HOW MIGHT BRANDS USE ESPORTS AS A MARKETING TOOL TO ENGAGE WITH ESPORTS CONSUMERS?
— A PLAYBOOK FOR MARKETERS ABOUT HOW TO WIN THE ESPORTS BUSINESS.
While the study of computer games in general is slowly becoming accepted in the academic world, the scientific investigation of competitive computer gaming, also called eSports, is still in its infancy. Due to the different facets of eSports and the rising impact on society, it’s becoming part of a modern subculture on a global level and is therefore an interesting industry to look at from a marketing and advertising point of view. A lot of companies from a wide range of industries, which are looking for investment opportunities, are now trying to find their entry into the dynamically growing and continuously forming eSports market (Bozorgzadeh, 2017).
ESports isn’t a new trend or technology. It is a full-blown shift in entertainment and culture that is taking a huge and growing amount of young people’s time and attention (Cunningham, 2016). So this shift needs to be understood by brands and companies if they want to connect and engage with the young target group. Why is there a need for that? Because marketers have a problem reaching the so called “millennials”. From a historical point of view, this generation seem to be more digitally advanced regarding the interaction with digital media and interventions as they grew up with these technologies.
A brief definition of eSports
For Hamilton et al., electronic sports, more commonly known as eSports, also known as esports, e-sports, cypersport, competitive (video) gaming or pro gaming , is the term to describe playing and spectating high-level games in a competitive atmosphere (Hamilton, Kerne, & Robbins, 2012). Wagner focuses more on the people’s fitness and given technology by phrasing that “esports is an area of sport activities in which people develop and train mental and physical abilities in the use of information and communication technologies” (Wagner, 2006). Wagner further takes into account, that the definition of “sport”, as it is defined today, is affecting how eSports is defined. Whereas in the industrial age, “physical fitness” was one of the most dominant values in society, sport contestants competed in traditional sport disciplines. But It has to be expected that the activities we will accept as sport disciplines will change as our value system change, for example due to technological progress (Wagner, 2006). Also, a definition of eSports need to be broad and generic enough to include upcoming technology trends and changes, for example using pc’s, consoles, smart phones or other devices to virtually compete. ESports further does not describe a single type of sport, it is rather a superior collective term, containing different eSports genres. Each requiring different skills depending on the athlete’s game and his or her role within a team.
The eSports industry
Based on the last years’ figures of Newzoo’s annual report, the eSports industry generated $696 million in 2017, with a year-on-year growth of 43.1% compared to 2016. $517 million have been realized by brand spending from various companies (advertising, sponsorship, and media rights).
Advertisements create revenue streams by displaying content to the eSports viewer. This entails ad formats such as live streams on online platforms (e.g. Twitch or YouTube gaming), in-between game ads or ads shown on broadcasting media around eSports content (e.g. ProSieben in Germany).
According to Nielsen, the revenues are expected to grow by +35.6% from 2015–2020 to reach $1488 million by 2020. Sponsorship is the largest revenue stream and will grow to $655 million in total by 2020. It is also expected that new brands, especially non-endemic brands, will enter and further invest in eSports to drive the growth in sponsorship revenues in the coming years. Advertising generates the second highest revenues and is expected to grow to $224 million by 2020.
The eSports ecosystem
While the eSports business in general is quite complex, it can basically be broken down into 5 components: publishers & games, players & teams, competitions with tournaments and leagues, branding & advertising and fans & eSports consumers.
Unlike the majority of traditional sports leagues, companies that are in any way involved in the eSports ecosystem, can play multiple roles. For example they can simultaneously be working as competition organisers financing a tournament through brand partnerships as well as they can be rights holders. At the same time, they can even be responsible for the broadcasts around the tournament and act as content creators to distribute content to streaming platforms (The eSports Observer, 2018).
