The new fanatics
Rugby fans are on the dive. Followers of competitive videogames – esport – are anything but, says Steve Kilgallon.
John McRae made his first big pay cheque from boxing. As co-promoter, he sold New Zealand on the “Fight of the Century”, a 2009 heavyweight bout between Shane Cameron and David Tua that still holds a pay-per-view television sales record.
The next big payday for McRae might also come from big-time sports action. But this time, no one gets hurt: McRae’s new business is in competitive videogames (or esport).
He’s far from alone in making the leap from real-life sports to electronic sports.
Traditional sports codes, with an ageing fanbase and struggling to connect with a younger audience, are starting to muscle in on the rapidly growing world of esport. Big-brand advertisers are also now showing interest.
It all makes sense when you learn that it’s predicted that computer gaming will soon overtake rugby in our national affections.
In America, basketball hero Shaquille O’Neal, baseball legend Alex Rodriguez and a range of professional NBA basketball and NFL American football teams have interests in esports teams. The buy-in for a franchise in one US esports league has climbed to as much as US$35 million (NZ$48m).
Across the Tasman, Australian Rules clubs Essendon and Adelaide have recently bought franchises; NRL clubs are sniffing around and one market analyst says it’s just a matter of time before Kiwi sporting giants pile in too.
First, a primer for those for whom this is an entirely unfamiliar world. Esports is a world where computer games – such as the fantasy battle game League of Legends – are played competitively, with fans watching on streaming television websites, or for big games, at packed sports stadiums. It grew first in South Korea, but has spread worldwide. As an example, League of Legends’ 2017 world finals in Beijing drew a sold-out stadium, 60 million online viewers and a US$4m prize pool. The world’s best players have amassed career prize earnings of close to US$3m.
“I think, for a long time, it was hard for people and traditional brands and sporting clubs to treat it as anything other than silly, just games that people play in their basement,” says one esports team owner, Chris Bridle. “But once the numbers started coming out about how many people play games and watch esports, then the smart brands started to realise what these numbers mean.” This is becoming big business – and now everyone wants in.
A NUMBERS GAME
A total of 88,000 people paid $40 each to watch David Tua knock out Shane Cameron in the second round at Mystery Creek in Hamilton, and from those 187 seconds of action, it’s thought John McRae and his then business partner David Higgins each banked a six-figure sum.
They had met in 2004 as lowly workers at the Employers and Manufacturers Association, and formed events promoter Duco soon after, originally staging black tie dinners with celebrity overseas speakers such as Bill Clinton, then moving into big-time boxing.
When the pair split, McRae partnered with Sky Television in events company Sky Arena, which staged a Shihad gig, three glitzy boxing promotions, and live-streamed sports events. When that wound down, McRae began to look for the next opportunity.
Now he owns a Sydney-based esports team, Tectonic, who play League of Legends in the eightteam Oceania Premier League competition. Five full-time players, three of them Kiwis, live and train in a brand-new North Sydney apartment, with a resident team manager/matron to look after them; McRae employs a further nine coaching and analytic staff in support.
McRae also runs a New Zealand high school esports league, and through his esport business – Let’s Play.Live – is a partner in a brand-new esports broadcasting suite which encircles the base of the Skytower in Auckland. He’s become a passionate advocate of esport.
“To me, it’s much the same,” he says of his new career. “You are dealing with talent, with media, with broadcasting. It might seem odd that someone who has promoted boxing is involved in esport. But it’s actually funny how many boxing people I come across who have made the jump for the same reasons.
“It is the biggest entertainment industry in the world – so it doesn’t take a rocket scientist to say there might be an opportunity there.”
The new wave of investors into esport are attracted by the numbers. Consumer insights agency Gemba can show you some impressive ones. They reckon one million Kiwis are playing electronic games, 470,000 are “consumers” (who read, watch or listen to esports content), and 465,000 are interested in competitive esport events. There are 620,000 esport “fanatics” – compared to 830,000 rugby union “fanatics” – but one million participants in esports (although this captures everyone from someone playing Candy Crush on their cellphone to the world’s biggest gaming stars) compared to 55,000 rugby players. Rugby’s figures are declining; esports are rising rapidly. “It’s already big, and it’s going to get bigger,” says Gemba’s New Zealand country manager, Richard Howarth. “New Zealand is not years behind the rest of the world: we are already switched on to esports and it is continuing to grow.”
The worldwide figures are even more compelling: the global esports audience is now 191 million people and predicted to reach 286 million by 2020.
For sports clubs, buying into esports may be partly a panic measure. The average team sports season ticket holder is around 40 years old, and there’s been a decline in the number of young people engaging with team sports. If you want an example of “pale, male and stale”, says McRae, just look at rugby,
It’s predicted that computer gaming will soon overtake rugby in our national affections.
league and AFL. So how do they (and advertisers) talk to the “cord-cutters” of the next generation, who often don’t own a television set, don’t read print media and don’t follow regular sport?
