eSports’ rapid growth continues to present new opportunities for broadcasters

Esports - 19 May 2016 By Daniel Smith, Sam Limbert, Vesela Ilarionova and Liam Thompson

The eSports industry has been at the centre of much development and discussion as expansion continues, propelling it to new levels. Sportcal Media takes a look at some of the important issues currently facing the video game competition sport and what impact they have had.

Traditional players make their move

There has been noticeable attention paid by traditional sport media market players in recent months towards eSports. Since December 2014, when Pitch International, the UK- based international sports marketing agency, became the exclusive agency of the first Gfinity Championships, a series of competitions for different games, an increasing number of agencies and broadcasters have become involved in eSports (see table below).

According to Jon Varney, a founding partner at Pitch International Commercial, one of the key reasons for getting involved in eSports was the crossover with the event management and commercial rights distribution for traditional sports. Speaking to Sportcal, Varney said

www.sportcal.com | E: [email protected] | T: +44 (0) 20 8944 8786 he believed that eSports “can deliver from a content perspective both for sponsors and for broadcasters.”

Pitch’s approach to eSports is not just as simple as buying and selling rights. As investors in Gfinity, Pitch is active across the business. Varney explained: “We’re actually selling a more integrated platform that has different touch points – a strong digital advertising presence but also the ability to engage consumers in hospitality, in tickets, in promotional activities… It was our view when we entered the market and still is our view that you have to take the product away from just a straightforward digital buy into a more integrated sponsorship platform.”

Going forward, Varney sees Pitch’s evolution in eSports as being more organic and about building a more sustainable structure for the sport in partnership with Gfinity, particularly in the UK. He added: “We’ve been in the market for 18 months, we’ve now got a very clear understanding of where we need to take the business to next, and I think without question that’s about organically growing now, not just event and stunt driven... Our view is that the type of content, whether that is in eSports or traditional sport, that does well is the content that is available week-in week-out.”

It is no surprise that traditional players have become involved as the eSports sector is expanding at a rapid rate as an online spectator sport; different reports have boasted varied figures but, according to Newzoo, the eSports global audience (made up of “enthusiasts” and “occasional viewers”) will be 256 million in 2016, and 345 million by 2019. Meanwhile, revenue from media rights, merchandising, ticketing, online advertising, brand partnerships and game publisher investment will reach $463 million in 2016, a 42.6 per cent year-on-year increase. Last year’s Championship of , the hugely popular “battle arena and real-time strategy” game, had 360 million hours of live coverage viewed over the four weeks of the competition, while the total cumulative daily unique impressions reached 334 million and an average concurrent viewership of over 4.2 million over 73 matches was recorded.

Regulation

While this is an industry on an upward trajectory, there are still challenges to face for a sector still in its relative infancy. Governance has been a talking point as the industry attracts various sports agencies, media organisations and brands eager to connect with a young audience. It is crucial moving forward, but with multiple bodies and stakeholders purporting to act as international governing organisations, there is also the risk of fragmentation.

The International eSports Federation (IeSF) was formed in 2008 and, based in South Korea, has 45 member nations, with the majority (37) coming from Europe and Asia. IeSF is

www.sportcal.com | E: [email protected] | T: +44 (0) 20 8944 8786 affiliated with WADA and SportAccord and, in April 2015, entered into a partnership with the IAAF, athletics’ world governing body. Despite this, IeSF members do not include major gaming markets such as USA, the UK and , and the organisation does not operate the major eSports series such as ESL and the Gfinity Championships (it does, however, run an annual World Championship).

Ralf Reichert, the chief executive of ESL, the eSports league and promoter, has previously said that, while he favours more governance, there must be caution to avoid overregulation: “Do we need international regulations? Do we need some sort of sports ministry involvement? Yes, and we’re super open to that, and we're talking on an opportunity basis to people who run these things. It’s still a little bit off in terms of time, but it will come. I think, on the other side, we need to protect the sport from being overregulated.”

