Little more than a decade ago esports tournaments in Australia amounted to small pockets of dedicated fanboys gathering in subterranean gaming dens. At best they were a strange quirk of the digital ecosystem and were largely invisible to mainstream business.<\/p>\n\n\n\n
Those days are long past. Now the money and all it brings with it have arrived in force. There are believed to be as many as 1.8 million esports fans in Australia, putting it on a par with some of the country\u2019s leading traditional sports.<\/p>\n\n\n\n
This month more than 20,000 esports fans attended the Intel Extreme Masters (IEM) at Sydney\u2019s Olympic Park. But even that figure pales in comparison to the audience of five million on streaming platform Twitch \u2014 which at one point included 256,000 concurrent viewers.<\/p>\n\n\n\n
The number of people who will view the event across any channel is expected to exceed 20 million this year \u2014 up from 13 million in 2018, according to sponsors of the event.<\/p>\n\n\n\n
The winners of the CS:GO tournament at IEM Sydney, Team Liquid from the USA, shared in a six-figure payday. But Sydney IEM, while growing and successful, and one of Australia\u2019s top esports events, is still just the equivalent of a grade match in the wider esports world.<\/p>\n\n\n\n
Industry site Esportearnings.com<\/a> indicates that over $US600 million in prize money has been awarded across 31,000 tournaments. And those prizes are growing as the fan base increases.<\/p>\n\n\n\n Individual competition prizes can seem stunning to people outside of the industry. The prize pool for a Dota 2<\/a>competition in 2017 exceeded $US24 million (much of it contributed by fans) while Epic Games\u2019 Fortnite \u2014 which is a relatively new esport \u2014 comes with a prize pool of $US100 million<\/a> for the season.<\/p>\n\n\n\n Two recent tournaments \u2014 The MDL Disneyland Paris Major (Dota 2) and Mid Season Invitational tournament (League of Legends) \u2014 both offered million dollar prize pools.<\/p>\n\n\n\n For the top players in the premier leagues, the rewards from prize money alone are very lucrative. Dota 2 player KuroKy, for instance, has racked up almost $US4.2 million in individual winnings.<\/p>\n\n\n\n The esports ecosystem is thriving. The industry will be worth $US1.1 billion this year, according to NewZoo \u2014 much of it from sponsorship and media rights \u2014 and its growth already has some wondering whether a bubble is forming.<\/p>\n\n\n\n Industry title KotaKu recently argued just that in an article titled \u201cShady Numbers And Bad Business: Inside The Esports Bubble<\/a>,\u201d although the dangers identified looked more like a typically overhyped emerging sector \u2014 hardly unusual in the digital space \u2014 than a market fuelled by classic bubble-driven asset inflation.<\/p>\n\n\n\n While money continues to pour into the sector, one thing that all the participants agree on is that there is an accelerating shift to professionalism.<\/p>\n\n\n\n Phid McAwesome, head of goto.game, a marketing company that specialises in the sector, told Which-50 that much has changed n the last decade. \u201cTen years ago it was [only] professional when it came to the games market, but now that we are more of an industry it is very professional. You have the likes of Adelaide Football Club involved.<\/p>\n\n\n\n \u201cThey own their own team and they bring that new level of professionalism into esports. You have ESL, Gfinity, and LPL over in New Zealand, bringing professionalism into esports broadcasting, and then you have dedicated marketing companies such as us and our competitors. It\u2019s a fully fledged industry on its own now.\u201d<\/p>\n\n\n\n That shift to professionalism also brings with it scrutiny, accountability, and a need for greater governance as one of the world\u2019s most successful professional esports teams \u2014 FaZe Clan \u2014 is now discovering. It is currently involved in a dispute with one of its star players, Turner \u201cTfue\u201d Tenney, in a case with much wider implications for all the esports organisations that manage teams in the sector.<\/p>\n\n\n\n At one level the arguments speak simply to matters of Californian employment law. However, from a wider perspective, the case has the hallmarks of the kind of disputes that emerge when legal entities \u2014 with lawyers and investors and employees \u2014 start transitioning from amateurism to professionalism. In a video statement FaZe Clan itself acknowledges it wasn\u2019t comfortable with the contract its original lawyers drafted for Tenney. But there the common ground ends.