BUSINESS OF ESPORTS AND THE FUTURE OF IT
Winning in sports is everything, and people want to be associated with winners. That’s what games do, and it connects sports fans to victories, both small and big. Although it’s all about winning, there’s nothing in the world that brings communities together, winning or losing than sports. Human beings are willing to watch anything that’s played between the best competitors and when the stakes are high. Technology in the form of esports is the only thing that could amplify those mini victories to sports fans day-in and day-out. It has the unique ability to engage with its sports fans right from the time they get up and go to bed well beyond live games, shorter programmed pre, and post-game shows.
It’s means a lot for gamers and players(especially young)to connect with their friends through ‘social engagement’ and ‘competition’ at the same time, which is the most basic driver of human behavior. And esports can only build more in-depth and combined social practice leading to life-long fan following. Because of these profound and meaningful engagements, esports companies can give the fans what they want.
ESPORTS: MORE THAN JUST A PASTIME
The narration and storytelling are what connect the sports fans. That’s what makes people care and relatable. The breadth of fan engagement and community building through esports is so deep in the current era that a seven-year-old esports player, for example, a soccer esports player knows more about the game than 57 years old who’s been following the sport for the last 50 years. In some instances, more than the pro-athletes and players themselves. These young esports players get well versed with the competition that the fundamental skills, techniques, and strategies of the game comes to them naturally by just playing the sport powered by Augmented Reality(AR) and Virtual Reality(VR) in immersive environments. They can wire their brain in virtual mode and play it for real. It’s helping young sports fans shape better as natural athletes through esports through learning and honing it in the virtual world. It’s helping them go out and perform better through esports training and simulation in specific youth programs and academies. So esports can educate a sports fan better through technology and storytelling. Isn’t it just amazing?
On the flipside, through esports, a fan at 15 who stands no chance to make it to the competitive arena in real sports can still become the best online esports player in his community, which then motivates him/her to play esports for his/her favorite league. He/She then stands a 50% more chance in achieving that goal, although physically unfit to play the competitive sport in real life. These are the stories that young sports fans need to hear to aim high to become the next best esports player in the country when he/she’s not able to make it in real competition because of physical limtations. So every passionate athlete then has a chance to make his/her dream come true, at least in the virtual world. In a world that has greater recognition and eventually leading him/her to get in front of his/her favorite players of real sports in his/her favorite stadium as a pre-show/pre-game esports player. There’s a better and higher opportunity to succeed, which all goes into making an alternative career option and living out of it. Today’s esports is all about creating opportunities and lifelines for sports fans to relive their best moments in life.
ESPORTS AS A PRECURSOR TO TRADITIONAL SPORTS LEAGUES
Esports can help grow the traditional sports in non-existest markets because the esports makers have every single data point that conventional sports businesses need in terms of fan engagement trends and patterns across all dimensions. It includes age, gender, geographic location, time spent, money spent, varying interest levels, and every part of the psychographic analysis that a new league wants. It would otherwise cost millions and millions of dollars in investment and years together to collect the same data, analyze, and test it in real-time. With all these data and analytics now generated through esports, it’s now possible to create specific target market audiences across all content consuming platforms and dry-run the show. Be it television, OTT, and others to super-serve to the fan base, which is the key to growth and success. The e-sports world can just hand it to traditional sports leagues because they already have it ready. That’s how major sporting leagues continue to engage existing fans and discover newer fans through technology. And by growing traditional sports leagues, the esports business grows, so it’s all complimentary.
There’s 3X more engagement through esports than the conventional ones. And adding the number of hours played and equating to the league games, we’ll never be able to recreate those many number of games in real. All this leads to countless content generation, thus monetization opportunities.
MONETIZATION IN ESPORTS: A STARBUCKS COFFEE ANALOGY
Microtransactions are already huge and will become one of the enormous revenue drivers for esports and gaming companies. Monetization comes in various forms and sizes. It’s called what’s the most commonly used model known as the ‘Freemium’ model. Passionate fans will be able to play the game by just spending a few dollars in purchasing the video-game through an app for the cellphone version and probably a gaming console for other connected devices on large screens. Then if players or gamers want to compete at the highest level, advance, unlock more game features like the characters, experiment with customizable or personalized options, they’d have to upgrade the services by paying a small one-time fee for it. It might not seem like a lot, but it’s a lot in the form of recurring revenue. It’s also called the loot box.