There is also the International eGames Committee (IEGC), which has an International Advisory Board to assist with governance as the sport moves forward. The IEGC will be running a showcase eGames event which is taking place in in August, at the same time but not part of the .

In addition to this, the ESL announced in May 2016 the formation of the World Esports Association (WESA), an organisation with aims of overseeing standardised tournament regulation, player representation through a Player Council and revenue sharing in a bid to enhance the structure and transparency of the industry. At the time of writing, the organisation had eight founding teams with negotiations with potential members ongoing. According to the IeSF, WESA would not clash with its mandate given WESA would perform the function of a union of professional eSports teams, rather than the role of an international federation.

With heightened external investment, growing prize money pools, and publishers running events independently, the risk of exploitation has risen and the call from some quarters for more regulation or cooperation between publishers is understandable. In October 2015, ESL announced a partnership with Sportradar focused on data distribution and fraud detection to root out any corruption in betting. In October 2015, the Korean eSports Association handed down lifetime bans for match fixing to a coach and two players of the Prime team, which plays in Starcraft 2 tournaments. This was not a lone case and is just one of the many challenges facing the industry as it bids to expand from an emerging sport to a mainstream sport.

eSports broadcasting expands

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The recent eSports expansion follows lengthy technological and social development, making a shift from the niche and bidding to join the mainstream. In 1999, the first television broadcast of an eSports tournament took place on Korean channel OnGameNet (OGN) – the Starleague, centred on StarCraft, a highly-popular game in South Korea. In 2005, American network MTV showed the Cyberathlete Professional League World Tour, and, in 2006, USA Network showed the 2006 Pro Circuit. eSports has been dipping in and out of mainstream since the 1990s, but it wasn’t until online audiences swelled and technology caught up with the needs of the sport that ‘traditional’ TV broadcasters began to show renewed interest in the sector.

Finding the sweet spot: engaging players and audiences with free-to-play and MOBA

Indicative of the interest in eSports is a 2015 study conducted for GfK that revealed seven million people had watched organised video game competitions in Germany, while a total of 12 million people were aware of the pursuit. In Korea, and Asia in general, the sport is already well established, with 44 per cent of the total eSports audience in 2016 projected to be from the Asia-Pacific region, according to Newzoo’s market report.

There are two major effects that have helped to shape the dynamics of the market. The first is the creation of free-to-play ‘MOBA’ (multiplayer online battle arena) games, and the second is the launch of online streaming platform in 2011. MOBAs are free-to-play

www.sportcal.com | E: [email protected] | T: +44 (0) 20 8944 8786 and their format allows for non-enthusiasts to engage with them and play as well as watch others play. According to a 2015 PwC report, MOBAs are the second-most popular eSport, second only to first-person shooter games.

Twitch, the online streaming platform that was purchased by Amazon for nearly $1 billion in 2014, is one of the most prominent eSports broadcasters and attracts over 100 million monthly users to its platform. Twitch has doubled its number of monthly viewers, up from 45 million per month in 2013. In the second half of 2015, an estimated 21 per cent of all site traffic to Twitch was driven by eSports and eSports-related content. In 2015 alone, Twitch was reported to have streamed 241 billion minutes of video, the equivalent of 459,000 years worth of coverage.

There are several rival services emerging to compete with Twitch including Panda TV, the Chinese eSports streaming platform set up by Wang Sicong, the son of Wang Jianlin, the head of entertainment and property giant Wanda, along with streaming services from Azubu, ESL and MLG TV. Azubu raised over $94 million in 12 months to bolster its eSports output and expand into new territories. While Azubu has been focused on eSports for growth, it is still a long way behind some of the main eSports streaming players. In 2015, Azubu had 49 million viewers of gaming content, while there were 355 million for YouTube, 258 million for Twitch, 54 million for ESL and 39 million for MLG. YouTube hasn’t needed to be active in acquiring eSports content because it is often used by rights-holders to boost the popularity of their eSports events, although the Google-owned live streaming website has been bolstering its live streaming portfolio in recent years.

