Greed is Good! Political Economy of Crowdfunding in ‘Dota 2’

First, a little context. This is the transcript of a 10 minute presentation I gave at Foundation of Digital Games 2017, which was held from August 14 to 17 in Cape Cod. It was part of the “esports panel,” which was organized by MIT’s TL Taylor and focused on the concept of grassroots esports. The other panelists gave talks on things like LAN cafés in Australia and gamer identities in China, but I wanted to say something about Dota 2 and crowdfunding.

In the event this makes the rounds on Dota 2 Twitter or /r/dota2, I’d ask you to keep this context (an academic conference) in mind. You’ll probably spot moments where I had to elide things for the sake of clarity and argument. Likewise, this was composed to be heard by a specific audience (a room full of academics), and the ideas and the way they’re packaged reflect that.

This is pretty jargon-free, but I want to quickly say what is meant by “political economy.” On a basic level, it’s the study of how money moves through a system. Where does it come from? Where does it go? By what mechanisms does it travel? Why does it accrue for certain actors in the system? And on what terms? These are important questions because it’s my view that the material concerns articulated by political economic analysis are determining of culture, social organization, etc. There are other factors and circular causality, sure, but I think political economy has the most influence. In short, if you want to pursue research in Dota 2— about, say, why it’s farther from gender parity than other esports, or determining what methods are best for gathering qualitative data — you need to start by understanding its political economy. This lecture is a basic, but very far from complete, attempt to do that.

This talk doesn’t exactly paint Dota 2 in a rosy light, and, out of context, you might come away thinking I don’t like Dota 2. Nothing could be further from the truth. I love Dota 2 and I want it to be better than it is, and that’s why I think it’s important to be relentless about the ways in which this ecosystem fails so many players (and I’m well aware of what people see as its benefits). This may change with the new majors system (and I’m hopeful), but piecemeal solutions tend to create as many problems as they solve.

Finally, most of this research is based on public and private conversations I’ve had with players and team owners, my own knowledge from working in esports for several years, and publicly available data. I think the argument is watertight, but there’s always more to learn. So, if you’re a player or team owner or investor or whatever and you’re interested in participating in some qualitative research, slide on into my (open) DMs. This is in a presentable, but not publishable state, and getting it to there will require more interviews (anonymous is fine, even preferable. Let’s talk!).

///

I’d like to start by thanking the organizers of this wonderful conference and extending special gratitude to TL Taylor, who initially invited me to join this distinguished panel.

My name is Will Partin and I’m a PhD student in communication studies at the University of North Carolina, but I have a pretty active second life as a journalist (of sorts) covering esports. I’m telling you this because that work has given me an acute appreciation for the tremendous variation, cultural and otherwise, between different esports scenes. Too often, we talk about “esports” as a single entity, rather than a loose confederation of communities, each with their own quirks. As a researcher, I’m always looking for ways to better understand and account for these variations, and my answer today is about the foundational role that political economic analysis can play into nuancing research into esports.

I have the good fortune of presenting about Dota 2 only a few days after its 2017 championship, The International, which took place last weekend in Seattle. By prize money, it was the largest esports event in history. Teams won around $25 million, a little less than half of which went to the winners, Team Liquid. That sum helps explain why 49 of the of 50 “highest earning” players in esports history play Dota 2.

I’ll come back to that statistic, because I think it’s misleading in interesting ways. But, every year, The International inspires a frenzy of coverage from mainstream and gaming publications, and, every year, journalists rush to mention the bulging prize pool. $24 million is an impressive amount of money, and it both drives clicks and gives Dota 2 an air of luxury, or at least legitimacy. You’ve probably seen some headlines like this in the last week, but here’s a few (including one for an article I wrote; as a writer, I’m not immune to this trend)…

…along with a glowing slide in this year’s Kleiner Perkins Internet Trends report. This infographic, in context, is meant to stand in for the explosive growth of esports as a whole, and convince you that Dota 2 is a booming business worthy of your entrepreneurial attention. The truth, of course, is much more complicated than a bar graph.