<\/p>\n\n\n\n As reported in The Atlantic, \u201cThe complaint, filed in Los Angeles County Superior Court<\/a>, argues that e-sports players\u2019 representatives should be regulated like agents of film and TV stars. It alleges that FaZe Clan violated California law by not allowing Tenney to pursue business opportunities and that it withheld Tenney\u2019s sponsorship earnings and forced him to pass on a lucrative brand deal because of conflict of interest.\u201d<\/p>\n\n\n\n Tenney\u2019s lawyer, Bryan Freedman of Freedman + Taitelman<\/a>, told the magazine that younger participants in the market can be guided into predatory agreements \u201cthat can cripple their earnings during their peak years\u201d, and in his suit, Tenney claims FaZe Clan signed an 11-year-old who was then pressured to lie about his age, as were his family.<\/p>\n\n\n\n Of course, it needs to be noted that these are only claims, and have yet to be tested in court. Likely, they never will be.<\/p>\n\n\n\n While the industry is still emerging and its formal structures are still developing, the basic layers are easy to understand \u2014 although as with any industry that is still in its formative years (comparatively), different models abound.<\/p>\n\n\n\n At the top, are the software publishers.<\/p>\n\n\n\n A company like Riot, for instance, which owns League of Legends, not only makes the games but keeps control of the events. A rival platform like Valve, which publishes games like CS:GO, takes a different approach, allowing third parties to run events.<\/p>\n\n\n\n Beneath the platforms and the games sit the organisations \u2014 \u201cOrgs\u201d in the parlance of the industry. The organisations own and manage teams, which then compete online and on stage in tournaments around the world.<\/p>\n\n\n\n For players in the top-ranked teams, esports is a profession. And like sports players in other codes, they make their money from a combination of prize money, salaries, and sponsorship.<\/p>\n\n\n\n Finally, at the base of it all, are the hundreds of millions of fans and regular gamers. But here esports diverges from other traditional sorts in a very important way. Those hundreds of millions of fans have built their own ecosystem and a burgeoning economy based on live streaming, content creation and another fan-to-fan commercial activity.<\/p>\n\n\n\n All the elements of digital transformation are present in esports, starting with SMACC (social, mobile, analytics, cloud and cybersecurity). To that, increasingly, you can add machine learning, artificial intelligence (AI) and the internet of things (IoT). Likewise, esports is a disruptive trend, creating at a terrifying pace a competitor to traditional media channels like television and print, and to traditional sports which compete for a share not only of the fans\u2019 wallet but also their attention.<\/p>\n\n\n\n It is no wonder that global sports brands like the NBL and local sports like AFL have been investing directly into esports.<\/p>\n\n\n\n Which-50 now tracks the gaming sector in the same way we track the banking or the retail sector, but there is a critical difference. The former are as old as society itself, whereas gaming \u2014 and in particular esports \u2014 is a new industry that is barely older than most of its current participants, and which exists entirely thanks to the emergence of the global internet infrastructure.<\/p>\n\n\n\n That infrastructure is more than the cables and wireless networks that carry IP traffic around the world, or the hardware that runs the games and provides a lucrative niche to companies like Lenovo, Intel, and Asus. These were the necessary preconditions, but they are the tinder, not the spark.<\/p>\n\n\n\n Instead, it\u2019s social media such as Twitter, online streaming services like Twitch and video sites like YouTube that are the real accelerant. These channels amplified esports tournaments and turned the industry into a genuine mass media phenomenon. <\/p>\n\n\n\n Investment banks like Goldman Sachs, for instance, believe the sector\u2019s viewership could rival that of the NBL by 2022. However, as the KotaKu article rightly points out, the comparisons are somewhat lacking in analytic rigour since they compare the audience of a single sport to the aggregation of all esports. (That\u2019s the same pea and thimble trick the digital advertising sector has deployed against traditional advertising media for two decades).