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The Role of Game Developers in Building Sports of the 21St Century

The Role of Game Developers in Building Sports of the 21St Century

Esports In-Depth: The Role of Game Developers in Building Sports of the 21st Century

Bryce Blum Executive Vice President of , Catalyst Sports & Media Founding Partner, ESG Law

Thursday, March 22 WHAT ARE ESPORTS?

Esports [ee-spohrts] — noun

1. The umbrella term used to refer to the competitive industry. THE ESPORTS OPPORTUNITY 2011 THE ESPORTS OPPORTUNITY 2017 LEAGUE OF LEGENDS THE ESPORTS OPPORTUNITY 2017 Counter-Strike THE ESPORTS OPPORTUNITY 2017 Dota VIEWERSHIP COMPARISON

TRADITIONAL ESPORTS SPORTS VIEWERSHIP VIEWERSHIP 73.5 M AVERAGE VIEWERS UNIQUE VIEWERS

46 M

37 M

28.4 M 25 M 20.4 M 18.9 M

2017 2017 2018 2017 2017 2017 2017 WORLD NBA CFP NATIONAL ESL ONE LEAGUE OF LEGENDS CFS WORLD IEM EXTREME SERIES FINALS CHAMPIONSHIP HAMBURG WORLD FINALS CHAMPIONSHIP MASTERS KATOWICE

References: New York Times – January 2016. Statista – June 2016. Yahoo Sports – June 2016. lolesports.com – November 2015/2016. Score esports – July 2016. Note: The right side is the unique viewers from the final match of each event while the left side is average of the final round of games. THE INFLECTION POINT

Esports have transitioned from merely advertising for the underlying game into an independently monetized set of spectator sports.

ADVERTISING FOR GAMES INDEPENDENTLY MONETIZED THE INFLECTION POINT MAJOR MOMENTS

2012 2013 2014 2015 2016

Mark Mastrov THE INFLECTION POINT MAJOR MOMENTS

2017 2018 THE INFLECTION POINT TEAMS

Linkin Park Steve Kaplan Rob Moore

2015 2016

Shaquille O’Neal Alex Rodriguez

Rick Fox 76ers Stratton Sclavos Dan Fiden

Andy Miller Mark Mastrov THE INFLECTION POINT TEAMS

Lionsgate Films Raptor Group Heat Neil Leiberman Madison Square Garden NetEase Company / Knicks

2017 2018

Marshawn Lynch Jennifer Lopez

Houston Rockets GS Warriors Jerry Jones Bruins AEG Ken Hersh

Michael Strahan

Mark Mastrov THE INFLECTION POINT 2011 LEAGUE OF LEGENDS THE INFLECTION POINT 2017 LEAGUE OF LEGENDS ESPORTS ECOSYSTEM IN 2018 ROLE OF THE GAME PUBLISHER RIGHTS FEES

PUBLISHERS DIGITAL ITEM REVENUE SPLIT

GAME/CONTENT FEES LICENSING FEES ORGANIZING AN ESPORTS ECOSYSTEM

There is inherent tension between a publisher’s two primary goals in organizing an esports ecosystem.

MONETIZATION V. MARKETING / ENGAGEMENT ROLE OF THE GAME PUBLISHER

HANDS OFF HANDS ON ROLE OF THE GAME PUBLISHER

HANDS OFF HANDS ON ESPORTS ECOSYSTEM IN 2018 ORGANIZING AN ESPORTS ECOSYSTEM RIGHTS FEES

COMPETITIONS PRIZE MONEY + REVENUE SHARING

LICENSING FEES

CONCESSIONS + MERCH + GATE ORGANIZING AN ESPORTS ECOSYSTEM

Can an esport be made?

CONVENTIONAL WISDOM V. MODERN TRENDS ORGANIZING AN ESPORTS ECOSYSTEM

Organize it yourself or Selecting & Securing Participants Media Rights hire a third party?

Yourself Third Party Teams Players Exclusive or not Selecting a Broadcast Partner

Which third party? Creating the path to pro • • ESL • Facebook • ELEAGUE • YouTube • PGL • • FaceIt Global v. Localized • MLBAM • MLG

Determining type of competition How do you engage fans

League v. Tournaments Off-? LAN v. Online play In-game content Drop for viewers Spectator Mode Social media engagement THE RIOT MODEL STANCE: Centrally Controlled Ecosystem

GAMES: League of Legends

LEAGUES OPERATED: • Campeonato Brasileiro de • North American League of Legends League of Legends (CBLoL) Championship Series (NALCS) • Liga Latinoamérica Norte (LLN) • League of Legends Championship Series (EULCS) • Copa Latinoamérica Sur (CLS) • League of Legends Championship Korea (LCK) • League of Legends Japan League (LJL) • League of Legends Pro League (LPL) • Turkey Champions League (TCL) • League of Legends Masters Series (LMS) • League of Legends Continental League (LCL) • Premier League (GPL) • (OPL)

CASE STUDY: LEAGUE OF LEGENDS CASE STUDY: LEAGUE OF LEGENDS

PROS CONS

Control Very Expensive • Protection of the brand Limited cross-regional play • High degree of professionalization Less responsive to external feedback • Manage revenue flow Hinders grass roots competitions Encourages investment from key stakeholders Reduced incentives to consistently compete Predictable Scheduling Global engagement THE ACTIVISION-BLIZZARD MODEL STANCE: Evolving