Now, a spectacle like The International might seem like an odd complement to the more obviously “grassroots” topics this panel has discussed. What binds our topics together is not size but an emphasis on community, albeit a very large one in my case. Despite the pomp and circumstance, The International is a grassroots event in the sense that it leverages (or, if you prefer, exploits) a passionate base of players and viewers. And the lever here is crowdfunding.

What I want to do is lay out the doubled-edged role that crowdfunding plays in the political economy of Dota 2. The soft, broad-reaching argument is that political economy is the lynchpin for studying virtually any research topic in Dota 2. It shapes everything from media literacy among players and fans, labor conditions, tournament amenities, demographics, and methodological concerns. There won’t be space to discuss all of these, so I’m going to hone in on the issue of player compensation. So the hard, narrow argument is that decontexualized statistics like the “$24 million tournament” headlines can give you a very warped understanding of the financial health of Dota 2 and its players.

But first, we need a bit of history. Dota 2’s professional scene began in 2011 when Valve organized first International to celebrate the game’s release. At the time, Valve indicated that they were only interested in running and funding The International once yearly; third-party companies, like DreamHack, ESL, and MLG, were free to organize tournaments in whatever way they wanted. Valve’s hands-off approach was part of a broader strategy that saw Valve shift its attention away from developing discrete products (games), to creating multi-sided markets.

As CEO Gabe Newell explained in a 2013 interview, “our job is to maximize productivity of users in creating digital goods and services. The markets will determine what the marginal value add of each of those activities are.”

Gabe’s explanation encapsulates what Nick Srnicek recently called “platform capitalism.” Platforms, in short, are technologies for the production of distribution; they create spaces of economic exchange on their terms, and then collect “rent.” It is an extremely efficient way to generate profit because it puts most of the “real” work on actors in these markets, minimizing expense and risk to the platform holder. So, in the same way that Steam is a platform for games and the exchange of virtual goods, I want to suggest that Dota 2 is really a platform for esports. This stands in contrast to the hierarchical, top-down system that Riot Games has designed for League of Legends and exerts near-authoritarian control over.

(For a longer look on how this works with respect to Steam, see Daniel Joseph’s essay, “Code of Conduct,” in Real Life).

Grassroots crowdfunding, as it turns out, fits very neatly into the Dota 2 platform because it leverages a community inseparable from its market. Normally, when tournaments want to boost prize pools, they pay for it through sponsorships or media rights. But negotiating those can be a tedious process, and Valve doesn’t play that game. Instead, in 2013, for The International 3, Valve introduced the Compendium, a $10 digital booklet stocked with virtual goods that Valve solicited from community designers (again, shifting the burden of production away from themselves). Initially, $2.50 of each compendium sold went to the prize pool, with some very basic community stretch goals.

In 2014, Valve released a more elaborate compendium for the International 4 that you could level up on your own with no limit on how much you could contribute (though, again, Valve was skimming off 75% of contributions). The prize pool quadrupled.

In 2013, Valve also allowed third-party tournaments to create their own compendiums (here’s one from The Summit, held in Summer 2014), which allowed prize pools to grow dramatically in size across the industry. It also meant that a significant percentage of the money available to top players comes directly from grassroots community contributions.

It also means that a significant percentage of the money available to top players comes directly from grassroots community contributions. In effect, Dota 2’s community started subsidizing its competitive scene. Indeed, grassroots contributions *became* the competitive scene.

And here’s a chart to give you a sense of just how crucial crowdfunding has become in Dota 2. So, you can see that the trend is upwards in both absolute and relative terms. These days, about two-thirds of winnings available to professional players comes from crowdfunding. This represents a considerable amount of the capital flowing through Dota 2 in general, and, for that reason, I think it’s where one should explain when pursuing research questions about Dota 2. It’s my view that the game’s distinctive political economy provides the basis for explaining many of the things that are distinctive about the game and its culture, like the extremely high earning potential for elite players.

