Esports: A Closer Look
Sport Hiatus Blog Series Episode 5.
In a climate in which so many industries are experiencing economic hardship, esports is booming like never before. What is behind this growth, and what opportunities might be available to those looking to break into the market? For this week’s piece, I spoke with several leading executives to get their take on the industry’s development and thoughts around its future.
By Jordan Gertzman, CAA Sports - CAA Executive Search
Industry Trends
While the esports and gaming industries have experienced steady growth over the past five years, Covid-19 has proven to be quite the accelerant for the market. Millions of people forced to stay home have turned to the space for entertainment, as both viewers and players. Twitch, the market leader in esports content streaming, played host to nearly 1.4 million average concurrent viewers in February, an all-time high for the company at the time. Now? That number has eclipsed 2.5 million. Total hours watched reached 1.8 billion in April, having cleared 1 billion monthly hours only once previously. This is startling growth, but is it merely a sign of the times, or is it sustainable?
While numbers of this magnitude are impossible to maintain, the consensus around the industry is that there is clear growth in the market that should be sustained. One senior streaming executive stated: “Major advertisers are seeing the value of the industry now, more than ever. We are seeing brands put more money into streaming advertising that was previously allocated elsewhere. Many are entering the market now for the first time because they see the increase in viewership and the engagement levels of this audience, and I think we will see quite a bit of carry over once brands see the return on their investment.” Given that insight, it does seem likely that overall revenue will continue to climb from the boost in sponsorship and advertising.
The biggest question at the heart of viewership growth is the source – Is the esports market bigger, or are existing fans just consuming more? One senior team marketing executive weighed in: “I don’t see this causing an overnight increase in esports fans, but I do think quarantine has boosted existing habits. There are many out there that are both traditional sports and esports fans who are now watching more esports than they ever did because live sports are gone. There are also many consumers who have turned to esports as a replacement for live sports, but are likely going to resume their normal habits once sports return. I don’t see a ton of conversion happening amongst that population, but I do think that when viewership does bottom out, it will still be higher than before.”
Along with viewership growth, gaming participation has also significantly increased. According to the NPD Group, all video game categories experienced double-digit sales increases in March, with hardware (console) sales increasing 63%. This, too, is a clear reflection of consumers looking for alternative ways to entertain themselves, with people of all ages finding options right for them. One individual I spoke with described how widespread this adoption has been: “You’re not just seeing demand from kids and 20 somethings who are alone and bored in their apartments. I got a call the other day from my 70-year-old neighbor who asked me what Xbox games her and her husband should be playing.” Consumers are also using video games as a primary source for connection. NPR recommended multi-player gaming as an outlet for children to socialize with each other during quarantine and continue positive social development. Whether or not frequent gaming continues following quarantine remains to be seen, but console providers and studios will continue to develop offerings at a high clip as long as demand keeps up.
Esports and the Talent Market
Given esports’ success relative to the rest of the sport and entertainment world, there is clear intrigue among available talent on the status of the hiring market. Are esports teams and publishers in sudden need of people right now given the influx of popularity? If so, what areas might be in the most demand, and from where do these companies look for experience?
Based on feedback from clients and connections in the space, there is generally high demand for talent, with recruiting activity continuing virtually. Commercially driven roles seem to be a priority, particularly at the league and team levels. Given the sudden increase in viewership of live events online, teams and publishers want to take advantage of the moment and maximize the value of their audience, requiring proven sponsorship and licensing executives to do so. Secondary to commercial talent demand is that of the content space. As one executive described: “Esports teams operate more like lifestyle brands over traditional properties. Fans love engaging with their favorite teams over digital platforms, and the teams that are best in this area have robust content teams. Engagement is higher than ever, and the spotlight is on these teams to deliver interesting content. If teams don’t have a Chief Content Officer now, they will soon. That is definitely a role that should be in high demand right now over many others.”
For those individuals suddenly looking for opportunities in wake of the pandemic, esports has been an area of high interest. A question that many of these individuals have, though, is whether or not previous esports experience or thorough industry knowledge is required to be hired. One senior commercial executive believes in the value of bringing people from outside the industry into the fold: “I think the industry is going through a clear maturation point right now from a business perspective. Five years ago, you had all these young gamers start teams, but they didn’t have a business plan. You see now with League of Legends, the Call of Duty League and Overwatch, owners are spending $20-30M to start a team. You need people who actually have business experience to run these operations. On the sponsorship side, there are so many non-endemic brands who have not done any work in the space yet. That’s largely because a Head of Sponsorship would rather do a deal with a seasoned seller they have known for 15-20 years than someone they don’t, and so many esports sellers never sold sponsorship before taking on their current roles, so they don’t have the right relationships. I’d much rather bring someone on has the rolodex and can get a meeting with a brand, over someone who maybe has sold for a year or two in the esports space.” This individual did go on to say, however, that there is still a need for people on the marketing and creative side of the organization who know esports well. “I wouldn’t feel comfortable hiring someone who knew nothing about esports without having people on the marketing side who do and are capable of developing good ideas on how to bring partnerships to life with the assets we have in place. Authenticity is still king, so we can’t just have a ‘fake it ‘til you make it’ attitude.”