<\/p>\n\n\n\n But still, money, as every marketer knows, follows eyeballs. And even if you discount the gimlet-eyed forecasts of the Great Vampire Squid<\/a>, those numbers are impressive and growing.<\/p>\n\n\n\n Even the sporting royal families have taken note.<\/p>\n\n\n\n In the 2018 Winter Olympics at PeyongChang, two esports \u2014 Starcraft 2 and Steep \u2014 were included as demonstration sports, and negotiations are underway to include esports as a possible new addition for the 2024 games in Paris. If 100 years of self-serving avarice and rapacious corruption have taught us nothing else, it\u2019s that the International Olympic Committee is quick to spot a dollar when it drops into its lap.<\/p>\n\n\n\n Take a sport like AFL in Australia. Most fans in the stands on any given Saturday probably played the game when they were younger and some may even kick a ball around a field a few times a year. At best even avid participants in the code probably play once a week and train two or three times.<\/p>\n\n\n\n The engagement of esports fans exceeds anything any of the AFL or other main codes in Australia could ever hope for.<\/p>\n\n\n\n Fans we spoke at IEM Sydney typically played and watched the sports for hours every night. They are incredibly knowledgeable \u2014 not only about the teams and the celebrity infrastructure that now wraps itself around their chosen game, but during the competitions they read the game, the tactics, and plans of teams in every round of every game at a level of detail that is impenetrable to outsiders.<\/p>\n\n\n\n For a novice watching a live tournament for the first time, the baying of 10,000 fans who can accurately predict what course the game will take in five seconds\u2019 time is disconcerting. It must be even harder for the players on stage, who don\u2019t get the benefit of all the data available to the audience as the game unfolds.<\/p>\n\n\n\n Finding consumers engaged at such a visceral and experiential level is the motherlode of modern marketing.<\/p>\n\n\n\n Alex vans-Colina is the Partnership Manager at Warner Music, and we spoke to him at IEM. He said the loyalty of fans to the new celebrities who are as much stars of esports as the players, is extraordinary.<\/p>\n\n\n\n \u201cWhen they change platforms they take a huge slab of their audience with them.\u201d<\/p>\n\n\n\n He said for his business the relationship with esports is strategic. \u201cThere\u2019s a huge crossover, the audiences \u2014 people don\u2019t just love gaming or music, people love music and gaming. We see a lot of the streamers who are playing online with like huge audiences using music in their stream. So we\u2019re pretty excited to be a part of the gaming world and talk to the people who love games and music.\u201dHe described Warner\u2019s relationship with esports as a natural fit, saying there are more and more crossovers. \u201cWe\u2019ve really seen artists dip their toe in the gaming industry in the last 18 months. Talking about the likes of Drake doing Fortnite, Marshmallow doing the Fortnite in-game concert with millions of concurrent watchers. Those are the kinds of numbers you can\u2019t ignore as a business that talks to teenagers.\u201d<\/p>\n\n\n\n We asked Chris Derrick, CEO of Order, an Australian organisation whose team won the Overwatch competition at the IEM Sydney, about the appeal of esports to potential sponsors.<\/p>\n\n\n\n \u201cIt\u2019s an attractive demographic for a lot of different marketers for lots of different product categories. You are talking about young males, they make up maybe 70 to 75 per cent of the audience. A key part of that group is aged between 18 and 25. They tend to be pretty well-educated and they are relatively high income earners.\u201d<\/p>\n\n\n\n Importantly, he says, they are not consumers of a lot of traditional media like free-to-air television. They watch a lot of subscription TV and listen to a lot of subscription music. <\/p>\n\n\n\n Derrick\u2019s point is an important one, since subscription television services tend to atomise audiences into smaller chunks, whereas esports offers the opportunity to aggregate larger audiences in a way that used to be the preserve of free-to-air, or even newspapers and magazines.