[GZ] So the whole idea seems to be that eSports is sort of this wild beast, and the first one to tame it and figure out how to define it within media will have a big opportunity. The industry has grown so rapidly but it’s not very well structured yet. So how do you tame eSports? What’s the trick to getting a league to take hold?
[PW] It depends on which place you’re looking at. For one thing, you have to think about the full experience. So in MOBAs, interestingly, I think there’s a lot of organic growth. I think Riot and Valve have done a really good job of supporting their communities. But I think the thing that they didn’t really try to do, and were kind of fortunate in, is create an experience that works really well from a viewing perspective. It’s top-down, you can kind of see the plays play out. People who aren’t a super high-level player, maybe a medium-level player, they can understand the strategy of what’s going on and see things they couldn’t really do but understand at a deep level.
If you bring somebody into an American football game, and they’ve never watched it before, it’s very hard for them to tell what’s going on. But a person who’s a big viewer can watch the plays unfold and
take place, and there’s so much strategy going on, they know the Xs and Os. That really creates this awesome viewing experience, even though they don’t have any athletic skill to participate. And that’s what’s evolved in MOBA. It’s a great viewing experience because of the strategy and high-level meta play, and it’s something players can relate to, but still it’s this elite group that can execute it and that other people can watch to see greatness. And then Valve and Riot have done a great job of fostering that competitive community through balance updates, really thinking about the high-level experience as they release Champions and things like that.
As the first point, you need to have what is a great eSport and really deconstruct what that is. What a lot of companies are doing now is saying, “Well what’s our eSport for this experience?” Like, “Hey, it’s got competitive multiplayer, what’s the eSport?” And it’s not DLC; it’s not, if it’s single player it’s story DLC and if it’s multiplayer it’s a map pack. eSports is not that. eSports needs to be built from the ground up, to think about the competitive experience and the viewing experience. On top of that, it takes a lot of innovation and creativity to engage all those different groups. How do you satisfy the needs of the professional community? [What about] the community on the fringe which considers themselves professional players, and maybe has dreams of going pro, but they’re never going to get there? And then the viewing audience that wants to feel like they’re a part of it.
If you think about the things Valve’s done, part of it is putting the microtransaction revenue back into prize pools. That’s great; players feel more incentivized, the pros have more money to play for. They’ve incentivized viewing through items you can get in the game, there’s a great betting site using the in-game currency. All that stuff creates this community.
I think there’s a blueprint in terms of creating an experience and then fostering it across all the different types of players that are engaged in the game. And because there are so many different types of groups engaged and because it requires a lot of money, it’s difficult. Lots of people are going to try and some will be successful at it. And it’s the companies that have deep pockets and bring in people with experience in these areas that are going to be in a position to create these successful eSports titles.
[GZ] And it does seem clear that having multiplayer, even great competitive multiplayer, isn’t enough. So with Call of Duty being at Activision’s forefront, sort of their claim to fame and a big part of their deep pockets, how do you think they’ll approach the series as a competitive first-person shooter?
[PW] Counter-Strike: Global Offensive has some interesting takeaways for the things that are important. I think there’s different challenges in Call of Duty, and there’s benefits. You have the huge brand recognition, and a huge, what we call, top of the funnel. Whenever you think about this kind of experience where a certain number of people get more engaged—with this many people playing Call of Duty, this many people interested in tournaments, this many people interested in watching and this many people interested in playing professionally—you have a tremendous top of the funnel for Call of Duty.
The challenges are that it’s primarily a console-based game, which has been tough from an eSport perspective. Most pros want that higher level of control which comes from a mouse and keyboard. The other thing is, you have to be creative about how to put that high-level meta game in the experience. I use Counter-Strike: Global Offensive as an example because they’ve come up with a tournament format that does this really well.
So in a certain Counter-Strike: Global Offensive match, they’ll play a string of [matches] one after the other. But then you have this buying round in-between, and what it creates is this sort of meta game around purchasing resources. Teams may take a whole round off because they think, “Oh, we’re going to lose this round anyway so we don’t want to buy a bunch of gear,” or, “Oh, we can win this round with only slight purchasing.” Or maybe, “This round is a super pivotal match, so we have to throw in all of our resources.” Someone who comes in and doesn’t understand the meta game would wonder what’s going on, you know, why aren’t you buying anything? But if you understand the flow of the match, you start to understand it and you can kind of follow along. That’s a way of putting in a deeper, strategic meta game around a shooter experience that naturally, if you just play one round, has less of it than a MOBA. But through the structure of the tournament, you’re creating that. That’s the type of thing that Call of Duty needs to figure out.
