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25 July 2019

MTG still wrestling with eSports as broadcasters look on

On the face of it, Sweden’s Modern Times Group (MTG) is making a good go of cementing its place in the top division of eSports as it has just reported sales in that division up 15% in Q2 at $46.9 million compared with the same period of 2018. It would be more accurate though to suggest the results endorse MTG’s decision back in 2014 to go for broke into streaming, which made sense in the Nordics which was already embracing OTT with a vengeance.

Penetration of subscription-based services in the Nordics has already passed well beyond 50% and MTG confidently predicts it will approach 100% by 2024. Against this background, MTG has used the Nordics as a springboard for an assault on the global market for both eSports and gaming, with reasonable results. But it is not doing any better in eSports than streaming generally, since overall revenues were also up by 14% for the quarter and in fact gaming was strongest with a 29% rise to $68.4 million.

Before going further, it is worth distinguishing clearly between eSports and gaming, which after all are two closely related verticals that feed off each other. Indeed, there would be no eSports if gaming had not been invented, the main difference being the participation of spectators and the organized nature of competition.

Gaming can be defined as applications that may or may not require access to the internet although usually do these days, with interactivity and a high graphics component. As it has become more pervasive it has generally split into “casual gaming” involving intermittent play and “hardcore gaming” reserved for people who are dedicated and devote a lot of time to it.

Esports evolved from hardcore gaming, being multiplayer video games played competitively for spectators. This usually involves professional gamers who often spend as much time practicing or training as conventional sports athletes, with a growing emphasis on leagues and team competition. Teams offer their players training facilities, coaches and even nutritionists or personal chefs to ensure their players are in top shape for the competition, so it is becoming just as serious as conventional professional sports. Indeed, there is increasing crossover between eSports and at least some conventional sports, especially in motor racing where the skills needed for eSports translate well to on track racing and vice versa.

Of course, it is different for other sports and we are unlikely to see experts at say the FIFA 19 football simulation game challenging for places at say Real Madrid. But even in those sports there is increasing overlap and interest in eSports for engaging fans.

Indeed, the reason MTG and others have bet on eSports is because they anticipate an ongoing cultural change already evident among Millennials towards participation as spectators, encouraged by the greater levels of interaction with teams and players compared with traditional sports. However, what MTG and others are finding is that monetization of eSports is proving harder or at any rate longer to achieve than had been hoped or anticipated, which is why revenues by many counts are lagging behind forecasts.

Nevertheless, MTG is right to have placed a stake in the ground early because there is little doubt eSports is going to become a major sector that broadcasters and pay TV operators cannot afford to ignore. While many have been prevaricating or paying little attention, MTG has at least set out its stall in the field convincingly by acquiring top brands, having been inspired to some extent by the Nordics punching above its weight there.

For example, in November 2015 it acquired DreamHack, which had already become not just one of the leading eSports players in Scandinavia but also in the world, yet was still affordable costing MTG $25.8 million. That came after MTG’s acquisition of 74% of Germany’s ESL brand from Turtle Entertainment. It also invested around that time in Zoomin.TV, then Europe’s largest multi-channel network, and Splay Networks, the leading multi-channel network in Scandinavia.

The problem for traditional broadcasters or operators seeking an entry are various. One is that valuations of any start-ups they might wish to acquire are currently too high, compared with what they were when MTG embarked on the field over four years. Related to that is the fact that eSports is almost totally a streaming phenomenon and that side has virtually been stitched up by two players, Amazon’s Twitch, followed by Google’s YouTube.

Some broadcasters did try to get in early, such as Sky in the UK in collaboration with that country’s commercial FTA broadcaster ITV, seeking to gain audiences via traditional distribution. That initiative rather petered out and Sky was left to pursue eSports on its own, notably in conjunction with the English Premier League (EPL) for its inaugural ePremier League (ePL). All 20 Premier League clubs were represented in the tournament culminating with the ePL final in London on March 28-29, 2019, which was broadcast live on Sky Sports and Premier League social media channels.

The opportunity for traditional broadcasters or operators sensed by Sky, which perhaps MTG is not reaching out so much by being steeped in the field, is to broaden eSports’ appeal and attract a more casual audience. To date, through Twitch and YouTube, it is still a niche field despite its size in the sense that it is geared towards serious gamers prepared to sit through prolonged matches lasting hours on end without pause.

Operators then could score by stimulating growth in shorter games with more snackable add-on content. We have seen TV make a similar impact on traditional sports, such as cricket with shorter formats like 20/20 where matches can be completed after work in the evening rather than lasting five days. The cue game snooker used to involve matches lasting days before its world championship was televised, while in table tennis individual games have been shortened to half their original length.

Esports has also been dominated by quite violent games and been stigmatized by a lack of inclusivity, being dominated by males and also white or to some extent Asian ethnic groups. There is scope for TV to create a more sanitized hinterland to the core field of serious gaming. There is also mileage, as Sky has done with the EPL, in partnering with traditional sports organizations, which again drives the genre’s growth outside the hardcore to attract fans from the conventional counterpart sports.

Success will also revolve around exploiting the eSports phenomenon of creating global celebrities fans can engage with. By the same token, there is plenty of evidence that attracting celebrities from other fields into eSports can also pull audiences greatly. This happened when the Canadian rapper, Drake, joined the popular Fortnite player Ninja on his Twitch stream, leading to the platform’s record for concurrent viewers on an individual stream being broken. There is surely scope at least for broadcasters and operators with deep enough pockets to exploit what has become known as the “Drake effect” by bringing traditional sports stars that mainstream audiences already know into their TV esports offerings.

Monetization through advertising or sponsorship would then follow the audiences, as the field becomes less disjointed. It is still early days, given that most professional eSports leagues have only been around about three years. Similarly, a significant trend only quite recently gathering force is the growth in use of physical venues to hold eSports championships and that also offers scope for broadcasters to come in.