Many people in the video game building community use the analogy for a Starbucks coffee. Most people wouldn’t mind spending $2-$4 on a coffee every day because drinking coffee is a part of life and a way of life. We all know it’s an addiction. Firstly, coffee is an addiction, and secondly, buying coffee from Starbucks is another addiction because it’s a reflection of one’s social status. And similarly, a very close analogy that we can all relate from a real sporting background is that we buy new sporting equipment every year. Be it a bat, ball or protective gear, and just anything that goes with the traditional sport. That’s how sporting goods manufacturers survive, through branding, marketing, and selling new variants every season that the players want to buy. The same strategy is used and executed on gamers in the virtual world. Gamers are excited about the new game features that they want to buy to stay ahead of their counterparts. And players wouldn’t mind spending a dollar or two in advancing to the next level and getting deep into the game. But over a while, say a year. It would have amounted up to more than $500 at a minimum. And that’s just from one single player.
Back in the day, gamers split the cost of purchasing a game and shared the resources. So a game that cost $79.99 could just be $20 each for a group of 4 friends who would take turns, rotate and play the game. Times have changed now. The full version games are available at $19.99 or even for free at times. Now each of those four players not only owns the game but continues to spend say $1 every day for the rest of the year. And now we are looking at — 4 gamers x $1/365 days = $1,460, roughly $1,500. So what was earlier an $80 buy out among four guys, or even $320 for four players, is now 5X in spending. It is just a start, and there are even higher levels of spending upwards of 20X against the cost of entry. That’s how gaming companies monetize individual players at a personalized level.
And when it comes to competitions, tournaments, events, affiliations for the community, and whatnot, the money involved is even crazier. Not only there’s an entry fee for the players, but for the fans watching it in dedicated esports stadiums. A lot is happening in this space already for increasing fan engagement and drive sales to traditional sports and vice-versa by letting fans win stadium passes, tickets, concessions at the venue. So that encourages fan participation in the game and hence the traffic to the stadiums. Above this layer is the sponsorship, branding, and advertisement, and licensing revenue, which is also the more significant chunk of the revenue pie. It doesn’t stop here; there’s more money involved in gambling and trading, the fantasy sports side of esports. When broadcasting and media players come into this space, the revenues will be unimaginable. The esports industry is hot right now and yet to peak.
FUTURE: 5G, CLOUD-GAMING & LIVE STREAMING SUBSCRIPTION PACKAGES
As we evolve as humans and with the technological advancements in the field of connected devices, we’ll live through the era of without cellphones, personal computers, laptops, televisions, and any connected device with a screen. That screen will just be our eyes, nothing more than a mini-projector. Today we hold our cell phone our hands, and that is independent of the body. But shortly, we’ll start wearing eyeglasses(AR) and headsets(VR) powered by technology serving the same purpose as cell phones and other computational devices with screens. And in the coming future, we’ll have a computer powered contact lens. Then the technology becomes a part of the body. So we’ll live through the eyes of technology connected to the biological world. That’s how humans are going to advance in the years to come. We might just be lucky to witness all this. And throughout this transition from cellphones to glass/lens wearables, 5G will play a crucial role in helping humans stay connected to the internet, which is the oxygen of the technological world. So with slim eyewear devices, the processing of data through the computer in it will also need to be lighter, faster, and efficient. There’ll be no more downloading and installing of games anymore, and all the video-games will then be played online and streamed using 5G technology through subscription packages.
Cloud gaming is going to be the next big thing with the advent of 5G as we step into the decade of 2020s and 2030s. Right now in-app purchases and the gaming consoles supporting the original games are massive both in terms of file size and cost. But even in the world we live today in 2020, 5G and cloud gaming are not far. It’s a huge design challenge with compressing the file sizes and streaming the ultimate quality of the game on a screen without any delay or lag, which is powered by another source of different bandwidth capacities. It’s tough, but possible.
There’s going to be inherent risk associated with all of this. But with the advent of social media platforms, people are far more educated than ever before. So there’s going to be a balance in dedicating time to esports and other things in life. It may seem scary, but let’s all prepare and brace ourselves for the future. Esports is still barely the surface of the cutting edge technology.
If you love sports, business, innovation, and want to connect to share ideas. Please hit me up on pratt@freebowler.com; I’d love to hear your thoughts and feedback.