You start by saying “What has worked well as an eSport?” and “What are the things making it work well?” Then “What are the things we need to add into our experience, and what lessons can we learn in order to create an optimal viewing experience?” There, Call of Duty is a phenomenal playing experience for mainstream gamers, and it’s been incredibly successful over the last, what, 10 years at this point. You know, driving between one and two billion dollars in revenue each year with these annual releases. [The question is] how do they take what’s been successful there and then look at other things that have been successful in engaging viewership, and then use that to drive the full experience.
[GZ] It’s funny you mention the annual installments, because that’s kind of how Activision has treated eSports in the past—as a marketing stunt for new Call of Duty games. They would push for a big tournament and throw a million dollars at it when the next Call of Duty is a month or two away, basically to throw coal in the hype train. This new division should change that going forward.
[PW] That’s a good point, and I think it circles back to why they’ve formed their new division. In a big corporation like that, you have lots of different agendas. When you look at eSports, you can say it’s a marketing tool around Call of Duty designed to push some revenue and also push agendas around that IP. When you don’t form a new division, the goals end up being formed by the traditionally important agendas of that franchise. So the people who are primarily in charge of the Call of Duty IP have been tasked with driving the most amount of annual revenue from that franchise that they can. So they’re going to take eSports and naturally fit it into that agenda.
So, to your point, that’s exactly what they’ve been doing. And you’ll see it on Twitch; post-Call of Duty launch, you get this huge spike in Twitch numbers, and Global Offensive will fall off the map a bit because they share users. They don’t put that support all year because they’re already thinking about the next big Call of Duty, right? [Laughs] So forming a whole new division with new objectives, giving them the executive clout to say, “We’re actually not going to totally support the launch because we believe there is a broader thing here to think about Call of Duty as a service.” They’ll be able to take that perspective because that’s what they’ll be tasked with, not just trying to drive two billion dollars each year.
[GZ] And something we can’t forget is that it’s Activision Blizzard. And Blizzard has so many established eSports under their belt, from Hearthstone and Starcraft to Heroes of the Storm and World of Warcraft, as well as Overwatch coming up. Between Activision and Blizzard, which games do you think will benefit most from what it’s going to do?
[PW] I think that in the short term, Call of Duty has the opportunity to benefit the most. It has so many players that a more solid eSports structure around it will be able to leverage that audience. But Blizzard does have so many great IP established in eSports, meaning as plans start to become grander—deals with television networks, deals with advertisers, deals to possibly start creating some of their own [viewing] platforms—in the long term… You know, Blizzard has shown, over the past several decades, that they create great experiences that map up really well with multiplayer PvP and eSports. They’re some of the original eSports. I think when you provide them with a super deep eSport infrastructure, they’ll start to really benefit.
[GZ] So it seems like this new division from Activision is going to be a support platform. And with something like Blizzard and their Battle.Net legacy, the older it gets, the more potential it has. So as the years go on, as they continue to have this support from Activision, Blizzard’s roster will see exponential growth over time.
[PW] Right, because they come in with all the things that make that so powerful. You know, there are people out there who will try a Blizzard product no matter what it is. [Laughs] All you have to say is Blizzard.
[GZ] Have to buy the next Blizzard game!
[PW] Yeah, I think anything they try to do from an IP perspective, they automatically have the built-in player base. That includes the exact type of people you want in eSports.
[GZ] What about the players? What do you think competitive gamers—the people who play in, attend or aspire to be in these tournaments, or even just Twitch streamers—can expect to change from this? What kind of opportunities do you think they’ll gain?
[PW] I think it depends on who you are. The more informed the consumer, the more they’ll be excited for this division or this league, but they’ll say, “Okay, show me what this means.” I think the professional players will take a wait-and-see approach with the support. With the mainstream players, it will just be providing them with more opportunities they can check out. I think it’s too early to say how well this will resonate with consumers; we don’t really know enough about the plans, other than the idea of the Call of Duty league showing these support changes that seem to be for the mainstream audience.
