Hype about esports has reached fever pitch, sparking a scramble by major brands to grab a piece of the action.
The sector is awash with money as speculators bet big on 2018 being the year it comes of age. Investment has come in from traditional sports teams, pop stars, private-equity firms, marketing agencies, games publishers, consultancies and market research companies. However, "non-endemic" (in other words, non-techy) advertisers have been largely notable by their absence.
Looking at the raw figures, it seems odd that more brands have not given esports a try. The global audience is projected to grow from 385 million people in 2017 to 589 million by 2020, according to widely cited figures from Newzoo. Prize pots for tournaments stretch into the tens of millions and broadcast rights are being sold for eye-watering sums.
This guide aims to demystify esports, and to identify the biggest opportunities and challenges facing brands as they consider a move into the sector.
What are esports?
It is a sunny January afternoon in Burbank, California, and fans in sports tops are queuing at the Blizzard Arena to watch San Francisco Shock take on Los Angeles Valiant in the opening game of the season.
These are not fans of NFL or NBA teams, however. Instead they are supporters of new city-based Overwatch teams. Welcome to the world of professional video-gaming, popularly known as esports.
Overwatch is an Activision Blizzard computer game that features two teams of six players battling against each other in a virtual world. The Overwatch League (OWL) launched in January with 12 city franchises, each of which reportedly cost $20m (£14m) to acquire.
A lot is riding on the inaugural season of OWL. Hype about esports has reached fever pitch, sparking a scramble by major brands to grab a piece of the action. This tournament, then, represents Activision Blizzard’s attempt to professionalise the world of esports and make it a suitable brand vehicle for large-scale advertisers.
"Having this professional structure is something that looks familiar to non-endemic brands that are new to this space," says league commissioner Nate Nanzer.
The reach and audience far outstrips other sporting and entertainment propertiesMark Brittain, Gfinity
Amazon-owned streaming service Twitch was unveiled at the eleventh hour as the tournament’s broadcast partner in a two-year deal, and is understood to have paid $90m (£63m) for the privilege. Other brands on the scene include Intel and HP, both of which signed multi-year headline sponsorships with OWL.
A week after the tournament launched, Toyota was unveiled as the first major non-tech sponsor, and subsequent partnerships have been announced with T-Mobile and Sour Patch Kids.
The mirroring of traditional sports goes way beyond the city franchises. OWL matches come complete with pundits who pore over the players’ performances.
"Blizzard is trying to do something that has not been done before on that scale," Chris Hana, co-founder of esports business platform The Esports Observer, says. "They are trying to take esports to the next level."
Initial results are positive. The opening day smashed expectations with a concurrent audience averaging 408,000. Across the week, the average concurrent audience stood at 280,000.
This franchise model is also being introduced to the popular League of Legends game. The North American League of Legends Championship Series launched the new season with its own franchise model; each team franchise cost about $10m (£7m).
Josh Kocurek, senior manager of global marketing for PC gaming at HP, sees it is a momentous time. "Two of the largest leagues going to a franchise model cements 2018 as a really big year for esports," he says.
Esport opportunities for brands
For those with little knowledge of esports, it can appear mind-boggling, due to the number of tournaments and games. One company that has a detailed understanding, however, is Intel. The brand’s relationship with competitive video-gaming stretches back over a decade, and it is just about to wrap up the 12th season of its sponsorship of the Intel Extreme Masters.
Jeffrey Clark, director of business strategy for gaming and esports at Intel, says: "You are going to have a lot of non-endemics trying to figure out how to reach the audience and
you will see experimentation in how to monetise esports. A lot of that will be pages ripped from the traditional sports playbook."
Procter & Gamble's Gillette made a foray into esports through a sponsorship of the IEM World Championship in Katowice, Poland last year. As part of this investment in the activity, the shaving brand signed up eSports athlete, Enrique "xPeke" Cedeño as a brand ambassador. Gillette went on to create content series "The Pursuit of Precision", which gave fans an exclusive look into Cedeño’s life.