GAMES Overwatch, , , , Starcraft II

LEAGUES OPERATED • The • Call of Duty World League • Heroes of the Storm Global Championship • Hearthstone Championship Tour • Global Starcraft League CASE STUDY: OVERWATCH CASE STUDY: OVERWATCH

PROS CONS

Control Very Expensive • Protection of the brand Less responsive to external feedback • High degree of professionalization Lack of opportunities to develop competitive • Manage revenue flow player base Localization unlocking fans and revenue Lack of regional play Encourages investment from key stakeholders Hinders grass roots competitions Predictable scheduling Reduced incentives to consistently compete THE VALVE MODEL STANCE: Laissez faire

GAMES Counter-Strike: Global Offensive and

LEAGUES OPERATED None CASE STUDY: COUNTER-STRIKE: GLOBAL OFFENSIVE

PROS CONS

• Inexpensive • Inability to protect the brand •2Lots of inter-regional competition • Unpredictable and overlapping scheduling •2Compelling content throughout the year • Inconsistent storyline development •2Opportunities for experimentation • Inconsistent Quality 2– Blast Pro Series • Unable to vet stakeholders 2– Beyond The Summit •2Strong environment for talent development FRANCHISED LEAGUES: A DEEPER DIVE

REVENUE SHARING Partners v. Stakeholders

DECISION- MAKING INFRASTRUCTURE

PERMANENCY: NO PROMOTION- RELEGATION FRANCHISED LEAGUES: A DEEPER DIVE

Price Tag $10,000,000 $20,000,000

Media Rights

Partners FRANCHISED LEAGUES: A DEEPER DIVE

Viewable Hours 18.8 Million 32.5 Million

Average Concurrents 191,274 134,359

Max Concurrents 401,720 436,789 (week 1, day 1)

• Chinese viewership not included NOTE: • Total Air Time is not the same. NALCS is 98 hours; OWL is 247 • OWL numbers do not inlcude MLG.tv MEDIA RIGHTS

EXCLUSIVE: Maximize immediate revenue

Overwatch League – Twitch (MLG) ESL – Facebook ECS – YouTube

Non-Exclusive: Maximize reach

LCS on Twitch and YouTube MEDIA RIGHTS — SELECTING A PARTNER

CRITERIA DO IT

Reach Revenue Quality Long-term growth YOURSELF?

FIND A PARTNER: MEDIA RIGHTS — DO WE NEED TV? DETERMINING THE TYPE OF COMPETITION (LEAGUE V. TOURNAMENTS)

Impact on monetization Listen to your community Calendar of content SELECTING AND SECURING PARTICIPANTS

PAY OUT

OPEN ECOSYSTEM

BUY IN SELECTING AND SECURING PARTICIPANTS TEAM FOLLOWERS SOURCE:

OTHER 9 TEAMS OTHER 9 TEAMS OTHER 9 TEAMS

26.3% 18.5% 80.2% 61.2% 19.4% 71.9% 7.1% 12.4% 87.4% UNIQUE SHARED UNIQUE UNIQUE SHARED UNIQUE UNIQUE SHARED UNIQUE

OVERLAP OVERLAP OVERLAP SELECTING AND SECURING PARTICIPANTS TEAM FOLLOWERS SOURCE:

OTHER 11 TEAMS OTHER 11 TEAMS OTHER 11 TEAMS

16.1% 8.1% 91.7% 46.3% 8.5% 90.8% 38.2% 12.8% 86.0% UNIQUE SHARED UNIQUE UNIQUE SHARED UNIQUE UNIQUE SHARED UNIQUE

OVERLAP OVERLAP OVERLAP SELECTING AND SECURING PARTICIPANTS

PATHWAY TO PRO

MINOR LEAGUES

COMBINES ENGAGING FANS: IN-GAME CONTENT

OWL Jerseys ENGAGING FANS: IN-GAME CONTENT

CSGO Stickers / Signatures ENGAGING FANS: IN-GAME CONTENT

Dota Compendium SO YOU WANT TO BUILD AN ESPORT?

WHICH PARTNER? DO IT

Expense Region Type of game Online v. LAN YOURSELF?

FIND A PARTNER: IMPORTANCE OF

SPECTATOR MODE

BALANCE

INITIAL DESIGN CONCLUSION

Organize it yourself or Selecting & Securing Participants Media Rights hire a third party?

Yourself Third Party Teams Players Exclusive or not Selecting a Broadcast Partner

Which third party? Creating the path to pro • Twitch • ESL • Facebook • ELEAGUE • YouTube • PGL • FaceIt • FaceIt Global v. Localized • MLBAM • MLG

Determining type of competition How do you engage fans

League v. Tournaments Off-season? LAN v. Online play In-game content Drop for viewers Spectator Mode Social media engagement Esports In-Depth: The Role of Game Developers in Building Sports of the 21st Century

Bryce Blum Executive Vice President of Esports, Catalyst Sports & Media Founding Partner, ESG Law

Thursday, March 22

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