The rise and fall of the Esports Industry - February 2025

Summary

In this master class, Professor John Pierce from Arizona State University provides a comprehensive overview of the Esports industry's explosive growth and subsequent challenges. Through in-depth discussion, Pierce explains how Esports transitioned from a burgeoning industry propelled by a global audience and digital platforms, to facing significant sustainability issues due to reliance on sponsorships and challenges in popularity. The session delves into lessons learned from the rise and fall of the Overwatch League and examines future opportunities and the potential for Esports to integrate emerging technologies and expand its global reach, including efforts to overcome gender disparities in the industry.

Highlights

• Esports soared in popularity with digital natives but struggled with traditional media adaptation. 🌎
• Professor Pierce dissects why the Overwatch League ceased operations, pointing to game popularity and business models. 🕹️
• The potential of VR to revolutionize spectator experiences in gaming was discussed enthusiastically. 🎮
• Significant growth opportunities exist in diversifying Esports participation to include more women. 👩‍🎮
• The advent of Esports in the Olympics, focusing on simulated games, marks a notable shift. 🏆

Key Takeaways

• Esports rapidly grew into a global phenomenon, but faced setbacks due to over-reliance on sponsorships. 📉
• Overwatch League's collapse highlighted the risks in Esports tied to game popularity and economic models. 🚫
• Esports has potential for innovation with virtual reality and expanded inclusivity for women gamers. 🌟
• The COVID-19 pandemic initially boosted Esports before exposing the industry’s unsustainable models. 😷
• Future growth in Esports may align more with lifestyle branding and mobile competitions. 📱

Overview

The master class conducted by Professor Pierce uncovers the hidden dynamics of the fast-evolving Esports world. Initially, Esports captivated global audiences with its promise of vast digital engagement and potential market growth. However, as Pierce outlines, the industry’s rapid expansion was not without pitfalls, exposing critical over-reliance on sponsorships and competitive inconsistency among players and games.

Professor Pierce recounts the cautionary tale of the Overwatch League, once a beacon of Esports success, now a lesson in volatility. Factors such as fluctuating game popularity, logistical challenges, and economic misalignment are primary culprits in its downfall. The narrative highlights a need for strategic adjustments in how Esports ventures can sustainably evolve.

Looking to the future, opportunities within Esports remain abundant. From the integration of cutting-edge technology like VR to a more inclusive approach for female gamers, the industry has avenues for significant reform and investment. Pierce’s insights stress the pivot towards strategic brand management, mobile gaming proliferation, and fostering a diverse gaming community as vital for future resilience.

Chapters

• 00:00 - 01:30: Introduction The Introduction chapter outlines the purpose of the ASU master classes, which is to connect students globally from allied universities with researchers and professors at Arizona State University. This platform allows students to learn remotely from anywhere.
• 01:30 - 03:30: Speaker Introduction and Presentation Outline The chapter titled 'Speaker Introduction and Presentation Outline' opens with a note of gratitude towards Sintana Education for sponsoring the lecture and providing Spanish translation. The focus of the master class is on Esports, with Professor Pierce presenting for approximately 30 minutes. Attendees are encouraged to submit their questions through the Q&A box for a subsequent discussion.
• 03:30 - 05:30: Background of Presenter The chapter provides an introduction to John Pierce, a professor in the department of marketing at the W.P. Carey School of Business, Arizona State University. The session is recorded for future access by professors, and there is a provision for Spanish translation by clicking a globe icon. The welcome sets the stage for Professor Pierce's presentation.
• 05:30 - 10:00: Esports Industry Overview The chapter provides an introduction to the esports industry, highlighting the speaker's passion for video gaming and esports. It notes the significant moment in esports history that occurred in 2018, which is described as 'The Pinnacle of Esports.' The chapter sets the stage for exploring the exciting and dynamic world of esports.
• 10:00 - 14:00: Esports Ecosystem and Categories The chapter discusses the evolution and challenges within the esports ecosystem, exemplified by the OverWatch League finals held at the Barkley Center in Brooklyn, New York. The event was initially a success, drawing a sold-out crowd, but the league eventually ceased operations in 20124. This example highlights a broader lesson in business that success can obscure potential challenges and inhibit learning.
• 14:00 - 16:30: Statistics and Market Comparison The chapter, titled 'Statistics and Market Comparison,' appears to focus on learning lessons from experiences, particularly when things do not go well. The transcript provides a brief career background of a speaker, who has experience in traditional sports and entertainment and teaches part-time at ASU. The speaker expresses enthusiasm about being part of the Sun Devil community. The chapter likely explores insights and lessons applicable to statistics and market comparisons, leveraging the speaker's professional background.
• 16:30 - 19:00: US Market Insights The chapter 'US Market Insights' introduces the speaker's background in traditional sports and entertainment, particularly referring to their extensive experience at the United States Olympic Committee. Following this, the chapter goes on to describe the speaker's transition into the video game industry, where they founded an agency focused on this space eight and a half years ago.
• 19:00 - 23:00: Investment and Industry Dynamics The chapter titled 'Investment and Industry Dynamics' introduces the concept of Player Two, an initiative by a marketing agency that operates within the video game industry. The agency is focused on ensuring that their clients act as 'Player One', the primary participant in video games, by linking brands with game publishers and intellectual property rights holders. This collaboration aims to create strong partnerships within the video game market.
• 23:00 - 27:00: Esports During COVID-19 and Revenue Models The chapter discusses the impact of the COVID-19 pandemic on esports and various revenue models emerging in the industry. It highlights recent collaborations and projects, such as the launch of Paddington Mission Marmalade in Roblox for Studio Canal and partnerships with Hello Kitty in different video games. The speaker is involved in business ventures related to these projects and also teaches at ASU.