Last year UK esports company Gfinity hired former Syco executive Mark Brittain as chief commercial officer to help present its proposition as a more tangible opportunity for consumer brands.
Brittain claims esports opportunities could "outweigh" what was achieved at Syco on entertainment properties including The X Factor, Pop Idol and Britain’s Got Talent.
"This is a sector [advertisers] cannot ignore any longer," he says. "Already the reach and audience they have far outstrips other sporting and entertainment properties, but people are looking at mainstream as being six o’clock on Saturday night on ITV.
"That is totally missing the point. It is not necessarily designed to be on linear TV. This is the future and one of the only ways for brands to reach that younger audience."
Esports fans are a hugely passionate and engaged audience. Brittain claims the fans of Fnatic – one of the most well-known esports in the world and part of Gfinity’s Elite Series tournament – are as "die hard" fans as can be found at any other sports team.
"People tune in to watch certain teams and players," says Liam Thompson, gaming specialist at Cake. "Those players are icons in their sport, just like you would watch [Cristiano] Ronaldo play [football]. People tune in to watch SK Gaming in Counter-Strike because they are the best team in the world and their captain has over half a million followers on all his social media platforms."
Hana suspects traditional sports teams and their owners are buying up esports franchises because they have "a problem with digitalisation".
"Since they don’t have an answer, they take what is already there and jump on the esports hype train," says Hana.
For prospective brand sponsors, there are, of course, issues regarding the violent nature of many games. Robin Clarke, global head of Publicis Media Sports & Entertainment, says he has had a "number of conversations" with brands regarding concerns over such negative associations. As a result, many are being drawn toward non-combat games, he claims.
That is not to say advertisers will eschew all such platforms: last year Snickers signed up to sponsor the League of Legends tournament, in a deal advised and brokered by Publicis.
A more pressing concern for Clarke is the accuracy of audience data measurement and proving esports’ effectiveness as a media investment, given what he describes as the current "inflated" figures surrounding viewing numbers.
"There is no question that advertisers are getting good rates [on ad inventory for esports], good eyeballs and engagement scores, but it is not smashing it out of the park compared with other investments we make in that space," Clarke says.
The stampede to invest in esports has created a massively fragmented market that has given the industry a Wild West nature.
"Games like Counter-Strike have very little structure," says Thompson. "Last year there were four or five different Counter-Strike esports tournaments within a six-week period."
There are also big questions about the shelf-life of games. "What is the life cycle of an esports game? We don’t know that yet. There is no game in its single iteration that has been around for 20 years," Hana says. "I don’t think there is a safe bet, so you need to be willing to accept a certain risk."
Overwatch League commissioner Nate Nanzer bullishly claims OWL will "stand the test of time" because, while the game may evolve, the fundamental six-versus-six team structure will remain the same.
Doubts also hang over the career span of star players. For instance, the best players of Fifa 18 may not necessarily be the best at the next version of the game.
Another challenge is how to build the brand of individual esports teams when they are not rooted in their community in the same way as traditional sports teams. OWL franchise London Spitfire, for instance, has US owners, who are based in Los Angeles, while all the players are from Korea.
"We did not feel we would be able to put together a majority UK roster that would be competitively successful in the league," explains London Spitfire president Dan Fiden. "We made the decision that fundamentally sports and esports fans want to win. British football clubs are not usually majority Brits."
Plans are in place to play OWL matches in the home cities of the franchises, while Fiden says he is in discussions with Premier League football clubs about securing a home for the Spitfire team.
There are also stereotypes associated with computer games that could hinder a breakthrough to a wider audience. Kocurek says: "We continue to combat the stereotypes and the stigmas around people who play games. We are not all nerds in our mum’s basement."
One of esports’ biggest strengths should be that it is one of the few sports where men and women are able to play on the same team. However, the OWL franchises received criticism for not signing a single female player at launch.
"My hope is we will get to a point where we do have women playing in the Overwatch League," Nanzer said at the time. "We still have a long way to go culturally to break down barriers."
