIGHT

After years of involvement with traditional sports, Bud Light is partnering with eSports for the first time. Starting next week, fans will vote for their favorite All-Stars of who the top players will engage the community via live streaming, custom content, tournaments, and onsite activations.

My Take: WOW. When looking at the top Ad Categories by spending, at least 1 Brand within each Category has invested within Gaming: Retail, Auto, Telco, Financial Services, CPG, QSR, Insurance, Beverage, etc.

In my 10+ years at the intersection of Gaming and Advertising, there’s been 1–2 Alcohol programs total (Coors Light did a program with Xbox 360 in 2014 and a Mobile Game in 2015). Not only had the Category not been expanded, the entrance comes from the world’s largest brewer with $50B in revenue that paid $1.4B to be the Official Beer sponsor of the NFL. The challenge came down to two factors: Age targeting limitations and the audience size post targeting.

eSports is the perfect medium for this demo as SuperData and Newzoo have already said (coupled with internal live streaming data I can’t share) the majority of viewership and audience is 21+. The data below from Gaming research firm EEDAR is for players only but provides additional corroboration for the 21+ audience:

I also like that the program incorporates a few different elements:

• Fan Engagement: Vote for your favorite eSports players supported by…
• Events: Athletes reveal at Dreamhack. Winners announced at E3. All-Star Tournament at TwitchCon. Onsite Activations.
• Custom Content: Exclusive streams on Twitch and a Behind-the-Scenes series developed by Machinima.

Is the program perfect? No. But for all the reasons above it’s a great start. Big hand to all those involved on the Brand, Agency, and Platform/Event side to make this happen. For new Brands engaging with eSports, 2016 is off to a fantastic start.

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