Avid gamer Austin Moorhead’s book takes the reader into the heart of the cybersports revolution, taking the reader step-by-step through the creation of the most massive league, the Overwatch League. It’s a fascinating insider’s story for Overwatch fans and anyone who wants to understand how the cybersport industry works. We’re publishing a few excerpts from Progaming, Overwatch, and Cybersport.
20 Million for Participation
What kind of a lunatic would pay 20 million for an opportunity to play in a eSports league? Someone like Robert Kraft. He’s known as the owner of the New England Patriots team that has dominated the National Football League, winning six of the last eight Super Bowls. On top of that, Kraft became the first team owner in the Overwatch league: he got the Boston market.
So how did Blizzard manage to lure in such a titan of a business? The creator of a sports empire doesn’t make deals to make new friends.
His actions are necessarily financially motivated.
Kraft became so enthusiastic about investing in cybersports because he realized: in the future, the nature of sports spectacle would change. And he was going to make sure his empire wasn’t stuck in the past. “We’re trying to take a long-term view in everything we do,” he explained his organization’s strategy.
Consuming differently
He said it became clear to him that millennials and members of Generation Z “consume differently,” spending many hours at games and not watching sports broadcasts the way Kraft himself and his peers did. “We wanted to be at the forefront of new trends and be pioneers in this area,” he said. – “What I love most about cybersports is the opportunity to interact with people all over the world.
His decision to pay $20 million for the Boston franchise was apparently motivated by two main reasons: video games appealed to young people and the move allowed him to capture global leadership in a promising new market.
When Kraft said that the younger generation “consumes differently”, he meant that they do not buy subscriptions to pay TV, which has traditionally been the main source of income in professional sports. Barring the 11 games per season available to Amazon Prime subscribers, you need a cable or satellite subscription to watch an NFL game, and only 60% of millennials have one. (Of the remaining 40%, half have stopped subscribing, and another half have never installed a pay-TV service at all.) Even worse, the share of those who did pay for channels was shrinking. Thus, Kraft had nothing to offer the huge number of young Bostonians who wanted to support their city in some way.
As it turned out, one entertainment that unpredictable millennials spent their time on instead of watching NFL broadcasts was cyber sports.
Less than 5% of American teens between the ages of 13 and 17 had watched an NFL game at least once in their lives, but as many as 16% had watched a cybersports broadcast. And the problem wasn’t limited to pay TV subscriptions. The average NFL viewer was around 55 years old and growing each year, and young people to replace aging American football fans were nowhere in sight: they didn’t follow the game either in stadiums or on TV and didn’t even watch slices of the best moments online. The drop in NFL TV ratings in the 2016 and 2017 seasons was the highest in decades: minus 8% in 2016 and another minus nine in 2017.
For those who have invested billions in league-related assets, such a decline is nothing short of worrisome.
And that’s why NFL club owners have taken an interest in the cybersports league. While eSports was filled with the very same young people Kraft wanted to tap into – the average age of a fan in any discipline was 24 – the decision to enter this market was complicated somewhat by the fact that before the launch of the Overwatch League it was a nightmare for investors.
No one had successfully replicated the combination of three key elements that determine the commercial success of traditional sports: league structure, sponsorship contracts with advertisers, and the sale of broadcast rights.
These elements have provided a clear order of events, consistent revenue streams and channels for fan interaction and without them, team owners have not been able to turn a profit. As a result, cybersport was periodically in chaos. Some teams were falling apart in the middle of the season, as the management could not pay the salaries stably, others – due to team conflicts (perhaps, the players were not paid enough, so they had no motivation to compromise), still others simply disappeared from the radar for no apparent reason.
The popularity of various video games was changing on a sine wave, and players were moving from one discipline to another, trying to go with the flow. Adding to the confusion was the fact that the largest eSports leagues had a system of moving the weakest teams to the lower leagues at the end of the season: the underdogs disappeared, and potential owners lost the desire to invest in an organization whose value could fall to zero overnight due to a bad team result.
From an
advertising
perspective,
even the young audience that traditional sports owners were trying to reach was something of a long term investment, but from an advertising perspective it was a double-edged sword. Broadcast networks like CBS, NBS, Fox and ESPN pay billions of dollars for the rights to show traditional sports because they can sell advertising on broadcasts: these are commercial breaks, logos that appear on the screen right during games, and generally anything else they can think of.
The young audience, while promising to bring generous profits to content distributors (assuming fans continue to watch cybersports broadcasts when they start working and their revenues grow), was not an attractive target for advertisers at the moment.
Advertisers were paying for access to potential customers with real income: the richer the viewers, the more money they would bring in.
Fans of cybersports in this sense were of little interest, at least for now. The young age of the audience conditioned their low level of income. But another problem was the peculiarities of the generation: millennials came of age in the years of the global financial crisis, so their lifetime income was lower than that of previous generations, such as boomers.
In addition, roughly half of cybersports fans are Chinese, and China’s average earnings are much lower than in the US. Finally, the vast majority of cybersports fans are men (or, for that matter, boys), and their share of the audience structure is even higher than that of traditional sports; but it’s women, not them, who are more likely to determine which consumer products to buy. (According to Harvard Business Review, women control 70 to 80 percent of consumer spending in the United States.)
The only categories of goods on which men make decisions are power tools, lawn care products, car tires, and certain consumer electronics such as game consoles or computers.
According to the book Progaming, Overwatch, and Cybersports.
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