eSports - what are the new rules of the game for advertisers?
As eSports moves into the mainstream of sport and entertainment, advertisers are waking up to the potential goldmine offered by this new and growing industry.
Marketers are starting to take eSports more seriously. And well they might. How do you ignore nearly half a billion people with a common interest, an economy that is showing exponential growth, and a potential goldmine for clever advertisers?
WHY IS THE eSPORTS INDUSTRY SO LUCRATIVE FOR ADVERTISERS?
Newzoo’s 2017 Global Esports Market Report makes for interesting reading. Some trends from this report, and elsewhere, include the following:
1. eSports is growing exponentially as a new independent business and industry.
a. The eSports economy includes media rights, advertising, sponsorships,
merchandising and ticket sales.
b. Revenues grew 52% from 2015 to 2016, and 41% in the next year. The
revenue forecast is for 36% CAGR between 2015 and 2020, when revenues
are expected to reach $1.5 billion. Sponsorships should reach $665 million,
and advertising $224 million. (Some forecasts double these figures, which will move advertising to half a billion dollars).
c. The global eSports audience is expected to reach 386 million in 2017 and to
grow by a further 50% by 2020. There are currently nearly 60 million eSports
participants.
d. eSports awareness will reach 1.3 billion in 2017 and 1,8 billion by 2020,
driven by game publishers and increased media coverage.
2. There is convergence of business models
Brands, media and entertainment companies are looking to capitalize on “the
favorite pastime of digital natives and millennials: playing games and watching game content”.
Traditionally, media companies rely on advertising for their revenue. Gaming, on the other hand, depends on consumer spending. The convergence of these business models will provide media companies with a more sustainable revenue mix and will allow advertisers access to the gaming market.
Live streams and events have moved gaming into the arena of broadcasting and media. For example, Turner, which is part of Time Warner, operates the ELEAGUE, a CS:GO league which is broadcast on TBS, Twitch and YouTube Gaming.
Content creation and entertainment have become as important as winning
tournaments. Tech and e-commerce giants like Apple and Amazon are starting to invest heavily into content.
3. eSports is gaining acceptance as a legitimate form of mainstream entertainment.
a. Traditional sports teams, clubs and leagues are becoming involved. Major
soccer clubs in Europe, such as Schalke and Paris Saint-Germain, are launching eSports FIFA leagues, with players branded with club colors. From
2018, NBA will be backing teams. These traditional sports bring in their
established fan bases, and their agencies, with experience in sports
marketing.
b. Universities are offering eSports scholarships.
c. Programs are giving players training in nutrition, fitness and eye-hand
coordination.
d. Major games are being covered by newspapers and on TV, just like regular
sport.
e. Agencies such as M&C Saatchi and Modop are starting to link eSports stars to brands.
f. MLG.tv, the primary eSports online viewing channel, has 225 million unique users. But it has also partnered with Facebook, so eSports programming will be viewable by Facebook’s 1.6 billion users.
g. Major companies are investing into eSports. In China, this includes Alibaba
and Tencent, with Tencent owning Riot Games, publisher of the League of
Legends game. Amazon has bought Twitch, the leading live streaming video
platform.
h. eSports will be a medal event at the 2022 Asia Games and is expected to be
included in the Olympics.
4. There is enormous industry potential.
The average revenue per fan is currently only a fraction of that for traditional sports (partly because viewing is free). The average for 2017 for eSports fans is only $3,64 compared to $15 for basketball. It is expected to grow to $5.20 by 2020. One projection in the Newzoo report doubles this projection.
5. The “Enthusiast” group of fans should be of particular interest to advertisers.
It is skewed to young (ages 21–35) and male (71% of the fans). According to
research undertaken by BI Intelligence, the share of millennials in this audience is two to three times higher than in any of the big four US sports. Most have good incomes and consume content online rather than via traditional media outlets. They are also very difficult to reach. Most of them are avid ad-blockers and do not respond to conventional advertising.
6. Revenue from betting
Revenue from betting is not included in the numbers provided, but betting on
eSports (as for traditional sports) is significant. It is likely that revenues from this source are larger than the eSports economy itself.
It is estimated that more than six billion hours were dedicated to watching professional gaming in 2016. It is expected to grow to 9 billion hours by 2021. That is a lot of hours that are potentially available to advertisers.
EXISTING ADVERTISING AND MONETIZATION MODELS IN ESPORTS BROADCASTING
So, how do advertisers capitalize on this?
eSports have interesting business models that include sponsorships, advertising, subscriptions and micro-transactions.
Currently, most of the revenue is from sponsorships. For example, League of Legends and Electronic Sports League have sponsorships from brands like Intel, Samsung, Nissan and Comcast — and their advertisements must be shown when games are streamed. Audi, Coca-Cola, Pepsico, Gilette and Bud Light are major brands putting money into eSports.
Advertising is the second largest revenue source. Streamers use advertising to monetize their input. This can be through advertising for a flat fee, affiliate marketing, (where streamers earn commissions on products sold), or programs such as the YouTube Partner Program and the Twitch revenue sharing model.
In the Twitch model, top streamers share revenue from advertisers, provided they include promotional material during their streams. They decide on the timing and generally play the advertisements when they take breaks. Viewers understand that they are supporting their favorite streamers when they watch the ads, but there is no real benefit for them.