• 27:00 - 30:00: Challenges and Lessons from the Overwatch League The chapter discusses the broad landscape of the video game industry, starting with a definition that includes all kinds of video game interactions, from casual mobile games like Candy Crush to watching others play games.
• 30:00 - 33:00: Case Studies: Financial Insights of Esports Teams The chapter titled 'Case Studies: Financial Insights of Esports Teams' explores the financial aspects of the Esports industry. It discusses the various stakeholders involved, including professional players, their supporters, and the larger gaming industry. A key point highlighted is the scope of the industry, represented as a large circle valued at $184 billion, indicating the significant economic impact of Esports globally.
• 33:00 - 36:00: Competitiveness of the Esports Industry The esports industry has experienced remarkable growth, evolving from being virtually nonexistent 10 years ago to becoming a $1 billion industry today. Although this figure might seem modest compared to the $9.3 billion streaming industry, it signifies substantial development and competitiveness within the broader gaming sector.
• 36:00 - 39:00: Future Outlook and Positive Aspects The chapter begins with a discussion on the nature of Esports, emphasizing that not every video game falls under the Esports category. Examples such as Candy Crush and Guitar Hero are highlighted as games without competitive Esports events. The most popular Esports titles are categorized into six distinct types.
• 39:00 - 43:00: Q&A Introduction and Badges Information This chapter begins with an introduction to Q&A and the concept of badges. It then explains various gaming genres, starting with MOBA (Multiplayer Online Battle Arena), describing it as similar to Capture the Flag style games. The chapter also briefly touches upon fighting and sports simulation games.
• 43:00 - 45:00: Impact of Future Games on Esports The chapter discusses the potential impact of future games on the esports industry. It mentions popular sports simulation games like Football FC 24, previously known as FIFA, developed by EA Sports, along with Madden NFL and NBA 2K. It briefly references Rocket League, highlighting its unique concept of playing soccer with cars on an indoor pitch. Additionally, the chapter touches on first-person shooters, describing them as battle games involving guns and strategic objectives.
• 45:00 - 47:00: Sustainability of Esports Events The chapter titled 'Sustainability of Esports Events' delves into various genres of video games that are prominent in the esports scene, particularly Battle Royale games such as Fortnite, PUBG, and Apex Legends. These games are characterized by large numbers of individual competitors, often 50 to 100, vying for victory in a single event. Only one player emerges as the winner in such formats. The chapter aims to provide an overview of the esports ecosystem, likely starting from foundational elements and expanding into the complexities of organizing and maintaining sustainable esports events.
• 47:00 - 50:00: Esports Landscape and Opportunities The chapter titled 'Esports Landscape and Opportunities' highlights the critical role of Publishers in the esports ecosystem. Publishers are described as the creators of video games and are considered the most significant part of the esports industry. The importance of Publishers is emphasized by the analogy that if the esports map were drawn to scale, Publishers would occupy about three-fourths of it.
• 50:00 - 52:30: Future of Esports Competitions The chapter discusses the contrast between traditional sports and esports, focusing on the ownership of games. In traditional sports, like football, no one owns the game itself, allowing people to play and modify rules freely. However, in esports, corporate entities own the games, which can lead to different levels of control and involvement by these companies. Some companies may adopt a hands-off approach, while others might be more involved. The future of esports competitions could be largely influenced by how these corporate entities choose to manage their ownership rights.
• 52:30 - 55:00: Chess in Esports The chapter discusses the differences in approach to rules and changes between traditional sports like football and esports. It highlights how companies like Valve and Riot have different levels of control over their games, similar to how football would be if its rules were suddenly changed dramatically by owners.
• 55:00 - 58:00: Streaming Market and Opportunities The chapter 'Streaming Market and Opportunities' discusses the flexibility and control that publishers have over their video games, enabling changes to cater to average players rather than just professionals. It also touches on the various platforms for gaming and the competitive teams involved.
• 58:00 - 62:00: Esports in Latin America The chapter discusses the structure of esports teams in Latin America, drawing a parallel with traditional sports clubs. It uses Fanatic, an esports organization, as an example, highlighting that they have 13 teams competing across different esports titles. The chapter makes an analogy by comparing it to FC Barcelona having 13 different teams competing in different major sports leagues around the world.
• 62:00 - 65:00: Esports in the Olympics The chapter discusses the organization of Esports, highlighting how different games have their own leagues such as the Valorant Champions Tour for Valorant and the LTA for League of Legends. It also touches on the platforms where Esports can be viewed, with Twitch being the primary streaming service, followed by YouTube and X/Twitter.
• 65:00 - 67:00: Advice for Aspiring Pro League Players This chapter discusses the various competitive events for aspiring professional league players, highlighting how these events are distinct from leagues. These events are comparable to traditional sports competitions like golf tournaments, tennis matches, swim meets, or track and field events, typically occurring over a weekend or a week and are place and time dependent.
• 67:00 - 69:00: Player Salaries and Industry Challenges This chapter discusses the interrelation between player salaries and industry challenges within the gaming sector. It emphasizes the critical role of brand sponsorships in supporting gaming activities. The presence of a large audience that engages with gaming content attracts these sponsors. Additionally, the chapter highlights the significance of numerical data for marketers, noting that the gaming industry was valued at 84 billion in 2023 and is expected to grow further.
• 69:00 - 72:00: Challenges and Risks in the Esports Industry The esports industry is experiencing significant growth and is projected to reach 206 billion within two years. Geographically, almost half of this growth (46%) is expected to come from the Asia Pacific region. Meanwhile, North America contributes 27% of this growth. Latin America is showing a growth rate of 5%, and the combined regions of Europe and EMA are also part of this expansion. This information highlights the geographical distribution of the esports market's growth and emphasizes the industry’s global expansion.
