eSports and OTT: Is change coming in this booming market?

StreamAMG’s Chief Strategy Officer Hugo Sharman was in Cannes last week at eSports BAR, exploring the role of OTT in realising the sector’s huge potential.

It’s mainly the numbers involved in eSports which has made those in traditional sports – people like me – sit up and take notice; 100m people globally play League of Legends, 70m people play tennis. The ‘real’ game that is.

Every week, gamers all over the world stream their games online, the most popular reaching 100,000’s of concurrent watching fans.

At last year’s Sports Pro OTT event in Madrid, there were some pretty impressive numbers thrown around regarding digital sport; The FIFA World Cup saw 9.1m concurrent streams globally.

NBC said it delivered 3.1m concurrent streams for Superbowl 2018. But that was only 2/3% of the total linear TV audience. So some big digital numbers, but compared with the biggest events on linear T.V, still pretty small.

Last week’s eSports BAR conference in Cannes, was eye-opening for similar reasons. Amazon-owned Twitch, YouTube and Facebook all presented some very big numbers reflecting their collective dominance of the gaming space. 200m logged-in users watching esports every day on YouTube. 50 billion hours of watch time in a year. Last year a Battle Royale event saw 1.15m concurrent viewers.

Arriving in Cannes last week felt more like being swept up in a modern-day gold rush than attending your usual conference event. There were as many ‘investors’ and VC’s amongst the delegates as games publishers, team and league owners, and service providers, all wanting in on the action. Like Sportel Monaco, but with hoodies.

But beware the hype. One delegate said to me ‘it seems like bubble, the question is when will it burst?’ A keynote presentation from a rights owner made me smile when he said that sponsors investing into the space ’need to be brave’. In other words, invest, but don’t expect to see an immediate and traceable ROI.

eSports and OTT

Beyond the Hype

To try and see through the hype and to understand the opportunity, it’s often best to try and understand where the money is flowing – this is where you see significant difference in eSports compared with sports. The top earners in eSports are publishers, such as Riot Games (the creators of League of Legends), the top players like @castro1021, and the major platforms like Twitch, YouTube and Facebook.

Like mainstream sports, eSports teams and event owners leverage these platforms for extraordinary reach. Millions of fans tune in to play and watch, in turn attracting sponsorship and ad revenues. As Lagardere Sports said in its presentation, 70% of revenues in eSports comes directly or indirectly from sponsorship.

The opposite holds true in traditional sports. Amongst the larger global sports properties, the split is approximately 70/30 in favour of broadcast vs sponsorship revenues.

By contrast, traditional broadcasters seem to be largely irrelevant in eSports. eSports doesn’t need traditional broadcasting. One of the few big rights deals done in eSports was actually from Twitch itself, who paid a reported $90m, two-year deal, for exclusive streaming rights to Blizzard’s Overwatch league.

Also unlike sports, the highest value content isn’t necessarily live; according to YouTube, 83% of fan watch-time across all eGaming is on non-live content, whilst only 17% is live.

Who will come out on top in the eSports sector?

Monetising the audience: are eSports ready for direct-to-fan OTT?

Mainstream sports is going through a digital and OTT-led renaissance right now. All of us are aware of the move towards owning the direct fan relationship and monetising on ‘owned and operated’ channels. eSports is going through its own growth explosion, but Twitch, Facebook and YouTube have such a stranglehold on audience reach, that many rights-owners simply aren’t in a position to monetise directly yet. The name of the game is reach – grow your audience as big as you can, and then monetise later. Be brave!

However, the more established publishers and rights owners are starting to seize the opportunities direct OTT brings. The key difference is the underlying commercial model. The audience in eSports skews much younger than traditional sports fans, and invariably they’re not used to paying for much.

The most successful sports OTT properties are based on subscriptions (SVOD), where the value of the content, and the depth of experience convinces fans to part with cash.

eSports doesn’t seem to be able to support a mainstream SVOD model yet. Other than for the biggest properties, alternative commercial models will be needed to finance an ‘owned and operated’ venture.

And so we are back to sponsorship.

The alternative is advertising, but as everyone knows, the only winners in digital advertising are Twitch and friends.

So for now, VC money floods into eSports, and the numbers keep going up, emerging leagues, teams and players must be happy to grow audiences for Twitch’s short term benefit, and their own long-term gain.

But change is coming. I believe that in the coming 12 months, we will start to see the growth of direct-to-fan OTT disrupting the ‘traditional’ eSports market. Just as has happened in mainstream sport.

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