<\/p>\n\n\n\n \u201cThey are hard to connect with.\u201d<\/p>\n\n\n\n But when you then look at the audience, it\u2019s growing quickly, and they are extremely passionate and engaged around the sport, he says.<\/p>\n\n\n\n \u201cThey are spending half of their free time on esports. Once you are into esports as a consumer you are all-in, whether that\u2019s playing games, consuming games, watching games, or getting involved in the social elements of the industry when you\u2019re following players and teams and the competitions.\u201d<\/p>\n\n\n\n He also says it is an audience that is open to brands adding value to the ecosystem \u2014 a point which was confirmed by some of those sponsors we spoke with in subsequent interviews.<\/p>\n\n\n\n He quotes US research which suggests that up to 70 per cent of consumers had a positive view of the brands that were aligned to the teams they support.<\/p>\n\n\n\n Beau Melia is the Managing Director of rival organisation Zero Gaming, which competes in games such as CS:GO, Rocket League, PubG, SFV and Fortnite.<\/p>\n\n\n\n Ground Zero Gaming was founded in early 2017 as a local community for online gamers. \u201cSince inception, it has rapidly grown into a formidable force within the Australian esports landscape as Perth\u2019s home of esports with a large focus on community and growth,\u201d he said.<\/p>\n\n\n\n Melia argues that esports creates an avenue for brands and marketers to reach and capitalise on a rapidly growing demographic, primarily 18- to 34-year-olds, as well as a growth in viewership from Generation Z, who he says, are more receptive to non-traditional sports.<\/p>\n\n\n\n \u201cWhile traditionally, this demographic has been difficult to influence, they are receptive to brands that show a long-term commitment to the esports space.\u201d<\/p>\n\n\n\n Typically, for now, those sponsors in the industry are drawn from companies with an obvious connection \u2014 such as IT hardware vendors and PC manufacturers \u2014 although brands like Mountain Dew and Maxibon are regular participants at events.<\/p>\n\n\n\n Intel, sponsor of the global IEM series, is one such business.<\/p>\n\n\n\n According to Anna Torres, Marketing Director Australia & South East Asia at Intel Technology Asia and a former Marketing Director for Intel in Australia, the company has been involved in esports for over 15 years.<\/p>\n\n\n\n \u201cIf we go back 15 years ago and I think about what we used to do in Sydney, it was sponsoring local LAN (local area network) events, with 50 PCs in one room. They were just connected in that one room with 50 people all playing against each other and walking away with a box or a CPU or a chip as a prize at the end of the day.\u201d<\/p>\n\n\n\n In 2006 the company teamed up with ESL (esports League).<\/p>\n\n\n\n \u201cThe analogy I would give is it\u2019s like the Tennis Grand Slam.\u201d<\/p>\n\n\n\n Indeed there are four different locations worldwide which host the Intel Extreme Masters: Poland, China, the US, and Australia.<\/p>\n\n\n\n \u201cIt\u2019s the fastest-growing spectator sport and we\u2019ve really nurtured that community for the last 15 years.\u201d<\/p>\n\n\n\n In an era when content is the critical connection between brands and their tribes, esports provides Intel with a rich seam to mine.<\/p>\n\n\n\n \u201cFor Intel Extreme Masters this year, we tried out something new in South East Asia, where we put the streams into Thailand, Indonesia and into Malaysia and then overlaid it with a local language. For instance, it was in Bahasa in Thai and we had local casters talking through the show throughout the weekend.\u201d<\/p>\n\n\n\n Torres admits that even though she is a marketer with wide experience in the sector, she still finds the figures stunning.<\/p>\n\n\n\n It\u2019s not just the headline figures, she says, \u201cBut it\u2019s everything that\u2019s happening beneath the surface. We\u2019ve seen the emergence of things like the Twitch stream.\u201d<\/p>\n\n\n\nHere Be Dragons<\/strong><\/h3>\n\n\n\n
Industry Structure<\/strong><\/h3>\n\n\n\n
A Most Digital Industry<\/strong><\/h3>\n\n\n\n
A Most Engaging Idea<\/strong><\/h3>\n\n\n\n
Organisations<\/strong><\/h3>\n\n\n\n
Long-Term View<\/strong><\/h3>\n\n\n\n