Kim "Geguri" Se-yeon has since become the first female player to join the league after being signed by the Shanghai Dragons.
Some games also feel less suited to a non-gamer audience. Overwatch, for example, is seemingly difficult to follow if you are a non-gamer, whereas Counter-Strike is far more accessible. Sponsors are understandably keen to make games as easy to watch as possible.
What next for esports?
Achieving mainstream recognition will take time, but progress has been made. Intel, for example, is attempting to introduce esports to non-gamers by lobbying the International Olympic Committee to include it at future Olympic Games. At the Winter Olympics in Pyeongchang, South Korea, the brand was given permission to host a Starcraft II tournament to help showcase esports to a broader audience.
"It remains to be seen what the next step forward is in the progression of esports at the Olympics and whether it becomes an official Olympic sport," Intel’s Clark says. "That is something the IOC has expressed a willingness to entertain, but there is no decision just yet."
Sponsors who have made the early foray into esports are happy with their investment. "Is esports an effective communications channel?" he asks. "So far, we believe the answer is yes."
The appetite for success shown by Activision Blizzard and its rivals cannot be doubted. This will be the year when those ambitions are truly put to the test.
An investment in esports is the same as weighing up sponsoring traditional sports. The difference between a competition such as Major League Baseball and the German Bundesliga is as stark as the divergence found in esports. To help marketers understand the landscape, Campaign has compiled a snapshot of the industry.
Most popular esports games
The games can vary quite considerably in their nature and can be anything from a virtual version of a real sport to a fantasy world that feels like an amalgamation of Lord of the Rings and Dungeons & Dragons.
A couple of the most popular games are League of Legends and Dota 2 and both originated from Blizzard Entertainment’s Warcraft III. The former features two opposing five-person teams whose main objective is to destroy their opponents’ base, while defending their own. The original Dota is credited with establishing what is known as the "multiplayer online battle arena" (MOBA) genre. It also features teams of five battling to destroy each other’s base.
The major first person shooter esports games are Counter-Strike: Global Offensive and Call of Duty. Counter-Strike has begun to eclipse the viewership of Call of Duty lately. The games feature two teams attempting to kill all the other players on the opposing team. These are the most violent of the esports games because they do not feature the comic-like violence of Overwatch. Activision Blizzard describes Overwatch as "six versus six team based-shooter" and the game has over 20 comic-book style characters each with a unique style of play, which enables the game to be very strategic.
Possibly the most enduring esport is the strategy game Starcraft II. It launched in 2010 and its popularity helped Twitch gain its audience when the streaming site launched the following year.
A game that is predicted to take the esports world by storm is PUBG, which has introduced the "battle royale" concept. In it 100 players battle to the death until only one is remaining and its addictive nature means it consistently has three million people playing it around the world at any point in time.
For those wishing to avoid the violence of most esports games there is Rocket League, along with games based on traditional sports such as Fifa 18 and NBA 2K.
Rocket League features two teams of rocket-powered vehicles who compete to hit a ball into their opponent’s goal. Fifa 18 and NBA 2K are relatively conventional games based on football and basketball respectively and, while these more traditional games have not historically played a huge part on the esports scene, they are increasingly playing a bigger role and featuring in more tournaments and receiving more investment.
Biggest esports tournaments
There is a large number of esports tournaments with many different tournament organisers. Each tournament can take significantly different formats.
While the Overwatch League and the NA LCS are creating franchise teams to try and to emulate traditional sports leagues, other esports tournaments follow more of an Olympic format with many different esports games featured during the same event.
The biggest tournament organisers include ESL, Gfinity and Major League Gaming (now owned by Activision Blizzard). ESL runs the Intel Extreme Masters series of international sports tournaments, while Gfinity’s flagship event is the Elite Series.
The accolade of the largest prize pool in esports is consistently won by The International, the annual Dota 2 tournament hosted by Valve Corporation, the game’s developer. Last year the prize pool surpassed $20m (£14m).