Activision’s recent push into eSports, spearheaded by an entirely new division of the company, came as no small shock. A nascent industry, eSports is still poorly defined; the only constant between its many tournament formats, leagues and genres is a love of top-level gaming. Otherwise it’s a logistical mess, one Activision seems hellbent on reining in, if only where their own properties are concerned. Indeed, eSports has never seen such a deliberate move from so large a publisher, and its implications are broad. To better understand them, I consulted with Patrick Walker, Vice President of Insights and Analytics at gaming research firm EEDAR.
[GameZone] Everyone seems to be asking the same question: Why now? Why do you think Activision made this move now? What’s the significance of the timing?
[Patrick Walker] I think it’s something they’ve been planning to do for a while. Within larger organizations, it takes a little while to spin something like this up. The creation of a division in a large organization with shareholders—that requires a lot of executive buy-in. And they’ve also brought in some heavy hitters.
[GZ] Yeah, they’ve got Steve Bornstein from ESPN and NFL, as well as Mike Sepso from MLG.
[PW] Right, so those are some pretty heavy hitters. That takes a while, to recruit these high-level executives. Those types of executive hires take a while because they tend to be the blueprint for a several-year roadmap. The big players tend to move more like a slow-moving ship, and the flip side of that is that, when they decide to go in a direction, they tend to bring a lot of weight. And I think that’s the exciting thing.
I think the why now is because eSports has had a really exciting year of growth. If you think about the easy thing for Activision, it’s to throw money at things. They have deep pockets. So if you look at Call of Duty tournaments over the years, they’ve had pretty high prize pools. What’s kind of been lacking—and I think one of the reasons Counter-Strike: Global Offensive has really taken off, in addition to other things like the legacy of the brand and the nature of the gameplay—has been the innovative sort of things that Valve has done to support their community.
Things like thinking about a good tournament format for viewing, creating incentives for viewers to get items in-game when they link their accounts and [watch tournaments]. They’ve really had a successful ESL tournament, in part because they were incentivizing viewership. And then the things [League of Legends creator Riot Games] has done outside of throwing money at tournaments. They treat their rules very seriously, rebalancing characters toward competitive play—all these things that go into supporting the eSports scene that are different than just putting money toward it.
I think because eSports has had a really good year in terms of viewership growth, also in terms of major television outlets starting to take note and dip their toe in the water, then also a lot a of venture capital coming in asking “What are the ways we can get on board?” Although it hasn’t led to super high revenue yet, you have a lot of innovation around betting sites and streaming sites popping up. I think the flurry of money coming in, the growth in viewership, has made the larger publishers realize that there’s a huge opportunity, if not necessarily from a revenue standpoint, definitely from an engagement standpoint.
As you have these “game as a service” business models becoming more important across, really, all the genres, even if you look at something as single-player focused as Skyrim. You know, you have this huge mod community that’s kept people playing that game for hundreds of thousands of hours. Games as a service and people being tied to your games for long periods of time: the realization that that’s important as a marketing tool is growing across these publishers.
I think that Activision realized they were a little bit behind in the game compared to Valve and Riot, definitely. But they have the type of content that is really great for eSports. You know, they have a major shooter franchise. Blizzard provides them with great competitive PC PvP games. They have Heroes of the Storm, they have Hearthstone, their own card game. They have one of the original eSports, Starcraft. They have all these IP, so that’s taken care of. So they’re in a good place to provide support and grow.
The other thing, and I think this is a long-term play and sort of my speculation, is that they have pretty big plans in terms of possibly developing [viewing] platforms. Because they’ve brought in [Steve Bornstein, who has television experience], which is the consumption part of the supply chain. They’ve brought in [Mike Sepsos, who has league experience], which is the league part of the supply chain. Companies always want to control as much of the supply chain as they can because they get more advertising dollars, but they also want to control the engagement. Think about how powerful Battle.Net has been for Blizzard to kind of distribute that IP.
[GZ] They’ve really built that legacy.