“A lot of people will think the rise of esports is the fall of traditional sports,” says Jason Spiller, who has been involved in the Kiwi esports scene for well over a decade. “I think that is an over-simplification – there are a lot of factors that come into it – but I do think there are a lot of things the traditional sports can learn from esports.”
And for sports teams, while there’s plenty that’s new, a lot of this new world is also old hat: they know how to sign, recruit, manage and prepare players to compete at the highest level.
Sports competitions like English Premier League football and NBA basketball have the least to worry about; the Olympics is big, but has no room to grow; events like the Indian Premier League cricket are growth stocks. But if you overlaid esports on the grid, they would be one of the biggest rising stars.
IN TO WIN
If the owners are piling in, the big corporate sponsors remain a (sometimes suspicious) step behind.
Gemba’s Richard Howarth has a powerpoint slide he shows to potential sponsors that describes the typical esports consumer. “It sometimes raises eyebrows,” he says, “because the stereotypical perception is that electronic games players are spotty 17-year-olds in their basement who never see the light of day. Let’s put that to bed.” Howarth’s standard consumer is clean-cut Eric, a 29-year-old family man employed in professional services, who also likes traditional sports, buys electronic gadgets, foreign holidays and good beer.
“If we sat down with a company asking, ‘Should we be involved in electronic games, because we don’t market to under 18s?’ We show them this and say, ‘Is this your consumer?’”
Which advertiser wouldn’t want to extract Eric’s dollar from the pocket of his designer jeans?
Daniel Ringland is the head of esports for Riot Games, who publish League of Legends and own the Oceania Premier League. He says the big brands are “past [the stage of] taking notice, they are interested”, they’ve signed up Samsung, LG Electronics and Australian burger chain Hungry Jacks and speak most days with others trying to understand this complex world. “We hope the ice is broken.”
Howarth, likewise, is talking to major brands and persuading them this is a good investment. “It’s already a big audience, it’s growing and it’s a great way of connecting with perhaps a younger demographic. At the moment, there’s not that clutter: in New Zealand, more than 100 brands sponsor rugby in some way. A handful sponsor esports… if I’ve got $100,000 to spend, in esports my money goes further.”
The increased interest of these so-called “nonendemic sponsors” (that is, companies which don’t have a direct interest in gaming, versus those that do, such as laptop retailers) has persuaded the optimists that the boom time is coming.
CREATING STARS
The reason everyone hopes that the big sponsors flood in is that right now, if you own a team there’s no other way of making any money.
Back in the physical world, even the biggest sports clubs struggle to make money: of the 16 teams in the Australian NRL, for example, only the Brisbane Broncos have regularly turned a profit. But their main income streams are pretty clear: ticket sales, merchandise, and a share of the central sale of television rights.
But esports doesn’t offer any of those to team owners: they don’t play a traditional home-and-away calendar in front of crowds; merchandising is in its infancy; the games are streamed for free online, and the game publishers take any commercial revenue, and dispense it as they see fit.
So it’s hard to see where the new wave of game owners will make their money. Gemba’s Roberts says if he was chief executive of a pro sports club, he wouldn’t buy an esports team.
And Riot Games’ Ringland admits there’s no money to be made… yet.
One problem is that esport has always been free to watch. McRae, who sold some big money pay-perview boxing deals in his day, says he’s “cynical” about it working here.
Riot say they won’t be trying it with an audience used to “getting content when they want it, where they want it”. They do want to move to home-andaway games eventually, but Ringland says: “I think it is quite sometime before ticketing is a significant line item.” So the main flow of cash will come from in-game purchases (a little) and sponsorship.
But there’s also the intriguing trend of fans paying money directly to players and teams they like. And here’s where the traditional sports might be able to teach the newcomers some tricks – for a big sports franchise has always been fairly expert at extracting money from their loyal fans. “We’re not super-strong at that,” admits Ringland.
In esports, it’s not unusual for fans to make small donations to players as an appreciation for a piece of entertaining play – part of an interface that is much more democratic than the one between a star footballer and the fan on the street. As gamers play, fans will use a chat window on the same screen to ask questions. “It’s as if I was somehow able to have a chat to [NRL star] Greg Inglis as he ran around the training field and ask him what he was thinking when he did that move,” says Ringland. “And then he explains it to me.”
Seven of the eight League of Legends teams are now investor owned, and the expansion question has been asked, but the money remains relatively low: the minimum salary is $11,000, paid for by Riot, with some teams topping up their best, and a good prize fund for a team would be around $50,000. One new tournament, however, points the way: a Gfinity event has just been announced, with games played in Hoyts cinemas, and a $450,000 prize pool.
MAKING IT WORK
The world’s biggest esports events are some spectacle, say those who’ve been to events like the League of Legends world final, or the ESL European Masters, where 173,000 spectators attended over two days in Katowice, Poland. Even events in Sydney have drawn 15,000 fans. There’s all the passion and atmosphere of one of the world’s major sporting events, with the added dimension that many fans