The streaming quality and easy access of Twitch, coupled with the style and appeal of the MOBA games, has allowed League of Legends, launched in 2009, to rise in rank and become the most popular game in the world of eSports. Last year’s League of Legends World Championships holds the record for most-watched eSports event with 36 million total and 14 million concurrent viewers. The viewing figures reflect the jump from 1.69 million total viewers in 2011 (when Twitch launched) to 8.2 million a year later. The 2015 event was shown in the UK on BBC Three and by Astro’s SuperSport Plus channel in Malaysia in

www.sportcal.com | E: [email protected] | T: +44 (0) 20 8944 8786 another nod to the increasing interest from mainstream television broadcasters, even if viewing figures fail to come close to those generated online.

The quest to deliver eSports television broadcast

The majority of eSports coverage is online as traditional television has been slower to react to the rising popularity of competitive gaming. Commenting on TV’s lack of eSports coverage, Stuart Saw, regional director, EMEA Twitch, previously stated that eSports content “doesn’t work on linear television.”A recent survey of eSports viewers by PWC supported this view, showing that 57 per cent have viewed eSports via a laptop or mobile device, with only 32 per cent stating that they had watched eSports on television. Further data on eSports viewing habits is provided by Newzoo, whose research finds that 67 per cent of American eSports enthusiasts use laptops or PCs to watch online video, compared to just 27 per cent for television.

The same PWC report included research on the demographics of those aware of eSports, and unsurprisingly the 18 to 24 age group had the highest awareness of the sport, fitting in with the use of mobile and online platforms as a driver of eSports. It is also estimated that 70 per cent of all viewers on Twitch are under the age of 35.

There have been opposing views about traditional television’s involvement with eSports. For some, mobile and online devices are predominantly used by eSports’ key demographic, negating the need for television in terms of progression. But the desire to ensure eSports exposure on traditional media platforms is driven by the quest for credibility to allow competitive gaming to go shoulder to shoulder with other “sports.”

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Both free-to-air and pay-tv channels have taken on some eSports content, while broadcasters such as Turner Broadcasting Systems (TBS) and Modern Times Group (MTG) have chosen to organise their own tournaments. MTG has invested from the top, acquiring ESL, one of eSports’ biggest leagues, and will now hold its own national and international tournaments for some of the most popular game titles in online gaming, most notably Counter Strike: Global Offensive and . Tournaments will be broadcast 24/7 on satellite pay-tv channel Viasat in the Nordic and Baltic countries, and will be offered as part of a bundle at no extra cost. Another big newcomer is the upcoming league organised by TBS, together with WME-IMG, in a deal struck with owner of Counter Strike: Global Offensive – . Others have opted to broadcast established tournaments for some of the most popular games – League of Legends, Counter Strike and Fifa.

ESPN, on the other hand, chose to invest in a newly-released game –MOBA-type Heroes of the Storm – and broadcast the college tournament Heroes of the Dorm on ESPN2, prior to the official release of the game. Following low ratings in 2015 (a reported 0.1 on Nielsen, equivalent to 96,000 viewers), the TV network showed the tournament in March 2016 to a slightly higher audience count – 110,000 across the network’s various channels.

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Tie-ins are key for sports simulation eSports

While the main eSports competitions don’t necessarily have a direct sporting link, sports simulation games are growing in the eSports world, with Electronic Arts’ (EA) major gaming franchises being particularly prominent.

There is a trend for eSports events around sports simulations to tie-in with existing sports properties and major events. Using the existing competition licenses acquired by games owners gives credibility to the eSports events and creates an association for fans of the sport. These events then effectively become part of the show of a major sporting event, for example EA Sports’ Madden American Football game is used for the Madden Bowl competition (during the same week as the Super Bowl). Konami’s Pro Evolution Soccer’s PES League has run throughout the current 2015-16 soccer season, culminating with the final in Milan on the same weekend as the Uefa Champions League final in the same city.