[PW] Yeah, they’ve built that legacy, and without having to give a kickback to [Valve through Steam]. Some companies have the power and horsepower to do it. EA can do it through Origin, Ubisoft can kind of do it with Uplay. And I think that’s what we’ll see in the eSports space. People with big horsepower will try and develop [viewing] platforms that give them more control of the ecosystem, but that always comes at the expense of [whether you can do it well] and not always leveraging the big, established players. But with that level of hires, and with them spinning up a whole division, that tells me they probably have pretty big plans down the road for the supply chain.
[GZ] And with Bornstein and Sepso coming in, some of their methods are obviously going to be applied here. What specifically do you think we should expect from their leadership. In terms of broadcasting, in terms of tournament structure, what should we expect to come from them in the next couple years?
[PW] It starts from what’s easier to spin up, then they’ll push up from there. One of the things I think you’ll see from the publisher leagues is trying to engage the amateur community, and I think this is going to be the bridge for PlayStation Plus League. These guys are really interested in not only fostering a competitive, high-level scene, but also diffusing that as much possible into their general player base.
Look at the announcement of the Call of Duty league. You already had a strong Call of Duty tournament scene with lots of money in it. I think the creation of the Call of Duty league is going to try and get more involvement from a larger cross-section of the player base, more levels of tournaments and these fan-type tournaments. I think that’s what you’ll initially see: more league support. But league support that’s not just driven around professionals, but goes into the broader player base of the game.
I think you’ll see deals made where guys like Bornstein are super valuable, you know, if you understand how television works and you’re able to go to these deals knowing the television perspective. Because ESPN, while they’re interested in the potential of eSports and bringing in a whole new live audience segment, this 18 to 24-year-old male that doesn’t watch a lot of sports, they’ve also going to very weary of what the mainstream guy who’s 50-years-old and watches baseball and lives in Iowa, they’re going to be concerned about what he thinks of the ESPN brand.
A lot of what they’ll do will be experiments. It’s not just how successful it is an as eSport, it’s how does the general consumer think about the ESPN brand as it happens. Then in the long term, as you’re looking to spin up experiences and your own consumption channels, guys like Bornstein are great. I think the short-term play is league support that brings in people that can participate, and the creation of deals with advertisers and networks. Because you are also starting to see mainstream advertisers come into this space, like Coke with League of Legends. I think there’s some kind of soy drink as well? [Laughs] That’s also part of the tipping point.
I think the publishers are getting involved because they realize how powerful [eSports] is as a marketing technique and an engagement technique. The money is starting to come because advertisers are starting to fall in line and realize there are deeper pockets in terms of revenue.
[GZ] There is a lot of talk about this promised land of financial growth within eSports. That because it is such a young industry, the people who can get in now will have a huge opportunity. To break that down, it seems to be split between publishers looking at eSports as a way to expand their audience and grow who their game reaches, and advertisers who look at the advertising and merchandising of it.
[PW] It’s actually kind of cool how it lines up so closely with traditional live sports. Which is why I think they’re trying to bring in people who are from that world, but also why it’s trying similar things like real-money fantasy. The other thing is that we’re seeing people come into that space trying to replicate that model. But when you look at the players and the different pieces, the publishers are coming in as a marketing opportunity rather than a revenue driver at this point. I think the leagues and platforms for distribution, they’re viewing it as an initial revenue opportunity and the advertisers are providing that revenue. I think there’s a pattern for growth there.
I think in the short term, the growth projections are somewhat moderate. But I think what’s really exciting is when you see these deep investments from big companies. There’s this recognition that the consumption patterns and buying patterns of a 15-year-old person are really hard to predict, and it’s scary because they don’t seem that interested in things like cable TV. [Laughs]
[GZ] What with more and more people looking to unplug.
[PW] And it’s been hard to figure out how to monetize them on the Internet, how do we monetize them on Netflix. When big companies see something that really excites this younger demographic and has a lot of live viewers and can somewhat fall into the model of current television consumption, that really excites them. So I think in the short- and medium-term, there will be revenue growth. But it won’t be that super explosive growth that you kind of see in other industries, something like mobile from 2008 to 2011. But I think as you start to move forward and the traditional ways of advertising start to fall away, if eSports has positioned itself as this thing where 15 to 30-year-old people are watching live and you can’t connect with that group through sports quite as much, that’s where it has the opportunity to really see super exponential revenue growth.