Publishers and games Game
Publishers create and distribute video games for various devices like for consoles, pc games or mobile phones. Classical game sales are their main revenue source, but also the sale of downloadable in-game content like any game features or items belong to their revenue sources. Publishers range from large, publicly traded companies that develop a variety of games in different genres. These are, for instance, Electronic Arts (abb. EA), Activision-Blizzard or privately held companies that create one or two key game titles, for example Riot Games or Valve (Catalyst, 2017). The speciality in eSports is that publishers at the same time create and own the game property, which entails that all other stakeholders are reliant on publisher’s approval to host competitions or broadcast streams. This is in contrast to traditional sports, where the German football Bundesliga for instance doesn’t own the rights to the sports of football per se, but only those rights to their own professional league (compare Catalyst, 2017). Another emerging revenue stream for publishers is the opportunity to licence their games out to external league organisers and streaming platforms in order to monetise their game development expenditure (The eSports Observer, 2018). Another trend of publishers to embrace the full revenue potential of eSports is the process of launching franchised leagues that are poised to capitalize on increased fees for media rights, sponsorships, and more (Catalyst, 2017). It is only a logical consequence for publishers to also enter the competition market, as they are the owners of the licensing fees and could therewith easily build another revenue pillar for their business. Taking these facts into account, publishers control a significant proportion of the power due to licensing and supervisory authority within the eSports industry.
Competitive video games that will be played by eSports athletes on a professional level in leagues or tournaments can be classified in three tiers, differentiating in the year they were launched, how many stable fans and pro-players they have and how frequently tournaments will be played. Further, games can be divided into categories based on 3 criterias (Hilgers, 2017):
- Monthly active users
- Yearly prize pool
- Monthly hours streamed
Games that record more than 8 million monthly active users per game, an annual prize pool for winning tournaments and leagues of over $5 million and a total streaming time of over 20 million hours globally has been categorised into tier 1.Games from different genres belong to this tier, for example Counter Strike: Global Offensive (abb. CD:GO) belonging to first-person-shooters (abb. FPS), League of Legends, DOTA 2 and Hearthstone belonging to Multiplayer Online Battle Arena (abb. MOBA). The game FIFA, belonging to tier 2, has the highest fan base and prize pool of all sports games globally, but is significantly smaller in terms of the overall engagement compared to the games in tier 1.
Players & teams
Similar to traditional sport, eSports can be either played in a team with multiple players such as League of Legends or as a single player like in FIFA. Esports teams are organizations that typically consist of a number of players that compete under one unified club (Catalyst, 2017). On a professional level, these clubs also become brands. These squats can be compared to some traditional sports clubs with active teams playing in various sports like football, basketball and handball. Depending on their success, these teams have accrued a large amount of followers on their social media channels. As a result, successful teams are more likely to get sponsorship deals with brands, platforms, tournament organisers and publishers as these entities are highly interested in reaching the teams’ fans through their social media presence by placing digital ads of all sorts (compare Catalyst, 2017). Therefore, sponsorship is traditionally the main revenue stream for teams, but due to the maturation of the industry, their revenue streams are also diversifying — revenue sharing of media rights, gate and concession sales and exclusive content distribution fees from platforms such as Twitch and Facebook are becoming the new norm (Catalyst, 2017). According to “the eSports Oberserver”, especially broadcasting game sessions are a lucrative source of income for players and teams as advertising space can be offered to brands. As a matter of fact, some teams recruit “influencer” alongside players to exclusively fulfil the role as content streamer to engage with their fans (The eSports Observer, 2018). Fans, who see the athletes play their favourite game, will then recognise and get in contact with the brand who is advertising. This could be done through brand activations on jerseys or in-stream promotional content for instance, comparable to a football team only using Nike or Adidas shoes (The eSports Observer, 2018). Besides the remunerative sponsorship deals, the strive for personal accomplishment for individual players and teams involves winning tournaments and prize money, which also contributes to the player’s financial stability. By analysing which brands have already established their own team competing in the brand’s name, no quantitative data has been found that provides an overview of the market. However, some brands have been identified owning their own teams like RedBull, Gillette and Euronics. But not only brands but also traditional sports clubs are establishing their own eSports teams with the aim to engage and target younger millennial audiences. Traditional sports clubs try to use this vehicle to expand brand reputation and awareness, which will ideally lead to wider a fan base. With the wider fan base, the Club has the chance to make additional money (Ginx, 2018). Research shows, that football teams like FC Schalke 04, VfL Wolfsburg, West Ham United and Manchester City got involved with competitive gaming by bringing on board eSports players who compete in their names. Interestingly, not only FIFA teams has been created by traditional sports club to compete in virtual football, but also teams who play the FPS Counter- 20 Strike: Global Offensive or the MOBA game League of Legends. That implies that there don’t need to be a connection between the actual eSports game and the traditional sport.
