eSports is Business Management in the World of Competitive Gaming Tobias M. Scholz eSports is Business Tobias M. Scholz eSports is Business Management in the World of Competitive Gaming Tobias M. Scholz University of Siegen Siegen, Germany ISBN 978-3-030-11198-4 ISBN 978-3-030-11199-1 (eBook) https://doi.org/10.1007/978-3-030-11199-1 Library of Congress Control Number: 2019931908 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and trans- mission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. 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Cover illustration: Pattern © Melisa Hasan This Palgrave Pivot imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Preface The one thing you should know about eSports is that it is moving fast, and it has been doing that for decades. In my early days in eSports (around 2003 and 2004), I was the editor-in-chief for a German magazine dedi- cated solely to eSports. Already back then, the questions were which tour- naments you cover, which events are relevant, and what can you cover within the limited space of a magazine. In the preparation for this book, I read old issues of that magazine and looked into the documents I had hoarded from that time. Back then, eSports was emerging: it was quite painful to watch the tournaments, but it was already a big thing, in its niche. There were discussions about being part of the Olympics, driven by already existing eSports federations, and non-endemic sponsors like Subway were involved in eSports. There were stars, and we experienced a highly fragmented market. Maybe some of you remember the Enemy Territory tournaments? It becomes evident that eSports is an umbrella term for competitive gaming and a whole industry comprising various actors. That was the same then; and, based on that history, there are observable patterns that describe the industry and the world of eSports today. This is the goal of this book—to give insights into this unique and different industry and supply you, the reader, with an in-depth understanding of it. There is an emerging community of eSports researchers, and all of them are doing essential work that inspired my research. Beyond that, the following researchers and eSports individuals helped me move toward v vi Preface a more holistic observation of eSports: Chris Flato, Chris Hana, Julia and David Hiltscher, Jong Seong Kim, Henry Lowood, Florian Neus, Frederic Nimmermann, Will Partin, Robin Reitz, Christian Scholz, Volker Stein, TL Taylor, Steve Wildman, and Emma Witkowski. Furthermore, I want to thank Maria Scholz and Lisa Völkel for their support in the research process. And, finally, I want to thank our university team of the Siegen Bisons, who constantly show me why eSports is such a fascinating and exciting environment to research and to be a part of. Although certain governing principles and patterns are observable and, at the meta-level, many aspects are explainable, eSports is still highly vol- atile and fast-paced. I experienced that first hand (again) when I was writing this book: every day something new happened and exciting stories emerged—for example, the franchising of the European League of Legends scene. Furthermore, there are signs that the eSports industry is potentially overheating. We may be in another bubble at the moment and in line for a downfall over the coming months or years. Many actors outside the eSports industry are throwing money at it because of a fear of missing out. The good news is that eSports has been there before, and it helped to grow the business of eSports substantially. Especially in an emerging industry, having a healthy business model is essential, but it is unclear what a robust business model will look like. This book will con- tribute to the research on eSports management and how to do business in eSports. It becomes clear, then, that eSports will grow, but not all businesses will participate in this growth and will survive. Good luck and have fun. Siegen, Germany Tobias M. Scholz November 2018 Contents 1 Introduction: The Emergence of eSports 1 The Relevance of eSports for Today’s Businesses 2 Understanding eSports Is More Than Just Another Hype 6 Framing eSports 8 Structure and Theoretical Foundation of the Book 9 References 13 2 A Short History of eSports and Management 17 The Need for a Historical Observation of eSports and Management 18 Early Years of eSports (1940–1997) 19 Pioneering eSports (1997–2004) 