Esports - what went wrong
An insiders perspective
I don’t want this blog post to be another example of the vitriolic negative pile on that esports is experiencing right now. I will try and keep it objective, based on what I experienced in the industry. I hope these views accurately represent the feelings of those working in esports but can’t make their feelings known for fear of consequences to their career.
A little background on myself. I have been in esports for about 15 years. Starting as a player before joining ESL full-time as a community manager / caster in 2013. I worked at ESL for 9 years, mostly in the product department before leaving in November 2022
During that time I saw multiple different attempts to make esports work. What I define (and is a widely held belief in the industry) as “make esports work” is make it sustainable through profitability. Get esports to a place where it’s contributing more to the world than it is consuming. It’s not unusual for a nascent industry to prioritise growth over profitability, Amazon didn’t turn a profit for years. However, within the context of the internet it has been around a long time - long enough for many other internet based industries to convert growth into profitability.
Although unsuccessful, I look back at the last 9 years fondly—for every knock-back we experienced it felt like we were making progress. It’s clear to me now that we were a lot further away from that goal than I naively realised. So, what went wrong? Why after 25 years has esports not “made it”? I don’t subscribe to the notion that it is any individual actor or organisations fault. For it to be unprofitable for such a long period, with so many attempts made there must be some fundamental problems at play.
Those two problems are Ownership and Popularity.
Ownership
Those that have the rights don’t have the will or expertise. Those that have the will and expertise don’t have the rights.
What fans may not realise is that someone actually legally owns the games they watch and play, namely the publisher/developers. In practice that means you need to procure a licence from the game publisher before running a tournament. Sometimes that comes in the form of a general tournament licence agreement, but most of the time (especially if you are running a professional tournament), you need a contract with the publisher.
That is fundamentally different to traditional sports. You don’t need a contract to host a football tournament, you just need 21 friends and a couple of jumpers. It’s this freedom in traditional sports that makes it sustainable, it works on free market economics. Do you have an idea for a product or service? You can go out and build it and ultimately the market decides if it sinks or swims. Imagine the USA as traditional sports, esports operates more like North Korea (from an economic perspective).
You may be thinking, hold on a minute - what about Riot? They own the rights to the game and run its esports operations. I can’t speak to how Riot operates as I have never worked for them. However, from what I have seen generally for publishers, the esports and game teams operate separately, both competing for the same resources but with very different business models. The ideas that have the greatest impact win—esports only touches a tiny proportion of their play-base (often less than 1 %). That in turn means the esports ideas lose and so the esports team can’t freely build what they want and we are back to square one.
Even if these issues are fixed for a single game or publisher. We are a million miles away from the industry wide consensus we would need to fundamentally fix the issue.
This severely hamstrings anyone who tries to build anything in esports. You can only build products and services that fit within the interests of the publishers. Even if you do conform to all the rules, restrictions and want to invest millions into the game, your licence request may still be declined. Or worse, accepted and then revoked. From the publisher's perspective, with IP ownership comes a certain degree of legal and brand responsibility. The guard rails are there to protect them from 3rd parties engaging in activities that could damage their brand or break the law using their IP. That’s what makes this issue such a difficult one, it’s no one’s fault - not the tournament operators or the publishers—it’s just the way it is.
Many have invested in esports under the assumption that it enjoys similar freedoms to traditional sports and got burnt when they realised it doesn’t. The industry should be / should have been more honest about this from the get go. I have some ideas of how to remedy this issue that I will explore in another blog post but as someone is always going to own these games, it can never be fixed completely.
Popularity
Don’t believe the hype.
It may sound obvious, but if esports were to become 10x more popular tomorrow, many of the problems that exist today would be negated. Publishers would be able to justify investing more development and publishing resources into esports, brands would be lining up out the door and everything from grass-roots to professional tournaments would be packed with eager fans and nervous players.
You can get carried away working in a young, exciting growth industry based around your favourite hobby. The reality is, not only is esports a small niche but it’s a lot smaller than the industry thought it would be at this point. To compare, the worldwide peak viewership of the most watched esports tournament - the Free Fire Singapore World Series 2021 was 5.4 million peak / 2.1 million average viewers (Esports Charts). The average viewership for the 2023 Super Bowl was 113 million (Nielsen). That pales in comparison to the 2018 FIFA World Cup where 3.5 billion tuned in (FIFA).
The highest esports viewership of all time is comparable to a promotion match between Nottingham Forest and Huddersfield Town in the English Football League Championship (Sky Sports) at 1.75 million average viewers. The EFL is the 2nd division of English football, below the Premier League.
So why is it not more popular? There are many reasons but here are a few. The first reason I have described above. It pertains to ownership and the subsequent consequences that it has on innovation in the space. The second is some find it hard to engage with a sport that introduces an additional degree of separation. Not only are you not participating in the activity yourself, but you are watching someone interact with the activity through a screen rather than directly in the real world. As someone who grew up playing games, that isn’t a big deal to me but it is for many non digital natives. Which leads me to the 3rd reason.
It comes down to demographics. To use Europe as an example. The median age is 44.4 years (Eurostat), that means 50% of Europe’s population are older than 44. They are the pre-internet generation, or at least the grew up in a time where internet use was still limited. The concept of watching someone play a computer game is alien to most. In the next 10 years, kids from the 1990s, those brought up on the internet and computer games will not only make up the majority of the population but be the boardroom decision makers. That in turn will trigger a kind of esports renaissance. So do we have to wait 10 years until esports become significantly more popular? Probably, yes.
But Oliver, we don’t need esports to be popular—we should go back to an older, smaller version of esports. Well, the issue with that is the older, smaller versions of esports weren't sustainable either. It’s not like the deal sizes would remain as they are today. For every incremental step we go back, we strip away inventory sold to partners which in turn would lead to smaller and smaller cheques from them. We “progressed” to the point we are today because we believed that the big splashy stadium events and deals would lead to sustainability.
Despite these issues, I still believe that esports will one day be the de facto most popular sports category in the world. The question is, how close are and how can we build for sustainability? My next blog post will be decidedly more upbeat, focusing on where I believe the opportunities and positivity lie in esports.
PS.
If there is a part of the esports industry you would like to know more about, leave a comment and I will endeavour to write about it. Aside from esports and gaming I will be writing about music and travel.