As the rights on the games are with the publishers, third parties need to get the permission of the publisher to host an event. As streaming seems to be a big business factor, “exclusivity is the growing beast in these deals” (The eSports Observer, 2018). Competitions then again make their income through media rights fees, sponsorships, concessions, and ticket sales (Catalyst, 2017). In Germany, the ESL is the most important and popular third party in the market.
Characteristics of German eSports consumers
According to a study by GMR, gaming is not a one-size-fits-all lifestyle activity (GMR, 2016). Just like fans of any other traditional sports, gamers are not identical in their habits and interests. Further, GMR identified three distinct groups of eSports consumers — the watchers, the players, and those who do both. “These groups have different opinions about brand involvement, which should directly influence brand strategies” (GMR, 2016). With regards to demographic facts of eSports consumers, Nielsen found out that 7 out of 10 fans are male (Nielsen Sports, 2017). Moreover, the Nielsen institute states, that characterizing all eSports fans as millennial males would be far too simplistic. Newzoo calculated that 205 million viewers are watching eSports globally, 117 million of them occasionally, 56 million frequently, 20 million also play sometimes and 13 million are active eSports participants (Newzoo, 2017). Deloitte ascertained, that the purchasing power is the highest within the ages of 25- 34. This statement can conclusively be justified by the fact that this age group is already earning their own money.
So how do eSports enthusiasts use and consume media and what is their attitude towards brand involvement in eSports? The average eSports fan spends nearly double the time (8.2 hours per week) playing video games compared to watching TV on a TV screen. Also, the duration of watching internet videos through websites (4.5h) surpasses the amount of TV hours (4.3h).
In order to understand how online and offline lives converge, GMR requested participants to rank the most common activities they do while playing or watching eSports. 69% of them visit social media platforms, 64% listen to music, 55% text, video chat or take phone calls, 53% hang out with friends and 51% chat with other players or viewers (GMR, 2016).
To summarise, it can be said, that the eSports consumers may be digitally driven due to their media consumption and interests, but they’re also quite social. The difference is that they are just more likely to take their social interactions into the digital and gaming spheres. Based on the findings, brands should strongly consider how they facilitate online and offline social integration and experiences within their marketing initiatives. Brands should also think of engaging in further activities, which the gamers act out while playing or watching eSports as this offers opportunities to form connections (GMR, 2016). Marketers also should keep in mind, that the brand’s values and product attributes should match the eSports target group’s values and interests. Value creation in sponsorship seem to be very important for them, hence brand integration should feel authentic (Ad Bureau report, 2017).
Branding & advertising
Three major opportunities around eSports marketing initiatives can been highlighted:
- eSports influencer marketing incl. content marketing
- team sponsorships
- event sponsorships
eSports influencer marketing
Millennials are the most populous generation on social media, but they do not trust direct paid online advertising on social media and websites (Mavrck, 2017). That’s why new ways of addressing this specific target group need to be found. Influencer marketing seems to facilitate a millennials’ social online experience rather than disrupting it through digital advertisements like banners (Mavrck, 2017). Further, the trend to share and create personal content to express themselves accelerates the use of social media and therefore millions of users can be reached through branded posts made by influencers on digital platforms like Instagram, Facebook and twitter. Fletcher states, that the increasingly large player bases of popular eSports titles put top performing professional players in a unique position as influencers. (Fletcher, 2017, p. 7). For millennials, it seems that there is not much of a difference to follow a sports, music or film celebrity or even a digital eSports top athlete. But what differs are the platforms fans are using to engage with their stars. For Fletcher, the global popularity of streaming services like Twitch and YouTube gaming provide gamers access to global fan audiences in real-time (Fletcher, 2017, p.7). A statistic by the “influencer marketing hub” underlines, that up to 90 percent of modern gamers turn to YouTube each week for advice and help on improving their gaming skills (Influencer Marketing Hub, 2017). This proves, that influencer marketing can be beneficial to maximize reach and frequency within a marketing context. Despite the advantages, Christopher Hana critiques, that marketers should not only concentrate on reach to maximize brand visibility, but points out that the engagement rate of fans with their athletes is a more crucial key performance indicator as this measures the amount of people engaging or interacting with the branded content distributed through the contracted eSports athlete’s social media channels (compare Hana, 2015).
More than 600 eSports sponsorship agreements have been made since the beginning of 2016, according to Nielsen market intelligence (Nielsen sports, 2017). William Deller from Bird&Bird, who is looking at eSports sponsorship deals from a legal perspective, sees a trend and states that until recently, sponsorship within eSports were dominated by brands, which are endemic to the gaming industry — software and hardware developers such as Intel and LogiTech. Now, also non-endemic brands have started to enter the eSports sponsorship market with big investments (Deller, 2017).
The GMR report argues, that it is critical for a brand’s success to identify and target specific segments of eSports fans to derive which strategy would work best. Brands should decide whether they want to concentrate their marketing efforts on a broad game or genre community like in a team sponsorship, or if they want to target a more specific segment within a greater fan base by partnering up with single athletes. These targeting decisions directly impact the selection of the marketing tactics used to achieve awareness, image and sales goals (compare GMR, 2016). Nicholas Bodell goes one step further by underlining that eSports team sponsorship has the speciality of sponsoring via streaming platforms while the entire team is playing. This seems to be a big advantage for gaining potential brand recognition as sponsored ads can directly be embedded into the teams’ streaming itself, which bypasses obstacles such as ad blockers (Bodell, 2017). Deller contributes that when brands enter into a sponsorship arrangement, both the teams as rights holders and brands as sponsors face many of the same issues of parties in traditional sport: exclusivity, territory, limiting liability and payment (Deller, 2017). The author’s market history research showed that the fluctuation of team members and also complete teams is quite frequent. Teams regularly leave and join new leagues and competitions, which makes it complicated for brands and advertisers to ensure the team’s quality. A solution might be to include termination clauses in the particular contract.
Another way to connect with the eSports audiences is through event sponsoring. The 2017 report of MEC highlights, that especially offline events can be a powerful acquisition tool and an affinity-building activation to help connecting fans with brandled experiences (MEC global, 2016). In the study by GMR, event sponsorship was one of the most impactful tactics for influencing purchase consideration. 71% of players (along with 51% of watchers) ranked event marketing as very effective (GMR, 2016). Further research showed that eSports event sponsorship is a low-cost alternative compared to traditional sports event sponsorship (Linqzil Digital Media, 2017). There also seems to be a creative way to subsidise the costs of sponsoring a large event through crowdfunding (Keller, 2015). But there is not only the option to sponsor large, already existing tournaments and events. There is also the possibility to hold white-labelled events, as Keller states. These are usually smaller and invitation-only tournaments and events. According to Keller, these events are almost always successful for brands as long as the brand understands to tailor its message to the gaming consumer in an authentic, valuable manner (compare Keller, 2015).
Summary and key take aways
Due to the eSports consumer’s technological and digital capabilities and understanding, digital media channels seem to be the right way to deliver a brand message. Additionally, there is also a high acceptance for classical “offline” event sponsorships. Whether online or offline activations, brands should keep in mind that interacting in an authentic manner, communicating on eye level and bringing value to the fans is crucial.
Comparing the different brand activation possibilities one can say, that before investing and deciding which initiative will be executed, the brand needs to analyse the market carefully and avoid to jump-start into the market. The three highlighted options differ in terms of their strategy and costs. If a brand wants to establish eSports as a pillar in their business, a long-term strategic sponsorship like owning a team is favoured. If the aim is to tactically promote a new product launch for instance, a singular white labelled event or player endorsement could help to get awareness and sales uplifts in short-term.
Effective reach and engagement require strategy.
As the market overview has shown, eSports games and genres are diverse and highly dispersed. Fans from one game are not necessarily following other eSports games or genres and thus might never pay attention to the brand’s activation, if the wrong game has been chosen. Brands need to think carefully about reaching fans. Investing in multiple titles may be a better strategy if the aim is to reach a large share of the market.
Being authentic and valuable is vital
As elucidated per definition, the culture of eSports entails a shared passion for this sport and comes with a high grade of genuineness and authenticity. Being authentic, especially for non-endemic brands, is key as these digital natives are willing to interact with brands when they feel comfortable and get real value from that relationship.
Openness towards brand engagement
ESports fans generally have a positive attitude towards brand involvement. This is a chance for brands to be early movers within major categories. Creative, costumer-centric approaches in communication could reveal untapped potential.
Create experiences, not ads
Millennial eSports enthusiasts do not trust paid online ads and do not want to be disrupted in their online experiences, brands need to enhance their online experiences rather than booking advertisements. This will resonate best with the eSports audiences.
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