The Major Difference: Game Companies

As we established last time, major sports organizations gain a majority of their profit from licencing rights to broadcast their games.  Bringing the show to your TV is the main goal of every game so that broadcasters can show you ads and make THEIR profit. This isn’t all that different in esports, we’re already seeing companies like Blizzard and Riot signing broadcasting deals with companies to stream their games.  But notice that it’s the game companies that are signing the deals, not a league of some kind.  That’s because the creator of the game owns everything about that game and can control who gets the rights which is very different from traditional sports.

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Streaming for charity?!? SHUT IT DOWN!

See, if you wanted to play baseball with some friends in your backyard nobody can stop you.  If you wanted to play with all the people in your neighborhood and make a tournament, fine.  You could even make a movie about it and sell it. Major League Baseball can’t stop you from playing baseball or profiting from it.  But if you were to make a movie about playing League of Legends, Riot Games owns that game and all the rights and could sue you if you use it to make a profit!  Every profit making venture utilizing a game that has a creator, (so anything that’s not a traditional sport like baseball, basketball, football) anything ELSE is owned by someone and they can control it’s use.  Basically using the game in any way gets into copyright issues, which is scary for the little broadcaster.

So the NFL is kinda like Riot Games in that they are both the big company which controls their sport, but for esports the control is more absolute.  This doesn’t mean that gaming companies are going to shut down all smaller broadcasts, streams, tournaments and whatnot but they do have the power to if they want to exercise that right.  Often they will want to allow certain projects to preserve their public image, or smaller ventures will simply be beneath notice, but larger organizations that want to broadcast games will have to be willing to negotiate with the relevant game companies.  And you can expect the agreement to be very profitable for the game companies since they basically hold all the cards.

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Checkmate

Esports, Sports, and Revenue

The world of esports has been changing lately.  With the new franchising for the NA LCS, new team owners buying up talent and money beginning to come in for the players, what could this mean for the esports economic landscape in the next few years? In order to better understand this I’d like to first look at how more traditional sports generate their income and what parallels we can draw between sports and esports.

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People will pay to watch a ball get kicked around? Sign me up!

Enter football.  No, not the football I pictured here, American football!  Specifically the National Football League, or NFL.  The NFL doesn’t have to tell us how much money they generate or how, but we have a pretty good guess thanks to one publicly traded team, the Packers.  The league generated about $13 billion in 2016, the most of any sports league in the world.  Teams in the NFL negotiate the redistribution of this revenue so that teams that are more profitable help out the teams that aren’t quite able to pull their weight.

The whole system keeps all the teams and their owners very happy.  You could think of the NFL like the United States: the team owners, like states in the union, vote on and work together to benefit everyone.  They redistributing wealth when needed to keep the system of teams working to generate money for everyone.  The league head is the president, a leader and negotiator for the good of all the teams.  This system works great for the owners who use their teamwork to negotiate for amazing broadcasting deals.

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How the vast majority the NFL’s money gets to them

This part is important because broadcasting rights make up nearly two-thirds of the income for leagues like the NFL! While teams like the Packers generate money by selling tickets, gaining sponsors,and selling rights to media and video games, a huge portion of their income is from selling the right to broadcast their games on various television networks.  ESPN, Fox, CBS, and NBC all want to be able to show football games on their channels to drive viewership and get people to see their advertisers, so the NFL negotiates (and negotiates HARD) to the highest bidder for the rights.

We’ll see in the next post how this is in sharp contrast to the way that a league like the North American League Championship Series (NA LCS) operates, or will operate with their new franchise model.  See you them!

Money in esports?

One might wonder while watching a stream of a major League of Legends tournament with thousands of viewers, professional casters, and ESPN level production quality: how did they pay for this?  Surely there must be money in this venture somewhere to get this kind of production, and you would probably be saying this to yourself while watching a stream you didn’t even pay to watch!  The answer is a little more complicated than most businesses, so we’ll firstly go into the ultra basics before covering the more nuanced aspects in later articles.