21 Experiencing a Phase of Stability (2005–2008) 25 Phoenix from the Ashes (2009–2013) 29 Back to the Wild West (Since 2014) 34 References 37 3 Stakeholders in the eSports Industry 43 A Stakeholder Journey Through the eSports Industry 44 Fundamental Characteristics of eSports Stakeholders 45 vii viii Contents Primary Stakeholders 49 Game Developer 49 Tournament Organizer 58 Professional Teams 62 Professional Players 67 Providers and Communities 70 Secondary Stakeholders 73 Governing Bodies 73 Sports Organizations 77 Sponsors 81 General Public 83 Investors, Entrepreneurs, Media, and Shareholders 84 Audience as a Shared Target for Value Creation 86 References 87 4 Unwritten Governing Principles 101 The Creation and Solidification of Governing Principles 102 Easy to Learn, Hard to Master 104 Shifting Metagame 105 Welcome to the Wild West 109 Born Digital, Born Global, Born Agile 112 References 113 5 The Business Model Network 117 Going Beyond Five Forces to Focus on Value Integration 118 Three Cs as Simple Rules 120 Coopetition 120 Co-destiny 121 Convergence 123 Value Integration in the Business Model Network 124 Cases of Different Developments Based on the Various Driving Forces 129 References 132 Contents ix 6 Conclusion: The Future of eSports 135 Utilizing the Risks of eSports 136 Franchise: A Gamble for Power 139 Frontier: Conquering New Markets 141 Fragmentation: Division of the eSports Industry 144 References 145 Index 149 Abbreviations AMD Advanced Micro Devices BIG Berlin International Gaming CBS Columbia Broadcasting System CGS Championship Gaming Series CPL Cyberathlete Professional League CS:GO Counter-Strike: Global Offensive CSPPA Counter-Strike Professional Players’ Association CXG Cyber X Games DeCL Deutschen Clanliga DeSpV Deutsche eSport Verband DeSV Deutsche eSport Verband e.V. DotA Defense of the Ancients ESB Deutsche eSport-Bund ESBD eSport-Bund Deutschland ESC Esports Charts ESIC Esports Integrity Coalition ESL Electronic Sports League ESPN Entertainment and Sports Programming Network ESWC Electronic Sports World Cup FIFA Fédération Internationale de Football Association HLTV Half-Life Television IeSf International e-Sports Federation IOC International Olympic Committee xi xii Abbreviations IPTV Internet Protocol Television KeSPA Korean e-Sports Association LAN Local Area Network LCS League of Legends Championship Series LoL League of Legends MLG Major League Gaming MOBA Multiplayer Online Battle Arena Mod Modification MTG Modern Times Group MTV Music Television Na’Vi Natus Vincere NBA National Basketball Association NBC National Broadcasting Company NCAA National Collegiate Athletic Association NFL National Football League NiP Ninjas in Pyjamas OGN OnGameNet OWL Overwatch League PGL Professional Gamers League PSG Paris Saint-Germain Football Club PUBG PlayerUnknown’s Battlegrounds PvE Player versus Environment PvP Player versus Player TBS Turner Broadcasting System Team WE Team World Elite WADA World Anti-Doping Agency WCG World Cyber Games WESA World Esports Association WSVG World Series of Video Games List of Figures Fig. 3.1 Primary and secondary stakeholders in the eSports industry 46 Fig. 3.2 Spectrum of regulation strategies for the game developer 51 Fig. 5.1 Ongoing evolution of the stakeholder network, highlighting the importance of the business model network 119 Fig. 5.2 Potential developments for the future evolution of business model networks 130 xiii List of Tables Table 3.1 Examples of top teams in eSports divided according to founding time and region 63 Table 5.1 The key business model attributes of the different categorizations (Scholz forthcoming) 127 xv 1 Introduction: The Emergence of eSports Abstract The world of eSports or competitive gaming has grown expo- nentially in recent years; however, the industry itself is not as young as many believe. There are many similarities with traditional sports and media businesses, but there are many differences, too, in the eSports industry. With the absence of a standardized governance structure, eSports is predominantly self-organizing and mostly business-driven. Primarily due to the young audience, the global approach, and the digi- tized environment, the eSports industry does not follow traditional busi- ness rules. Consequently, an observation of the history from a business perspective and an in-depth analysis of the strategic management are nec- essary to categorize the eSports industry.