The sentiment that esports experience is not required to break in was shared consistently among those polled, with the caveat that many thought it important to have genuine passion for the space. One individual described hiring in this industry “incredibly difficult” as he is constantly working to find a balance within the company of hardcore gamers who intimately know the space with people who bring a stronger technical skillset to the posts they are in. This person said that in a perfect world, every candidate would have the passion of a gamer combined with the perfect skillset, but given the infancy of the industry, those people are few and far between, particularly for senior level roles requiring more experience. Hiring managers advised that trying to fake a passion for this space is not wise and will not get you very far in a process trying to do so. Far better instead to demonstrate why the space is of genuine interest and lay out exactly what value you can add by joining the organization.
What Does the Future Hold?
The esports industry is certainly enjoying quite a bit of success, but what does this business look like for the duration of lockdown and once it ends? On the topic of competition, one leading executive out of Asia believes the issue of fair play will be center stage soon. Describing the challenge of holding exclusively online events, this individual called it “incredibly hard” to fairly regulate matches and ensure the integrity of competition. “Some companies like Riot have committed to sending referees to the physical locations where teams are playing, but given the issues around exposure and staffing, that does not seem sustainable. Integrity has never been a massive issue with live events, as regulators could easily ensure the tech teams were using were standard and up to code. Now, that’s not so easy, so I think you will see publishers invest heavily in anti-cheat systems, either recruiting specialists to regulate it in-house or using 3rd parties. It might provide an opportunity for new talent to come in who have strong backgrounds in compliance and security.”
A major topic of conversation was around traditional leagues’ involvement in esports and their commitment moving forward. With the emerging popularity of NBA 2K and e-Formula 1, it will be interesting to see whether these leagues find legitimate value in this market, or whether they view it as a fun side project that is filling the void of their primary offerings. One person I spoke with felt strongly that league involvement in esports is here to say, citing that: “Well before Covid-19, leagues like the NBA and Formula 1 viewed esports as a long-term initiative. They want to grow their respective audiences and see esports as a way to capture younger fans who may not be a fan of their sport already. Projections are that esports will start off as a very small percentage of the total fan base, but they are working on 10+ year growth plans, and I think those plans have only accelerated because of the pandemic. There very well might be a drop off in viewership in products like 2K, but you have to assume viewership will still be higher than it was before when it levels out.” Another saw this as an obvious pathway for leagues to get involved if that hadn’t thought much about it already: “If any league was on the fence about getting into esports, they have to be having much more serious conversations now and will start to make some sizeable investments in the space. The smartest leagues will be the ones who get involved with esports that aren’t just the online equivalent of their own sport. The NFL did a fantastic activation with Twitch during the Super Bowl, holding a Fortnite tournament with 240 professional athletes. They didn’t settle for a madden tournament but chose the game that their athletes are playing and has much higher engagement levels with young audiences. More leagues should follow that path if they want to see real success.”
As gaming participation grows, so too will the marketing dollars spent. One executive believes that in-game advertising is about to experience massive growth, as brands see just how much time consumers are spending playing these games. “Epic Games just announced $680M in revenue, and Fortnite is a free game. Think about where all that money is coming from now, and where they will continue to find ad dollars. Kids are spending so much time in the game, they can easily take that viewership to brands and say ‘Here’s your audience. They’re engaged and willing to spend.’ The esports tidal wave was already coming, and I think the wave just doubled in size. It’s exciting to think about where this can go.”
Esports has obviously experienced incredible growth, and there seems to be significant opportunity for individuals looking to break in. While it remains unclear how much sustained growth the industry experiences when people resume their normal lives, consumer habits are being changed every day it remains, and it seems likely that there will be tangible growth in the market following the pandemic. Organizations will continue to grow, new businesses will emerge, and top talent will begin to take high-profile esports positions, understanding their potential personal impact. It is all incredibly fascinating to watch, and I look forward to seeing how the industry develops over the next several months.
Episode 4: https://www.sporthiatus.com/featured-stories/staying-productive-at-homenbsp
Episode 3:
https://www.sporthiatus.com/featured-stories/hiring-and-onboarding-in-the-current-environment
Episode 2:
Episode 1:
