Competitive gaming, better known as esports, is growing at lightspeed. Teams, players, leagues and game developers are pulling in multiple millions in revenue every year. But where’s it going? And who’s getting the biggest piece?
Los Angeles had never seen anything quite like it.The city’s Staples Centre usually played host to Lakers and Clippers basketball games – or, in the off-season, rowdy rock gigs. It had certainly never seen a capacity crowd turn up to watch a bunch of geeks play video games.
And it wasn’t just the 13,000-strong crowd. It was the 32 million people watching online. The event was the League of Legends Finals, and the prize for the most skilled team was the Summoner’s Cup – and $1m in cash. Tickets for the event sold out in under an hour, and subsequently popped up on third-party sites like StubHub with prices in the hundreds of dollars.
But the really eyebrow-raising aspect of all this: it happened in 2013. Competitive gaming – esports, to use the most common term – is even bigger now. To pick a few more numbers, the website eSportsEarnings.com estimates that over $181m in prize money has been given away in the past few years, and game publisher Activision recently bought the biggest gaming league, Major League Gaming (MLG), for $46m. Esports is, by any metric you care to measure, a massive business.
Despite the big numbers up top, making a living in the industry can be difficult. That doesn’t mean there aren’t plenty of ways to do it, although some aren’t exactly legal.
On the face of it, the biggest moneymakers fall into two categories: those who make the games, and those who run the leagues.
When it comes to games, there are some unquestioned big dogs: Dota 2, League of Legends (LOL), Heroes of the Storm, Counter-Strike: Global Offensive (CS:GO). The first three are MOBAs (multiplayer online battle arenas) – team games with complex rules, heavy difficult curves, and obsessive fan bases. CS:GO is a more straightforward first-person shooter. There are others, but really, these are the important ones; LOL alone pulls in over 67 million players every month. Much of its money comes from in-game microtransactions.
The companies that make these games – Riot Games for LOL, Blizzard for Heroes of the Storm, Valve for Dota 2 and CS:GO –don’t feel a particular need to discuss their finances with reporters. The leagues are a little more open. Take the European Gaming League (EGL), a UK-based organisation that puts together tournaments and events for gamers.
Glen Elliott, the man in charge, started his career in banking, but he’s always been a competitive gamer. A few years ago he decided that he enjoyed doing that more than he enjoyed being a senior sales trader at Merrill Lynch. According to Elliott, the big numbers routinely seen in media reports are a little misleading – and certainly don’t apply to the majority of companies in the industry.
“No one’s ever made money in esports,” Elliott says. “Some of the successful teams and players are doing it, but it’s taken a very long time for them to get to that stage. If you look at the financial side of esports, even the companies who are well-oiled machines, this is all still a new business that has a long way to go. Eighty per cent of a league’s revenue comes from sponsorship, and there aren’t a lot of sponsors out there. Everyone is looking into it, but no one wants to go first.”
Making a living
EGL started off on what Elliott calls a shoestring budget, but he now says that it’s pulling in “several hundred thousand pounds” a year, helped along by a partnership with ad agency BBH. While EGL is certainly doing quite well for itself, it’s not exactly being bought for $46m, like MLG. Running a league is a time-consuming, difficult business, and while Elliott says it’s a lot of fun, it’s not always particularly lucrative. Stadium events, in particular, are notorious for losing money. Riot Games admitted that it lost money on that Staples Centre gig, and doesn’t make any profit on the league it runs, LCS.
What about the players? After all, that $181m in prize money has to go somewhere.
Michael O’Dell is the managing director of British professional gaming squad Team Dignitas. His title should give you an idea of just how he approaches what he does; this isn’t a bunch of teenagers in a basement. O’Dell (whose gamer name is Odee) says that players, if they’re good enough to both win tournaments and impress sponsors, can make quite a comfortable living.
“I’d say the average salary for a North American player is around $50,000,” he says. “And that’s salary. Tournament winnings and sponsorship and streaming money is on top. They can earn quite a bit if they are successful.
“I still think sponsorships are vital. We’re not at the point where we can dismiss them, and I don’t think we’ll ever be able to. They’re just growing, and now non-generic companies are coming in to sponsor teams. It’s always going to be important to us.”
The catch, of course, is that much as you might enjoy gaming, you aren’t going to make bank as a professional gamer. You just aren’t. In 2013, Philip Hübner of the Extreme Masters league calculated that the best players make around 600 moves a minute – ten moves a second. These are professional athletes, as committed to their sport as any basketball player who ever took the floor for the Lakers at the Staples Centre. They train for hours every day, and have to pay close attention to their physical and mental health. “Very few people can make it at the top level,” says O’Dell.
So if you don’t want to run a league, don’t have an idea for a game that can topple LOL, and can’t click ten times every second, then what can you do?