• 72:00 - 75:00: Strategies for Growing the Esports Industry The chapter "Strategies for Growing the Esports Industry" discusses the economic impact and growth potential of the gaming sector compared to other entertainment industries. It highlights that the gaming industry, including iconic characters like Mario and Luigi, is valued at 184 billion, surpassing the movies and entertainment industry's 95 billion and the music industry's 92 billion. The comparison provides insight into the immense growth potential and current standing of the gaming industry within the broader entertainment landscape.
• 75:00 - 77:00: Promoting Female Participation in Esports This chapter discusses the significant size and impact of the gaming industry, suggesting it is as large as the music and movie industries combined. The focus is on promoting female participation in esports, highlighting the need for increased representation and opportunities for women in this rapidly growing field. The chapter likely explores strategies and initiatives to encourage more female gamers to engage with esports, aiming to bridge the gender gap and create a more inclusive environment.
• 77:00 - 81:00: Esports Industry Growth and Future Innovations The chapter discusses the growing cultural attention towards the esports industry, an attention that traditionally has been associated with music, movies, and other entertainment. It highlights the shift in perception and increasing popularity of esports, especially focusing on data from the United States, which has a population of approximately 340 million. The chapter likely continues to explore the ramifications of this growth and what innovations might be on the horizon for the esports industry.
• 81:00 - 86:00: Webinar Conclusion and Future Event Promotion In the chapter titled "Webinar Conclusion and Future Event Promotion," statistical data is presented to highlight the growing trend of video game engagement in the US. Approximately 61% of the US population play video games for an hour a week. The demographic study from 2004 to the present indicates that the average age of video game players has increased from 29 to 36, suggesting that either older individuals are increasingly engaging with video games or the community of players is aging along with their long-term interest in gaming.

The rise and fall of the Esports Industry - February 2025 Transcription

• 00:00 - 00:30 okay everyone we will go ahead and get started so um the goal of the ASU master classes is to connect students from our alliance partner universities around the world to researchers and professors from Arizona State University so you can learn from them no matter where where you are a
• 00:30 - 01:00 sincere thank you to sintana education for their sponsorship of these lectures and to the for providing Spanish translation in today's master class we are talking about Esports and what our presenter Professor Pierce will speak for about 30 minutes and then we will have time for questions please use the Q&A box to submit your questions this lecture is
• 01:00 - 01:30 being recorded and will be available to your professors later remember if you want to hear this webinar in Spanish just click the globe icon now let's welcome John Pierce who is a professor in the department of marketing at the wp carry School of Business at Arizona State University thanks again for joining us today Professor the rest of the time is yours wonderful thank you for inviting
• 01:30 - 02:00 me it's such a pleasure to be uh part of this uh presentation this morning I do uh uh love to speak about video gaming and Esports and to share this crazy world with others so thank you for this uh opportunity the picture you see on your screen is a uh is the what I would call The Pinnacle of uh Esports that occurred in uh 2018
• 02:00 - 02:30 and it was at the Barkley Center in uh Brooklyn New York a soldout crowd uh for the uh inaugural OverWatch League finals and I'll tell you more about it later but a spoiler alert uh in 20124 the league ceased operations uh so it went from this to to not having operations so sometimes when in business when things are going really well it can be hard to learn
• 02:30 - 03:00 um about things but when when things uh don't go well it can be much easier to learn lessons so we're going to learn some lessons from this today so just a quick background for me I have uh my career has been in uh traditional sports and entertainment um and I've been teaching at ASU part-time since 2016 I'm thrilled to be part of the sundevil community
• 03:00 - 03:30 community and uh but my formative uh education and uh work experience were in traditional Sports and and entertainment including uh eight and a half years at the United States uh Olympic Committee so uh eight and a half years ago I started an agency that works in the uh video game Space uh uh called player
• 03:30 - 04:00 two uh player we called it player two because uh you know if you've ever played a video game it takes two people to play most games and there's player one and player two and we wanted our clients to be player one and uh we work we're a marketing agency that works solely in the video game space and uh we connect uh brands with uh game Publishers and uh intellectual property rights holders with game publishers
• 04:00 - 04:30 so as you see on the screen here uh we we recently launched uh for Studio Canal uh Paddington Mission marmalade in Roblox uh We've also done some really fun collaborations with Hello Kitty uh into different video games so that's what we uh do as a business and then I teach at ASU um uh as well so what I want to talk about
• 04:30 - 05:00 today is Esports but in order to understand uh Esports it's important to start with like well where does it fit so if I start here on the left uh anybody who plays video games uh is is part of the video game industry and that includes you know playing Candy Crush while you're waiting in line at the grocery store uh people who watch other people
• 05:00 - 05:30 play video games or part of the industry and then the people Esports narrowly defined as people who compete for trophies and or prize pools uh are the Esports industry and of course the people who watch and support uh those players and to give you a sense of the scope of it the uh gaming industry this kind of broad uh light blue circle is $184
• 05:30 - 06:00 billion industry and in a minute we'll put it into context with other Industries the streaming industry the people who watch other people play video games at 9.3 and then Esports is this1 billion doll industry which in comparison doesn't sound like a lot but 10 years ago was was next to zero um and if you think of the the gaming industry as a
• 06:00 - 06:30 spere uh Esports kind of operates as the tip of the spere so not every video game is an esport game so for example I'm not aware of any competitive events for Candy Crush or Guitar Hero um however uh the most popular Esports titles are divided into these six categories is
• 06:30 - 07:00 roughly uh starting at the top left MOA is an acronym for multiplayer online battle arena so these are sort of like Capture the Flag style games uh fighting games are exactly what they sound like to people uh in a uh you know in a in a fighting environment uh sports games are actually what I would call Sports simulation games this includes the the uh