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About how much I’ve made from esports

Let’s start with the ultra basics.  Businesses make money by being paid for goods and services.  Pretty basic right? Esports is an industry where there are multiple avenues for reaching your customers, and lots of ways of things to sell.  You can sell a good such as gaming peripherals: controllers, monitors, mouse pads, headphones, or something new like gamer glasses (remember those?).  Or you could sell a service: stream production, writing the news, coaching, or playing the game as a pro or as entertainment.  Basically if the thing you sell can be handed to the person it’s a good, if what you are selling is something you DO it’s a service.

Esports is a new industry, so the customer base isn’t quite as profitable as other more established industries.  A lot of the growth that has been seen in the last few years is from rich investors moving in to hopefully turn a profit down the line as things get settled.  So while it is growing, it’s not the kind of growth that is profitable yet and this means that while some are jumping in head first, others are skeptical that a profit is there for the making.

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This could be you your boss!

So can a guy and his friends become a pro CS:GO team? Could you take a few thousand dollars and create a gaming organization with sponsors and pros? Could a new content creator start making YouTube videos and become a millionaire overnight? I’ll be going into all the ways that someone could get started in the esports industry, what the profit margins are, and how to get started.

(Spoiler: The best way to get started it to just start right now!)

 

What is Esports?

Here’s just a little page to clarify what it is I mean when I talk about esports.

Esports is basically electronic sports, sports played on a computer or gaming console. They are competitive in nature, often pitting either one player against another or two teams against each other.  Just like traditional sports, they require different types of skills depending on which game you are playing, and professional players practice and train just like professional sports athletes to be the best at their game.

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That’s one evil controller

Esports is different in one major way from sports like baseball or football in that a company created the game that is being played competitively, so they own all the rights to that game.  Major League Baseball doesn’t own baseball, only runs a league and all that the league entails, while the company Riot Games OWNS everything League of Legends and thus can dictate everything around the competitive play of it.  This is a pretty major difference that changes a lot of the monetization of playing games and esports as a whole and I’ll go into that in more detail at a later point.

Count discovers internet gambling

As you may be aware, I’m currently living in Melbourne for the foreseeable future, a place distinctly different from the USA.  Now I could be checking out kangaroos and dingoes, but why do that when there are other more financially disastrous options.  The state of Victoria allows sports betting of all types and I thought that since I already watch a ton of competitive Hearthstone among other games, it might be a bit spicier if all of my money were on the line.

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Now imagine this is is a children’s card game

There are a few options for online betting but I decided to go with Loot.Bet since they are running a nightly tournament featuring a bunch of pros.  They have constantly updating odds and you can bet on the outcomes of each game even during the game itself. It seems pretty exploitable if you had good knowledge of how certain decks matchup against each other or how certain pros will fare.  I’ve decided to put $100 into the system and see what I can do with it, and I’ll let you know how I do.

Also, if you are wondering if you can try it, their FAQ let’s you know what countries can legally participate. And conveniently right below that they mention how you can bet anonymously, how subtle. It’s still illegal though if you reside in those countries so don’t do it.

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Right next to each other in the FAQ, heh

I wouldn’t recommend trying it out yourself yet though, at least wait until I bet a few times and try to get my money back out of the system. That last part is pretty important, hopefully I wasn’t totally scammed. The customer service is a bit iffy though, I’ll keep trying and see how it goes.

Stay tuned next week for part two of our three part series.

Part 2- “Count is a gambling god”

Part 3 – “Donate so Count doesn’t get his legs broken by the Russian mafia”.

Twitter Management

Twitter is the number one way that people in eSports (and gaming in general) communicate.  There isn’t any doubt in this, for some stupid reason everyone just decided twitter was the way and have never looked back.  So if you want to be a part of the conversation, and you do, then you’ll want to start as soon as you can in setting up a profile, friending everyone and brush up on your memes.

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This could be you!

