The Power of Presence of Electronic Sports

On October 19th 1972, Stanford University students gathered to compete at the game Spacewar.  In 1980, more than 10,000 people from all over the United States gathered to compete for the high score in Space Invaders.  In 2014, over 40,000 people filled the Seoul World Cup Stadium to watch the finals for League of Legends.

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2014 League of Legends Final Tournament

 

The examples listed above are all forms of electronic sports (e-sports).  E-sports are video games that are played by professional gamers at the highest level in a competitive scene.  Many of the players work “full time” and are constantly practicing, similar to other sports (football, basketball, etc).

The existence of e-sports has been around for more than 30 years but was not prevalent until the late 1990s and early 2000s.  Even at that time, e-sports were only popular in South Korea.  Today, electronic sports have taken the internet by storm with tens of millions of people watching the Superbowl equivalent of e-sports.  Companies are scrambling rapidly to adapt to this new form of entertainment, as the potential market and revenue return is huge.
Here’s a list of the “successful” electronic sports video games:

League of Legends

Counter Strike GO

DOTA 2

Hearthstone

 

For every single game on the list, balancing patches are released periodically.  This means that every company is constantly watching the state of the game play and changing it accordingly (strengthening or weakening aspects of the game).  On top of that, games must be created under the mindset of being a “spectator sport”.  This means that the games must be easy to view for the general audience, both aesthetically and logistically.  (insert more things that they need)
What’s the point of cultivating and growing an electronic sports scene for a company’s respective game?

Direct Marketing

The first is the most obvious, but e-sports are a huge direct marketing campaign for the game.  In 2014, there were 36 million unique viewers for the League of Legends championship with 360 million hours watched during the 4 week tournament while competitor DOTA 2 drew in 20 million unique viewers during their final tournament.  DOTA 2 specifically had 6-8 percent of their viewers that were completely new to the game and had never played it before.  The League of Legends numbers were unreleased, but assuming a relatively same ratio that means that a potential of 2.88 million new customers could be added after the World Tournament.  All of the games on the e-sports list are strategically free to play with this as a reason, the free starting cost and no switching cost of the game makes it appealing and eventually leads to micro transactions within the games, the main source of revenue.

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League of Legends “regular season” viewership in 2016

Partnerships

The next benefit of growing an electronic sports scene for a game is the direct partnerships involved with the game.  A large viewership count means a larger influence from advertisements so many tech related companies are willing to invest thousands or event millions partnering and advertising during electronic sports events.  League of Legends has hundreds of sponsorships, with big companies like Coca-Cola and HTC.  Just recently, Acer had bought the rights for the gameplay highlights, with their logo square on the corner of the screen.  On top of that, third party gaming tournaments need to pay rights to the gaming company in order to use their game in the tournament.  The biggest example of this is Major League Gaming and Dreamhack having to pay Blizzard a hosting fee for using their games (Starcraft) during the tournaments (Blizzard/Activision has since gotten so big that they have purchased Major League Gaming).  Gaming companies are getting free advertising for their game while third party tournament companies are doing the majority of the work in setting up and hosting the tournaments.

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League of Legends partnership with Coca Cola

Retention Rate

The last benefit from investing in electronic sports is the positive effects it has on retention and churn rate reduction.  In the last 5 years, the gaming industry has shifted more towards “Gaming as a Service” (GaaS).  Gaming companies are focusing more on games they can constantly update in comparison to big title games that have a high development cost and get outdated quickly.  Electronic sports’ main contribution to the transition to Gaming as a Service is its increased user retention.  Churn rate for GaaS games are very important since they rely on micro transactions instead of an upfront cost (60 dollars for a game).  Electronic sports play an integral part in maintaining the longevity of the game as it immerses the viewers, generates new players, and encourages players to “play like the pros” and play the game to get better.  For Riot Games (maker of League of Legends), they have no plan on creating a sequel to their most popular game in the world right now and are fine with constantly improving and adding new content to the original.

As the gaming industry continues to evolve away from traditional games to micro transactions, casual games, and advertisement games, electronic sports play an increasingly important role in the success of a game.  Out of the top 10 grossing PC games in 2015, five of them had strong electronic sports scenes with the top one, League of Legends, having the biggest e-sports scene in history.  With e-sports having its own section on ESPN, electronic sports will be a here to stay.

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League of Legends on one of the biggest sports websites in the world

2 comments

  1. Nice followup to your presentation!

  2. Your post is very well-presented, and you taught me something new about the innovative marketing of video games. It is interesting to watch companies figure out how to increase viewership and profit. Your examples show that the growth and revenue can be about the experience and sharing the experience, more than just the wow factor of the graphics, sound, and adrenaline rush of being in a virtual fight or flight situation. Seems like these companies that are promoting the e-sports around their games have really thought about their strategy, value proposition, and their customer’s needs on multiple levels.

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