• 07:00 - 07:30 football FC 24 game from EA Sports it used to be called FIFA um Madden in the NFL NBA 2K uh rocket League doesn't really fit here but I don't know where else to put it it's a game where uh soccer played by cars on indoor pitch uh firstperson Shooters are exactly what they sound like these are um uh battle games that include guns and some sort of objective strategy games
• 07:30 - 08:00 are typically individual games and then Battle Royale like fortnite pubg and Apex Legends uh you know 50 or 100 people compete uh at any given time and only one person will win so these are the most popular genres of video games so and to give you a sense of the the entire Esports ecosystem we typically like on a chart like this you would start at
• 08:00 - 08:30 1:00 but today we're going to start at 7 o'cl because the Publishers are the most important part of this ecosystem uh the Publishers are the people who make the video games and I I suppose if I if this map was drawn to scale the Publishers would take up about 34s of the map so if you think about like the
• 08:30 - 09:00 uh context of traditional Sports uh no one owns the the game of football you could play football in any pitch anywhere in the world uh and make up your own rules and not have to pay anybody to do that um but in Esports the games that their players are playing are owned by corporate entities some of whom take a hands-off
• 09:00 - 09:30 approach like valve and others take a very Hands-On approach like Riot so uh imagine in a in a football game if they uh decided that the uh the owners of of football if there were any uh decided to change the rules such that the uh halves were only 25 minutes instead of 45 minutes or they decided to change the the shape of the of the goals instead of
• 09:30 - 10:00 being these rectangular shapes to more of a pentagonal shape that's what happens in eorts where the Publishers can change the rules of these video games whenever they want to to satisfy the needs of the average player base with the needs of the of the professionals taking a back seat with that said if you go around there's platforms that people play the games on to be discovered you have teams uh that compete and and uh
• 10:00 - 10:30 typically uh teams will have uh upwards of uh fanatic for example has 13 fanatic teams that play across 13 different esport titles so imagine if uh FC Barcelona uh imagine if Barca had 13 different barcas that competed in uh Major League Soccer the NBA the National Football League the Australian football League La Liga right um that's what
• 10:30 - 11:00 happens in Esports you have leagues each game typically has their own league so the valerant champions tour is valerant the LTA is the americ league for League of Legends the channels that uh consumers watch these on are typically mostly on Twitch this purple icon here uh some on YouTube some on X and Twitter but mostly on Twitch which is a live streaming
• 11:00 - 11:30 platform uh and then finally we have events that are uh different than leagues because they're typically competed like over a weekend or a week so think of a a parallel and traditional Sports it would be a golf event or a tennis event or a swim meet or a track and field event uh typically you know place and time dependent over a week or a long weekend and then of of course uh nothing
• 11:30 - 12:00 happens without the brands who support all of this activity through sponsorship and the only reason the brands are interested is because there's so many consumers that are watching and paying attention so let's look at the numbers because uh as marketers we want to look at numbers so you can see that the the games industry in 2023 as I said earlier was uh 18 84 billion it's predicted to grow
• 12:00 - 12:30 to almost 206 billion in the next two years and you can see where geographically where that growth is coming from in 20123 almost half of it 46% comes from Asia Pacific uh North America accounts for 27% Latin America growing at 5% uh Europe and EMA combined at
• 12:30 - 13:00 22% and then well how does this compare to other Industries so as you can see here gaming same number 184 billion there's Mario and Luigi but what about movies and entertainment oh wow 95 billion and then music 92 billion so movies and entertainment includes film releases streaming
• 13:00 - 13:30 services music includes downloads streaming and touring so if I'm doing the math and I add music and movies and entertainment together I come up with a number just slightly bigger than the gaming industry so you could make an argument that gaming is as big as in movies and the music industry combined and yet uh it doesn't get the same
• 13:30 - 14:00 cultural attention that where it hasn't anyway that music and movies and entertainment get but as you can see uh as we as we'll talk about soon that's changing so let's look at just the US uh the US has a population of approximately 340 million people of which
• 14:00 - 14:30 19.6 play video games which equates to about 61% of the US population report playing video games an hour a week and you can see the uh the AG is growing so in 20 2004 the average player was 29 years old 20 years later the average player is 36 so that says see one of two things that older people are discovering video games games which I think is
• 14:30 - 15:00 unlikely um and or what it says is that the people who started playing video games as a kid continue to play video games as an adult and then if you look at the people who follow Esports 60% of uh the esport audience are made up of Millennials and gen
• 15:00 - 15:30 Z and to put that in comparison we uh studied other sports so mixed martial arts 40% of the audience is Millennial and gen Z we call this international soccer but in the US that would include the Premier League La Liga you know all of the uh World Cup all of those types of events Action Sports Major League Soccer NBA NFL the National Hockey
• 15:30 - 16:00 League things like baseball uh the Olympics you know if the screen kind of went off another 10 feet you might find the Olympics uh and baseball down there so that's why brands are interested because so many young people are interested in watching other people compete so that's I wanted to give a like spend the first uh 10 or 15 minutes just giving a background of like what Esports is and how big it is and how it fits
• 16:00 - 16:30 now I like to show this slide because people are like well why if it's such a small industry why are so many people in why were so many people investing in it and the idea is in Investments you know the the same reason people invest in things oftentimes is the same reason babies you know put everything in their mouth uh psychologists say that that happens because the babies want to understand
• 16:30 - 17:00 how it works what its properties are what it feels like what its texture is well the same thing on the investment side you know we invest in in Esports because it's the only way to see how it actually works now some investors uh we're going to talk about the rise of investment and and the fall but there were some investors who were skeptical about Esports um and one of them was the owner of the
• 17:00 - 17:30 Dallas Mavericks and Shark Tank uh host Mark cubin and his point I think is worth studying because he said that um why would you in basically why would you invest in Esports if you don't own the IP which is a acronym for short abbreviation for intellectual property right if you don't own uh the