If you want to tweet like a pro, there are several tools you can use to do powerful things like find out when your followers use twitter, automatically sharing blog posts or articles, or posting prewritten messages at later times.  My favorite right now is HootSuite, which allows you to write messages ahead of time and set when you’d like them to be posted.  I can couple this with WordPress’s ability to schedule when my blog posts get posted and suddenly I can manage ahead of time when I want to share my stuff.

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Me on Twitter

Another useful tool on twitter, especially for those of us who are a little more popular, is the ability to send automatic direct messages to new followers.  So far the service that I like best for this is CrowdFire, it can DM new follows for free, but it does add a little ad for itself to your message unless you pay.  CrowdFire also can manage all of your social media apps and looks very slick.  If I had a gripe with it, it’s that CrowdFire is so easy to use that it’s kinda scary,  kinda like an iPhone it’s smoothed out the interface so much that you don’t have options or customization.  It’s not clear sometimes what it’s doing and hopefully its not messing up my twitter right now as I type. (Later edit: It worked! Awesome)

Lastly, the site dlvr.it allows you to subscribe to blogs and twitter users to post their content to twitter or other social media apps.  I just set it up to share some of my favorite blogs to my twitter and help them out a little. Just like the other sites, you can create an account for free and use some of it’s services but it becomes more powerful if you pay.  Surprising easy to setup and use, check it out!

Why Blog Why

Why you doing this?!!?  What would compel someone to spend time out of their busy lives to write a blog that three people will read or make a video or tweet with no followers or anything else that people do?  I don’t really feel like this is the time to get into the existential question of why humans do anything (maybe later), but I think there are many good reasons that someone would want to create something, to make a product to share with others and I’ll share with you some of mine.

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So meta

Learning is fun and structure can help

I’m the kind of person who just loves to gather data on all the things that I love.  I’ve watched SO MANY videos of high level tournament play of Brawl, Smash 4, Melee, Hearthstone, DotA, Street Fighter, World of Warcraft, and a bunch of games I haven’t even played, it’s probably the one activity I’ve done more than anything else for the last six years. I just love to know why people make the decisions they do, what options are good and which are bad, and what it takes to be great.  While that’s all well and good, just consuming media and knowledge like that doesn’t lend itself to a whole lot of growth.

The act of creating something with the knowledge that I’ve been absorbing over all of that time will allow me to refine that knowledge and digest it in a healthier way.  The way I see it is when you have ideas but keep them in your head it’s easy to not take a critical eye to them.  The act of saying your thoughts out loud and to another person can really help you see your ideas in a different light and refine them into something more coherent and valuable.

Your creation allows others to understand your passion and value it as well

Humans love things they can touch, it’s why you bought that show on DVD instead of just downloading it or watching again on Netflix.  We like holding things in out hands and having tangible proof of what we own, our skill, our achievements.  That’s why I love seeing tournaments give out trophies or medals, I really want one!  I want to show it to people and say, “I won that by being amazing at something!”.

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Yeah that’s a car not a trophy, but they aren’t that different if you think about it

When you make a video, an essay, gain a follower or construct a wooden table, you gain the ability to show someone your passion for whatever it is that you love.  There is a distinct difference between telling someone, “I love making tables” and “I made this table, it’s a hobby of mine”.  Actions are always more believable than words, they just have more weight.  This is especially true when it comes to becoming employed.  The people who can use their skills and knowledge as a job in eSports are usually incredibly skilled players who have demonstrated their skill time and time again, players who have attractive personalities and command people’s attention, or people who have other demonstrable skills that would be valuable to a company (like tournament organization, management, networking, etc).  If you want to show your skill, have something tangible to show!

Creating is fun!

It’s just a lot of fun to make things, way more fun than you think when you start out. Actually sitting down to make something can be a chore, but you feel so good once you’ve made it!  I wish I could SHOW you this, but for now you’ll just have to take my word for it.  If you are low on ideas of what you can create, I’ll be delving into that later so stay tuned.

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Satisfying