Wake up and smell the esports

A recent South Park episode aired in North America, ‘#REHASH’, and probably had most viewers over the age of seventeen, and who don’t devote at least 20 hours per week to playing Minecraft or League of Legends, a little mystified. In the episode, pre-school children taunted the show’s main characters, who are assumed to be about ten years old, because they didn’t understand the culture of video games as a spectator sport. The older children had only a vague understanding of who PewDiePie is, and no understanding whatsoever why their four year old siblings would rather watch video of people playing Minecraft than actually play the game themselves on the family Xbox. The living room is dead and a new entertainment industry has sprung up while you old people were sleeping.

Sure, new industries spring up all the time in recent years, but I was struck while giving a talk at a telecommunications conference in Silicon Valley the other day that 40-year-old executives had precisely the same lack of clues as cartoon ten-year-olds. PewDiePie? Who? DotA2? World championships ten million dollar prize purse? And suddenly I had everyone’s attention.

What kind of fast growing cultural phenomenon separates not only the middle-aged from the adolescent, but also slices finely through adolescent demographics with a resolution of months, not decades? One that grows so large, so quickly that unless you were in precisely the right place at the right time (playing League of Legends obsessively in 2012) you probably missed it.

esports, or the spectator sport of video games, has gone from almost nothing to a bona fide professional sports industry within two and a half years. In 2011 the Season 1 League of Legends World Championships was held at a small festival in Sweden, with 1.6 million global viewers, and a total prize pool of 100,000 USD. In 2014 the Season 4 League of Legends World Championships occurred live at the 45,000 seat Seoul World Cup Stadium in South Korea. 27 million viewers tuned in from around the world, and the prize pool was 2.13 million USD.

To put that into perspective, Major League Baseball’s World Series recently drew 14.9 million global viewers.
Here is a nice illustration of what that evolution looked like (stolen from Reddit):

esportsThe world championships for a similar video game, DotA2 (short for Defense of the Ancients 2) had a total prize pool in 2014 of 10 million USD. And the story is the same for Call of Duty Black Ops, with over 1 million USD in prize money, and a host of other popular titles.

The rapidity of esport’s growth has had some interesting side effects. esports has had to professionalize very quickly, and traditional media companies and sports agencies have begun to pay attention, but in the interim years there was tremendous opportunity for new players. Most people know about Twitch, and its acquisition by Amazon for just under 1 billion dollars. A few new entrants into this market have appeared, including SpeedInvest portfolio company hitbox.tv, who leads the pack of contenders for Twitch’s crown. But this won’t be a ‘winner take all’ market. Early investors have wondered if Twitch will suck all the oxygen out of the room, and create a service like YouTube, that dominates one sector of online video. But esports is growing in a number of directions, and esports video will resemble traditional sports far more closely than the vast monopolies enjoyed by internet companies that provide a best-in-class, narrow feature set, such as ‘search’ or ‘video self-publishing’ to a massive audience. There will be an esports ESPN (and, in fact, that might be a direction in which ESPN evolves, although the culture of traditional sports is not entirely compatible with esports); there will be a Tennis Channel of esports; Fox Sports; Eurosport; the Golf Channel, and on and on. This market can be sliced in many different ways for an online service, not just in terms of content programming, but also in terms of features and viewer requirements. Live viewers of professional esports might want high quality, stutter free video with professional production quality and professional announcers, but people watching celebrity gamers such as PewDiePie (the largest YouTube channel by subscribers), and others in the ‘Let’s Play’ movement who offer casual, and often comedic, video game play to millions of spectators, require features that engage an audience personally: chat, sweepstakes, voting and polling and loyalty programs. In the future, esports services in certain segments will provide unique features and interactivity.

esports is at the end of the very beginning of its commercial evolution. Justin Kan, founder of Twitch, was very clear in a recent interview at TechCrunch Disrupt: he believes that esports will be as large, if not larger, than professional sports. And I agree. The global video game market is already larger in dollar terms than cinema. Everyone plays video games. And live broadcast for video games isn’t just for elite cyber-athletes. PewDiePie and hundreds of others prove this. The esports market is at the very beginning of its growth, and it will have plenty of room for the professional gamers, in addition to the speed runners, ‘Let’s Players’, modders, hackers, the critically unskilled (and often unwittingly hilarious), and even the trolls and griefers.

On that note I’ll leave you with an old video of two young geniuses exploiting bugs and their opponents’ naivete in Team Fortress 2. ‘Team Roomba’ don’t have skills. They don’t have a coaching staff or a private bus or team jerseys. In fact, they are terrible and probably live with their parents. But they are hilarious, and 2 million people have watched them making their teammates lives an utter misery.