• 17:30 - 18:00 intellectual property of the game then why would you invest in a team who is at the whim of one of the game Publishers he went on to say that that um there's a the hype that was involved in the from the late teens around Esports was because um people were hoping to get on the ground floor and that valuations were
• 18:00 - 18:30 skyrocketing um but that the industry itself wasn't fundamentally sound because the teams didn't own the intellectual property um and if you did have a team that was doing well that was great but it made it hard to scale hard to grow uh Beyond just that one team uh and then finally he gives an example of Real Madrid who was building a brand outside of what
• 18:30 - 19:00 they're known for in in in football um but that was a a rare success case um and that the one of the challenges in orts is that 50% of the audiences in Asia where it's harder for us teams to build a base and harder for us companies like sponsors uh many US companies don't do business in Asia so let's talk about about originally why it was so attractive for
• 19:00 - 19:30 investors so if you look on the left on the left side of your screen you can see well I mean hey it's a it's an actual Global audience I mean in in baseball we have the World Series but it's not really a World Series it's a US and Canada series uh you digitally native uh with established viewing platforms like twitch it was an opportunity to capture younger uh audiences oh by the way there's already
• 19:30 - 20:00 high-profile investors so you should do that too um they suggested that there was going to be growing linear media rights that means media rights from uh traditional broadcast Outlets like NBC or CBS or ESPN in the US uh and that there was going to be and that there were Major Brands involved the challenges that that uh investors saw at the time was by the way it's like there's you know hundreds of games
• 20:00 - 20:30 that are competed there's a lot of content out there this was super interesting to me when I first studied this was that they said one of the challenges was the the players were not unionized and I thought at when I first saw this I was like oh isn't that a benefit for ownership if in most businesses if the if the workers are not unionized that's good for ownership in the sports world it's uh
• 20:30 - 21:00 it's not beneficial because there's uh nobody to negotiate the terms of employment with meaning if uh you wanted to have a draft of players or you wanted to create a salary cap to keep salaries at a reasonable level there's nobody to negotiate with to do that and then if as an ownership group if you Institute that
• 21:00 - 21:30 kind of those kinds of rules then you can be sued by the federal government for for not for not having the proper Trade Practices so there was a real downside uh not so much not uh a lot of governance and the governance that was there was was different depending on who the game developer was um and that this last one turned out to be pretty true troubl drawing casual fan so if you
• 21:30 - 22:00 don't watch or play video games why would you tune in so what ended up happening was when covid came so Esports was on this rapid Crescendo and then during covid it was Esports became the only uh entertainment option in for people looking for competition uh F1 drivers uh started doing simulation races online Premier
• 22:00 - 22:30 League stars were competing in FIFA now known as eafc and all of a sudden Esports was literally at the top of the world um all of the brands couldn't activate in traditional Sports decided to activate an orts but then quickly things turned uh and in part the reason they turned was because the Esports Revenue model was uh highly reliant on
• 22:30 - 23:00 sponsorship you can see here the green line on the left is sponsorship compared to media rights fees from the different game Publishers merchandise and tickets Etc and what ended up happening was when Brands started to struggle during covid uh they you know started to lay people off reduce their spending well the first thing to go was things like
• 23:00 - 23:30 Esports um and then they started to look harder at okay well if we're going to invest in Esports what are the actual viewership what are the returns and they started looking harder at it and make making it deciding it was not as clear that it was successful for them and then they also discovered other platforms which be which were on the rise at the time especially Tik Tok where they Brands felt they could reach people people uh just as well and
• 23:30 - 24:00 cheaper and then the Venture Capital firms who supplied most of the investment during this time realized that uh that if the ship if the if the water wasn't Rising it was sinking and then uh decided they wanted their money out as well so other things were happening in the macro environment uh there was some misconceptions about
• 24:00 - 24:30 Esports and gaming that it's bad for society that it's only for kids it's antisocial right as something became bigger there were more critics who said hey is this really what we want is this a good thing um you know the the supply chain pressure interest rates inflation cost of living all of these things came together to make it harder for Brands to invest um which then caused a problem because they were overly reliant on
• 24:30 - 25:00 sponsorship so the OverWatch League this is the slide I showed you at the beginning with the uh with the blue screen and the Full Arena at the Barkley Center so they ceased operations in uh just six months ago and there's a lot to learn but one of the things that we there's six things we learned that cause the challenges of That League would imagine if the premier League uh ceased to
• 25:00 - 25:30 exist uh it was that kind of shock to the system so the first was the game itself became less popular uh the original OverWatch shifted to OverWatch 2 and people just stopped playing the game as much they made a decision to uh broadcast their matches exclusively on YouTube which uh caused you know challenges for people who were used to watching on
• 25:30 - 26:00 Twitch covid-19 um this was the OverWatch League was the first League that decided that they wanted to have a city-based model uh if you remember the slides I showed you earlier with fanatic and Immortals and some of the other teams you notice that they didn't have a city name next to it wasn't you know uh Madrid or Barcelona it was fanatic or or uh Immortals in the OverWatch League they decided to have a city-based model so you had the San Francisco
• 26:00 - 26:30 shock uh you know you had the Shanghai dragons uh the Paris rain and covid uh prevented the city-based model from launching uh because uh they just like traditional Sports they were no longer able to host events um this was the first League to have teams in multiple countries and multiple continents so we had uh teams
• 26:30 - 27:00 across uh North America South America uh Europe and Asia um but the international C nature of That League caused travel problems uh server problems uh you know people that were during covid you know the London team had five Korean players who decided they wanted to go back to Korea instead of hanging out in London during covid and then because it was a North American
• 27:00 - 27:30 base League there weren't enough good North American players and then finally to you know the the when things are going bad they get worse the the or the the uh overseeing company of the OverWatch leag Blizzard Entertainment had a a corporate wide sexual harassment Scandal which gave uh Brands uh significant pause and most of them pulled out of their sponsorship
• 27:30 - 28:00 so I think we're doing we're I have a couple more minutes right so I wanted to look and show uh three team examples um one is uh of their financial so one is fazeclan many of you probably know who they are um they're a a Lifestyle brand they compete in Esports um they believe that they sit kind of in the middle of uh traditional media New Media uh Global celebrity and
• 28:00 - 28:30 traditional Sports um you know they have some of the most recognizable uh Brands uh you know in terms of social media following uh and they were believing they could monetize through you know prize pools sponsorship their content consumer products and then replicating some of their business models in other markets around the world um you know they believed that
• 28:30 - 29:00 they were going to be able to grow from digital channels into more linear channels uh and that they were going to grow into the number of games they competed in but when you look at their numbers so this is the most Esports teams are private they uh were a public company so we had access to their financials and you can see see that uh for the thre month this is a
• 29:00 - 29:30 three-month window so on the right you'll see a six month for six months uh they were losing $28 million over six-month window in 2023 so you could say that a $56 million loss for the year primarily uh because of their uh overhead their General administrative uh balloon to $30 million which is uh
• 29:30 - 30:00 mostly salaries for executives you look at another team uh Sentinels same thing we're going to earn Revenue through merchandise sponsorship digital Goods publisher money and our share of prizes if you look at their financials it the same same story uh their operating loss for the year was was 8.2 million and you can see
• 30:00 - 30:30 it's entirely because of this General and administrative number there's salaries they were paying so and the final example I'll show is is G2 which is a a european-based Esports organization so again we compete uh we have great fans and we make great content uh we do a lot of of brand Partnerships you can see most of this is uh most of the revenue is through
• 30:30 - 31:00 sponsorship still but they're better at it so they have collaborations with Ralph Lauren with MasterCard Red Bull Phillips Spotify Etc and you can see here you know that they're operating income for the year the last time they published the numbers they had a 1.37 profit for the year uh same kind of split between sponsorship and publishers and consumer products um
• 31:00 - 31:30 but they CL they said that they had a a increase so I don't know if you um have studied quarters five forces but there's a a tool that we use in business school to teach about the competitiveness of an industry uh and how much power other industry players have and when you see a lot of uh industry stakeholders have high power it's
• 31:30 - 32:00 generally a really difficult business model so for example a new entrance you typically want there to be some restrictions on new entrance uh with Esports teams there's not you typically want the people who buy your products to have uh less power um but here investors sponsors have a ton of power you typically don't want there to be substitutes but substitutes for Esports include other Esports teams other sponsors and frankly practically
• 32:00 - 32:30 any other Leisure activity uh you don't want your suppliers to have a lot of power so the suppliers are the players the Publishers the league operators um and then finally all of this leads to you know how competitive is the overall industry and you can see that um it's there's stiff competition for for sponsors players and fans so generally this is a very difficult uh industry if you you know use this
• 32:30 - 33:00 model to determine how difficult it is so and I guess I want to leave you with a positive message and if you're if you're uh an instructor or a student and you think wow why would anybody like this is crazy why would anybody want to watch other people compete in video games you know I would say that that uh I tell people all the time it's only weird if you think it is is um that uh the people who watch and
• 33:00 - 33:30 compete in these competitions uh they enjoy this Outlet uh This Is How They see the world they they uh care about the the League of Legends World Championships and the rainbow six championships I would say that uh the world is changing and uh that how people consume content is more dig Ally native um you know if you were if you're
• 33:30 - 34:00 in college now you probably had to argue with your parents to have a television in your room uh and now they don't do that anymore they just bring their their iPad or their phone uh becomes their television or their television um they're growing up without cable uh there everything is streaming and what that means is that cont live content that stream digitally is
• 34:00 - 34:30 important and then I'll leave you with this you know what if I told you that there was an Esports event that had a a prize pool richer than the indd 500 the US Open even Wimbledon and that the money for it did not come from sponsorship or medor rights or ticket sales but rather came from the fans themselves to crowdsource the prize pool to pay the
• 34:30 - 35:00 players so it doesn't mean that you can't just you know Esports the business model has struggled because of uh the valuations that were placed on it but it doesn't mean that it's not a real activity with real fans and a real chance to grow and I'll leave it at that um okay thank you so much Professor
• 35:00 - 35:30 Pierce for your insightful presentation um I think for a lot of us this was new information and it is just fascinating to see how this industry has developed we are going to move on to the Q&A um but before we do um I'm going to go ahead and draw your attention everyone to the screen and here you will see information about our badges if you would like a badge for your
• 35:30 - 36:00 participation in today's Master Class you will get one if you signed up for this webinar with your University's email address for questions regarding badges please go ahead and email the email here on the screen or contact us at the WhatsApp number you see on the screen should you have any questions about getting a participation badge for today's
• 36:00 - 36:30 webinar okay so we will start with the very first question in the Q&A box um so Professor Pierce um a an attendee asks what will be the impact of future video games like Grand Theft Auto 6 or year-by-year EA Games in Esports teams and the most important video game studios I think that the well first of all the
• 36:30 - 37:00 GTA6 launch later this year will be the largest uh by Revenue video game launch that uh we've ever seen before and I predict that the game will retail price will be over $100 per game I don't however think it'll have any impact whatsoever on Esports I honestly can't imagine people competing um in that game but I think
• 37:00 - 37:30 it'll have a huge impact on the streaming industry that there will be thousands of people streaming that game on Twitch and tens of thousands of people watching them do that uh as it relates to EFC and Madden and college football 25 uh and other sports simulation games I think they'll continue uh to the the the conver collaboration between the