On that note, in my last few minutes, I want to look at the downstream effects — good and bad — of crowdfunding when it comes to player compensation. In doing so, I want to provide some sobering context for those eye-catching statistics about prize money, which all too often are taken as a transparent sign of the Dota 2 ecosystem’s robust state of health.

In fact, it’s a common complaint from team owners that Dota 2’s ecosystem is actually immature, which a lot of legitimate teams straight up ignore the game. It’s true that, when you include prize money, total compensation for Dota 2 players is higher than any other esport, and crowdfunded winnings hugely outweigh any other source of potential income (e.g. salaries, streaming revenue, etc.).

This has created a very peculiar incentive structure for players. Generally, a full-time Dota 2 player contracted with a sponsored organization will make anywhere from $500 to $4,000 monthly. But signing with a team also means doing media appearances, mandatory streaming hours, and other activities that might take away from practice. And if you’re inclined to think that this is what makes you win — especially when there’s so much money in winning — then taking a salary might not be worth it after all. In fact, many players and teams are increasingly willing to take that chance. Over the last year, there have been a number of high profile lineups who have left their sponsored team, or decided not to sign with one at all, foregoing salaries and other benefits to live (in theory) on prize money alone. In a sense, there’s a metagame outside of Dota 2 as much as there is inside it, and many players have stopped seeing signing with an organization as an optimal strategy.

Put simply, crowdfunding has helped create a situation in which players’ and teams’ interests aren’t aligned, and, right now, the Dota 2 ecosystem is a lot more attractive to players than it is to teams. But it’s also an extremely unequal system. Rich winners get the headlines, but they’re ultimately the anomaly, and when we focus on them (as survivorship bias might have us do), we have a warped understanding of players’ financial health. Importantly, impressive figures like that can blind us to the precarity of many (even most) Dota 2 players.

Since 2011, Dota 2 players have won around $128 million, and around half of that has gone to just five teams (Evil Geniuses, Team Liquid, LGD Gaming, Invictus Gaming, and Newbee). Among individual players, there’s a similar concentration of wealth — the top 20 highest out of maybe 500 active pros since 2011 have earned around 40% of that. This has created tremendous wealth disparity and income inequality among Dota 2 players (and if that sounds familiar, well… welcome to neoliberalism; wealth moves upward in an unregulated system). In short, it’s a great time to be an elite Dota 2 player, but it kind of sucks for everyone else. The crowdfunded, meritocratic system is appealing in some ways, but we should be clear about its cost. If you’re not on the top 10 or so teams, you’re probably making next to nothing.

For comparison, Riot Games deals with this problem by mandating minimum salaries for players in their proprietary leagues. As a result, there are far more League players making a living wage than Dota 2 players making a living wage. Without reliable income — and especially at the second tier of play, fraud and unpaid salaries are still a serious problem — many second tier Dota 2 players are forced to turn to other sources of revenue, legitimate or not. Some have other jobs, or stream, but both cut into practice time and make it difficult to break into the professional scene. And, though there are important exceptions, Dota 2 has far fewer “new” pros every year than other games, and many top teams mostly just swap around the same cast of characters ever shuffle. This is also why match-fixing continues to plague Dota 2 when it’s mostly disappeared from other premiere esports; if you’re a second-tier Dota 2 player, it’s probably in your financial interest to throw games because there’s not a sustainable incentive structure for anyone but super-elite players.

Maybe that doesn’t sound like a problem to you because, yes, Dota 2 seemingly a “meritocratic,” high-risk high-reward system (I’d disagree with that too, but that’s for another day). But it’s my view that Dota 2 is failing many of its players, the very people who generate value for the game. So if there’s one takeway from this, it’s that a lot of the media narrative about Dota 2 centers on its amazing prize pools, but this (understandable) fixation can occlude our understanding of how the scene works, and the troubles many players face. Crowdfunding has done incredible things for a small minority of Dota 2 players — and congratulations to them all — but it’s indirectly made life harder for everyone else.

///

August 2017