You could commentate – or cast, as it’s known. This is a sport, and it needs commentators to make sense of what’s going on. Mark Perozo is the executive director of Perfect Alliance, an esports company that showcases and develops casting talent. He’s a dedicated caster, and he says that it’s a particular skill, one that’s as much about interacting with the fans as it is about making sense of what’s happening on the game map. “The main difference between traditional sports and esports is the presence you have on social media, and the interaction you have with your audience. In [traditonal] sportscasting, it’s a lot of fun to watch, but you don’t get instant feedback like you do with the chat features on some of the streaming mediums. That feedback can be a good thing, and it can also be a bad thing, because some of the feedback isn’t useful.”
Perozo says that casting is a role where, if you’re good, you can quite happily sustain yourself. “You can earn anywhere from $30,000 a year to $100,000 a year depending on what games you are involved in and which ones you excel in,” he says. “I can’t quite make a full-time living in it yet, although I have a job that allows me to do it.”
Casting isn’t the only option. You could start a service like Twitch, which broadcasts game sessions and competitions and is largely responsible for the massive growth of esports (it was bought by Amazon in 2014 for a smoking $1.1bn). But let’s be real: you’re not going to found the next Twitch. Twitch is like Google. People can barely remember a time when it didn’t exist. You’d be far better off developing something that people don’t know they need yet but can’t live without once they try it.
Enter Jason Xu. Like Elliott, Xu comes from a banking background, and a few years ago he had a genuinely brilliant idea. With all the different games and leagues, it was becoming really tricky for players and organisers to put together tournaments. Xu’s idea, Battlefy, solved all that. It offers a management platform that allows players to organise tournaments using a single, simplified interface, regardless of game type or location.
Battlefy isn’t revenue-generating yet, but in 2014 it raised $1.3m in seed capital. Crucially, it has the support of the big game companies, like Riot Games and Blizzard. “Esports is the first ever virtual sport,” says Xu. “What that means is, it isn’t bound by geographic and physical limitations. That really changes how competition is formed and how content is created and distributed. It has global scalability, and it’s something that you haven’t seen in any traditional sport. Esports changes the rules of the game.”
Or, you could just cheat. In 2015, Kory Friesen, known as SEMPHIS, openly admitted that his Counterstrike team used the drug Adderall in an ESL tournament (Electronic Sports League) in Poland. They were competing for $250,000 in prize money.
Adderall’s a weird one. It’s used to treat attention deficit hyperactivity disorder, and it’s known for focusing the mind and keeping you alert. It’s also ideal for gamers looking for an edge. In the wake of Friesen’s admission, ESL instituted a drug testing policy, becoming the first – and so far, only – league to do so. (It declined to comment for this story.)
“We don’t have a doping policy at the moment,” says EGL’s Elliott. “We are looking at it and we are speaking to publishers about what their requirements are. There is an issue. It’s mainly down to how young the industry is, and the fact that there never used to be big companies running the teams or the leagues. A lot of that is changing, and the industry is becoming more professional.”
Of all the people we spoke to, no one really agrees just how big a problem doping is. O’Dell says he has “absolutely no idea” about it: “From my own experience, when I was a pro player, I couldn’t even have a beer. It would muck up my aim.”
“I think it’s something of a headline-grabber,” says Xu. “As to the long-term impact: in any physical sport, you’re going to see things like disqualifications. Traditional sports survived and will continue to survive, so why can’t we?”
Strangely, more direct cheating is something that has largely become a non-factor in esports. In the past, you could tweak your settings to allow auto-aim in first person shooters, or set up mouse macros, combinations of keys designed to help automate tasks (such as setting an automatic weapon to fire with one click of the mouse instead of holding down the button). “It doesn’t happen at all in something like, I’d say, 99 per cent of professional tournaments,” says O’Dell. “There are rules in place, like having to submit your [settings] in Counterstrike tournaments before you play. With League of Legends, we’re not allowed to use peripherals that have been out of the studio. They’re looked after under lock and key in the studio in Los Angeles, and when we turn up to play, we get our kit.”
The advent of VR
Then there’s virtual reality (VR). It’s had more press than any other type of technology in the past two years, and 2016 is when most manufacturers are looking to release their headsets.
It is tempting to view this as the next big source of revenue in esports: customising and creating competitive content that relies on VR. If you think Counterstrike matches are crazy now, imagine what it’ll be like when you’re right in the middle of it?
But Walter Wang at HTC isn’t so sure. He’s the company’s esports project manager, and one of his jobs is to explore how its Vive headset could be used. “It is too early to talk about the interest from leagues for VR,” he says. “Especially since the majority of VR platforms still haven’t fully launched. We look forward to seeing how receptive players are to the games and experiences that make it to market. [But] the potential is endless, and we might not be that far out.”
Xu says VR may be a bigger draw for the spectators than the players. “It’s an interesting question, and we’ve been approached by a number of VR companies. The opportunity and the capability of VR can really change how people watch any type of spectator sport... think about the virtual stadium, where I can put on my goggles and feel like I’m in an alternative reality.”
Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.