• 37:30 - 38:00 actual professional leagues and those games will continue to get closer and closer and you'll see uh current players former players uh and those Esports leagues uh grow especially as the game becomes more themes become more realistic thank you so much for your answer that is fantastic um our next question for you um participant from our audience
• 38:00 - 38:30 asks um would Esports fan base grow enough to sustain the events as in this last example I I think yes and the key to that answer is around how PE how you define sustainable so if sustainable uh means satisfying you know um you know reasonable Sal iies you know for the hardworking staff that work on
• 38:30 - 39:00 it and reasonable um pay for the players who compete and train so hard then yes it's sustainable if sustainable means providing 30% return to private Equity firms then no okay fantastic before I move on to the next question I would like to draw everyone's attention to the screen please if if you um would all in the audience be so kind as to scan the QR
• 39:00 - 39:30 code here with your phones and take our survey about today's webinar to let us know what you think we would greatly appreciate it and I will leave this up here for a few minutes okay our next question is the following how do you think that e Sports um landscape will change in the next 5 years and what are some opport unities that might arise for organizations that
• 39:30 - 40:00 are ready to adapt and Lead through these changes I I believe that Esports teams will become more Lifestyle brand oriented that they will become less dependent on paying top tier players and that um that uh as new games come online teams
• 40:00 - 40:30 will be more adaptable to picking up those games and I do think one of the major areas of growth moving forward is going to be in Mobile Esports competitions um where uh individuals will be able to compete on behalf of a team in games that come up and become popular quickly wonderful thank thank you
• 40:30 - 41:00 um so we have our next question here asking um says hello Professor I just want to ask do you think that in the upcoming years um will Esports competition continue to deteriorate and if so what do you think um would the impact be not just on the games but also players and streamers I actually don't think it'll deteriorate I think what's I think what
• 41:00 - 41:30 is happening now there's a level setting of expectations so instead of um you know an event organizer booking the Barkley Center in Brooklyn or you know uh you know big stadiums and Arenas uh and then having all of that kind of overhead and expense I think the right size to smaller venues uh the the expenses will become more more in line with revenues and uh the integration between
• 41:30 - 42:00 uh teams and the games uh will uh will tighten I don't think it's in the best interest I think Publishers recognize it's not in their best interest to have teams uh going out of business because they uh you know ran out of money so I do think there'll be fewer teams but the ones that are there will be more successful all right thank you so much for your
• 42:00 - 42:30 answer um moving on to the next question um an attendee from the audience says now that chess is gaining Esports traction what's the most effective way to build a formal Esports structure that attracts both viewers and sponsors I love this question because I I just was reading about this uh earlier this week that the at the Esports world cup which will be held at the end of July in Riad Saudi Arabia uh chess will
• 42:30 - 43:00 be uh will be introduced as a new esport there and uh many of the top tier teams are signing up the best chess players in the world to join their Esports team so for example this just last Saturday Team Liquid which is a North American based team signed Magnus Carlson uh arguably you know the the most famous living
• 43:00 - 43:30 chess player uh to compete for them in Saudi Arabia later the summer at the Esports World Cup I'm fascinated to see how it's done um you know if they're just televis if they're just putting on the screen what's happening on the board or if they have some way to replicate digitally what the players are doing so that um you know it looks it's brought to life so for example you can imagine like in in a real life chess game you take the night and you move it four pieces over
• 43:30 - 44:00 and it's a physical you know plastic or wooden piece but in a in a video game type environment or Esports environment you know that that KN could you know could have a a swooshing tail with it it could you know jump over it could animate in a way that would make CH I think would bring chess to life for millions of people in a way that it doesn't right now so I'm super fired up about Chess and
• 44:00 - 44:30 Esports fantastic thank you so much for your answer um uh next uh attendee asks um with more and more people getting into streaming is there a possibility of an oversaturated Market um and should streamers shift to competing uh content and tournaments instead I think they two different skill sets for uh streamers have one skill set
• 44:30 - 45:00 uh meaning being entertaining um and people who compete in video games you know typically are more driven to practice and you know are less entertaining by Nature so I I I think they're two different uh skill sets uh and whichever I was better at is what I would you know focus on but there there's already you know I don't know if it's an
• 45:00 - 45:30 oversaturation but you know there's more than 4 million content creators on Twitch of that of those uh the top 1,000 of those content creator of those 4 million earn 60% of all of the revenue on the platform so you know there's millions of content creators streaming to to one person or frankly to
• 45:30 - 46:00 nobody um and if you if you ever you know are in the so inclined go on Twitch find a content creator who's got nobody watching and tune in and donate you know $2 to them and you'll make somebody's day thank you so much for that fantastic um the next question um um Professor pce you may or may not know the answer to
• 46:00 - 46:30 but I think uh because we have a lot of members of our audience joining us from Latin America I will go ahead and ask um do you happen to know how Esports are evolving in Latin am in Latin America in terms of infrastructure government support or professional opportunities for players and developers in comparison to other regions of the world yeah I think in um so for example in Brazil uh
• 46:30 - 47:00 Esports is a very mature um uh industry you'll sometimes see games or matches broadcast on traditional television there especially um firstperson shooter games are very popular there um the new League of Legends structure uh has a a North Division which is all North American teams uh and then a South Division which is made up of Central and South American teams uh one of the teams in the in the
• 47:00 - 47:30 North American division is a team called uh lion gaming l y n which is based in Mexico uh which is very popular there uh and the Latin American teams that are competing on the South Division the studio is based in South Paulo and is um hosting the first um League Championship uh later this spring so I think they're I'm not I don't know the answer to