There seems little point in sports games attempting to compete with the sports themselves, so by using licenses that have already been acquired by the publishers, event organisers are able to tap into the large fan bases the games, sports and competitions have. With games

www.sportcal.com | E: [email protected] | T: +44 (0) 20 8944 8786 such as League of Legends and Counter Strike holding a strong position in the market, it seems that sports simulation eSports is less about competing with other eSports games or other sports for viewers and fans, and more focused on complimenting the existing sports events with the gaming version.

This has the potential to open up an interesting area for rights-holders to explore – that of combining rights for sports events with eSports versions. While there have been a few isolated broadcast deals done for sports simulation eSports events, if there are more eSports competitions linked to existing sporting ones, media rights packages could be created for the virtual version, or be bundled in with the rights to the main sports competition.

One of the largest eSports events in the sports genre is the Fifa Interactive World Cup, an annual event organised by Fifa, with matches played on EA Sports’ Fifa game. There are a number of eSports organisers who use the Fifa game in their events, such as the Gfinity Championships, but the Interactive World Cup is a prime example of an international sports federation looking to benefit from the rise of its eSports version. For the 2016 edition held in , USA, the finals were broadcast live on Fox Sports in the USA, and by Sky in the UK, with streaming from Fifa available in more than 100 countries.

Fifa benefits from having a popular gaming franchise of the same name, but other international federations might look to follow suit if a good quality game can be produced, though one of the appeals of Fifa is the large fan base the game developed over a number of years.

Bundesliga top of the league for eSports growth

As with the actual sports that the games are based on, there is value for broadcasters and eSports organisers in having the consistent content throughout the year that domestic leagues can provide. The Virtuelle Bundesliga, run alongside the domestic soccer league in Germany, recently had its finals weekend broadcast by Sky Deutschland on the same weekend as the pay-TV broadcaster’s expansive coverage of the final weekend of Bundesliga fixtures. But viewing figures for the competition weren’t strong, as an average audience of under 5,000 viewers watched the coverage on television, although those figures excluded viewers of Sky’s free online stream, highlighting the difficulties facing broadcasters trying to tap into the growing eSports market.

The league has eSports players representing the same clubs as are in the actual Bundesliga, which makes it easier for fans to gain an interest in the event as the affinity to teams already exists. VfL Wolfsburg were the first team to sign up professional eSports players with German Benedikt Saltzer and Englishman David Bytheway competing in eSports competitions sporting Wolfsburg kits and attending club events. German soccer clubs are leading the way for eSports growth within sport, with Schalke 04 recently taking over Elements, a team competing in League of Legends competitions.

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Along with German teams, eSports is beginning to break in to the UK market, with West Ham United becoming the first Premier League club to sign an official Fifa player with the signing in May 2016 of Sean Allen, who came second in the 2016 Fifa Interactive World Cup. The Football Association also hosted a ’s version of the Emirates FA Cup at Wembley Stadium in the same month, with a player selected to represent each of 64 clubs in the competition.

Recognising that this is a growing market, EA, publishers of popular Fifa and Madden games, launched a competitive gaming division in December 2015 to enable eSports competitions for its major franchises. One of the focuses of this division is to develop live events that are engineered for broadcasting as part of the third of its three core pillars for the division: competition; community; and entertainment. This move from EA highlights how publishers are aware that their games are being used to develop eSports and that it can be beneficial for them to try and control that by having an in-house organisation to capitalise on competitive gaming.

With a range of different teams, games, competitions, streaming services and ways to interact with eSports, there’s no definitive successful model for it as a sport. This makes it difficult for broadcasters to make long-term commitments to eSports as it is an industry that is quickly evolving. With no dominant international federation or over-arching governing body yet to be fully established, fragmentation within the industry is likely to continue. While television broadcasters are dipping their toes into it as an industry but not really paying rights fees for content, eSports is still dominated by online streaming and that’s where the lion’s share of the audience remains and where that audience is used to consuming its content. However, with new competitions and games emerging all the time, opportunities will arise for broadcasters to grab a piece of a growing (and increasingly lucrative) industry.

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