There is growing potential to monetize the eSports industry by selling team and media rights. There is also talk of introducing a pay-to- view model, but this may be difficult to introduce, and there is a risk of losing viewers and sponsorships.
An important part of monetization is via micro-transactions. Jodie Fullagar, head of entertainment at M&C Saatchi Sport and Entertainment explains how games like CS-GO have models based on skins that allow viewers to personalize their experience; or viewers can make donations to be added to prize money for tournaments; on Twitch, viewers urchase “Cheers” to indicate their support for streamers. Subscriptions give special benefits to viewers.
EFFICIENCY OF ADVERTISING IN THIS MARKET
Advertising revenue is expected to reach $1.5 billion by 2020. However, this is only a tiny fraction of the worldwide digital ad-spend. According to eMarketer, this is already about $224 billion in 2017.
Part of the problem is that the audience is very fragmented, and the sport lacks the structure and organization of traditional sports. There is a wide array of gaming competitions and almost as wide an array of tournament organizers. On the Twitch platform, more than 2 million unique streamers per month draw nearly 10 million active daily viewers — and all of these streamers are striving to be recognized by teams and sponsors.
However, the biggest problem is that people hate advertising. Ad-blockers have become a must-have tool for internet users. This is especially true for eSports fans: the advertising on existing streaming platforms is annoying and excessive.
There must be some innovative ways to better engage users, so that they start to watch ads enthusiastically.
An opportunity for advertiers is that fans are likely to reward brands that help the sport — and their favorite streamers — to grow. This is an extremely engaged community. However, they also want a certain level of altruism from brands, and some relevance in the content of the ad material.
- A good example of this is the Arby ad showing its sandwiches being blown up along with references to one of the popular eSports games.
- Another example is Coke sponsorship of streaming to 200 cinemas in the US to allow fans to watch the LoL World Championships. Coke also runs its own eSports twitter channel.
- Mike Sepso, SVP of the gaming company Activision Blizzard, believes that brands will be seen as less intrusive if they sponsor stats boxes or documentaries about professional gamers.
Of course, companies whose products or services are directly related to the gaming industry have an enormous opportunity.
Events are becoming a major opportunity for branding and sponsorship. This can be at the stadiums where events are held — booths, video displays, posters, freebies and interactive marketing. At the same time, adverts and banners can be running for the huge online audiences for these events.
The wide diversity of sites and tournaments may seem a bit chaotic, but they also provide an opportunity for advertisers to choose the platforms that best suit their products, their target markets and their budgets.
INNOVATIVE ADVERTISING MODELS — THE PLAY2LIVE STREAMING PLATFORM
A start-up company called Play2Live (P2L) has given attention to many of the opportunities and barriers for advertisers on streaming platforms. It has created a streaming platform which integrates blockchain functionality and therefore has unique interactive features and monetizing tools and will ensure advertisers actually engage with their target audience.
Some of the features include the following:
- It encourages other products, partners and users to join its ecosystem, rather than competing with them.
- It has developed 15 different ways to generate its own revenue — and 11 of these are shared.
- Blockchain technology ensures that this revenue sharing model is fair and transparent and allows everyone to benefit — including viewers.
- It has integrated betting and gambling on the platform, allowing viewers to place bets during tournaments and to place bets with outside bookmakers without leaving the platform. It is important for advertisers that users stay on the site.
- Viewers interact directly with streamers, not just via chats. Users can set tasks and challenges for streamers, vote for the content they’d like to see and make donations. Streamers can set tasks for viewers (e.g. to watch other streamers, or to watch adverts) and reward them for completed tasks. Premium subscriptions give viewers special rights during tournaments.
- Streamers have 11 ways of monetization and can start to earn LUC (an exclusive internal currecy) from their very first streams, without any limitations. They are B2B partners on the platform, incentivized to attract new viewers.
- Tournament organizers are a key part of the ecosystem and will ensure that content is set up in line with viewers’ votes. They will benefit from the crowdfunding options to fund special events.
- All transactions are paid for with the in-platform coin — the LUC — which can be bought with fiat currencies or cryptocurrencies.
Play2Live have an interesting approach to advertising.
- Because we understand the level of rejection of advertisements, advertising is disabled by default on the streaming platform. Users can enable it at any time and watch advertising. Why would they ever do this? Because the revenue from advertising is shared, not only between the platform and the streamers, but also with the viewers.
- Viewers receive bonuses in the form of LUC tokens every time they view an ad spot or other advertising material. They provide their personal data, to avoid bots on the platform.
- Streamers can use gifts donated by advertisers to reward viewers for tasks completed.
- The LUC earned by watching adverts has real value: it can be converted to fiat currency or cryptocurrency through the platform’s internal exchange gateway, or it can be used to buy games from partner stores, for bets on teams and competitions, for subscriptions and for fees to participate in tournaments or games on other sites.
A FINAL WORD TO ADVERTISERS
eSports is here to stay and is becoming accepted as a form of sport and entertainment. Brands have a real opportunity to benefit from this market. However, they will have to adjust their advertising approaches to fit into the special requirements and demands of the players and audience.
Innovative approaches such as the one devised by Play2Live give an important lead into how this can be done.
Stay tuned!