• 47:30 - 48:00 whether their state supported or not but I do know that there's a uh a thriving industry particularly in firstperson shooter games uh in Latin America fantastic thank you so much for your answer um I'm sure our audience members really appreciated that um so so my next question is and actually quite a few
• 48:00 - 48:30 participants asked the same question so I am eager to ask this um very simple could Esports one day make it to the Olympics well one day is gonna happen in 2027 the Esports Olympic I forget what they're calling it's the Olympic Esports games are taking place in some Saudi Arabia um they haven't announced which
• 48:30 - 49:00 games they'll be um competing in but I uh I believe it will be only Sports simulation games um for sure not first-person shooters um and so the Olympic the international Olympic Committee has decided that yes it wants to include Esports but only Sports simulation games so basketball uh football Etc uh and they want to conduct the they
• 49:00 - 49:30 don't want to include them in the in the the traditional Olympic Games they want to make a separate event called the esport Olympic Games okay very interesting thank you so much um the next question for you um is can you give um any advice to Young talents in the
• 49:30 - 50:00 Philippines to make it into the pro league practice practice practice go on face it um or another similar platform where you can be discovered uh stream your your play so whichever game you're you know competing in or trying to compete in um stream your your your gameplay even if there's you know less than 10 people watching
• 50:00 - 50:30 one of those people might be a scout from another team very good okay thank you for that um next question is why do player salaries vary so drastically they vary drastically because the there is not a receptacle to
• 50:30 - 51:00 publish the player salaries so each salar is negotiated secretly between the player and the team uh without kind of any structure around um you know what does a first year player make what does a seconde player make what does an MVP make uh like other leagues do that's first reason second reason is most players don't have many players don't have agents who negotiate on their behalf many times they're negotiated by their
• 51:00 - 51:30 parents who are well-meaning but not experienced and the third reason is because when a the age of the players is so young you could many in many leagues the a professional player could be 16 or 17 years old and $50,000 us is a lot of money to a 16-year-old whereas a player who's been competing in the league for five or six years uh that's not a lot of money so a
• 51:30 - 52:00 willingness to take lower amounts of money because it feels like a lot of money to them those are the three reasons fantastic thank you so much for your answer um so our next question is um what are some of the biggest challenges that companies in the Esports industry May face and how can these risks be identified and addressed to ensure a
• 52:00 - 52:30 successful future for the industry uh the biggest risks are not diversifying outside of of uh Esports competitions so not developing uh a Lifestyle brand or or some other way some other type of of way to signify like what the TEAM stands for so that if they have a bad year competitively um you know Brands will
• 52:30 - 53:00 still want to stick with them uh so that's one area the other way is is to you know fend off the the pressure to add cost you know that that you know like any small business um you have to carefully manage your cost along with your revenues and um and being in alignment with Team
• 53:00 - 53:30 ownership on whether how willing the team owner is willing to go into debt or to take a loss uh in any given year so really being aligned on cost and diversifying outside of just competing in video game tournaments fantastic thank you for your answer um so next question is what strategies can
• 53:30 - 54:00 the Esports industry today and POS and in the future possibly Implement to attract more players professionals and investors into the ecosystem well the biggest opportunity to add players is to figure out how to make it more comfortable for women to want to compete in in these types of environments because right now 90% of the comp competitors are men and in every single professional League it's
• 54:00 - 54:30 100% men there's only been you count on two fingers the number of women who've played on professional teams and in both cases they had to prove that they they had to do live tryouts to prove that it was them that were competing not somebody else on their behalf because the male oriented audience just couldn't like believe that a woman could compete and if you think about it it's idiotic because there's literally
• 54:30 - 55:00 nothing about video games that would give an advantage to one gender over another like literally nothing so the opportunity to grow participation in competitive Esports is to uh for Publishers for teams to leagues to proactively create opportunities for girls and women to want to compete and to feel safe doing
• 55:00 - 55:30 so fantastic thank you so much um okay so um an audience member asks our next question here oh sorry before I get to that um I just want to um show everybody um draw your attention to our next slide for those of of you that would be interested in joining our very next webinar um we have
• 55:30 - 56:00 um beyond the bench understanding US legal culture um with Laura cords from um Sandra Deo Conor College of Law here at ASU so if you are interested in joining this webinar on March 19th at 8:00 a.m. please go ahead and scan the QR code to register okay we will wrap up now um with our couple of last questions so um let me ask you this from
• 56:00 - 56:30 the audience um we have an audience member who says [Music] um Professor um I am quite a very proficient player in Plants versus Zombies what are your thoughts on that the game like going to the Esports stage uh I first of all awesome uh I
• 56:30 - 57:00 would I would stream that game 24 hours a day but I would not rely on it becoming competitive for uh prize pools or trophies or anything like that but I would stream that game um uh all day long fantastic thank you so much um our last question is this how might
• 57:00 - 57:30 technological advancements like virtual reality and AI affect the future of Esports well I think that VR has a if you think about it like VR should be a game changer for Esports because instead of you know watching A League of Legends match um in a 2d environment where I'm sitting here and I'm looking at my screen and it's flat I should be able to put on a
• 57:30 - 58:00 pair of VR goggles and be in the middle of the map I should be able to like be standing right in the middle of the map and watch the competition like where I could almost Reach Out And Touch it um and the same thing for like a a you know an NBA 2K type of game I should be able to sit like on the sideline like sit on the court side and and watch it
• 58:00 - 58:30 right in front of me versus like on this flat two-dimensional screen so I think virtual reality has a a huge opportunity uh in gaming to CH fundamentally change uh how people uh consume that type of content fantastic well thank you so much Professor Pierce that is all of the questions we've had time for today today we always have more questions than we have time to answer so um thank you
• 58:30 - 59:00 audience for joining us today and I hope to see you all in our next master class thank you very much Professor Pierce thank you have a wonderful day everybody