Marketers Enter the Gamer Gateway

12/31/2018
Zach Brooke
Key Takeaways

​What? The popularity of esports is taking off.

So what? Marketers have an opportunity to get in on the ground floor of esports.

Now what? Consider what sponsorships could make sense with different teams, leagues and games.

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​Fortnite’s runaway success both echoed and surpassed previous g​​aming sensations. Could its massively popular multiplayer features and eyepopping jackpots help marketers get their sea legs with esports? 

I first felt the cultural force of “Fortnite” when I couldn’t select a user name. I was aware of the viral video game from the many references saturating news and pop culture, but the difficulty of coming up with a unique identifier placed me in the eclipse of its soft power. Typing in all manner of nouns that fired through my neurons only to see them rejected felt as if the Big Data miners finally figured out how to replicate my thinking patterns: An obscure disco-era musician dead since 1983; a piece of furniture sent for repairs. Both taken. 

Success arrived only after keying in “newdisplaynam.” The hurdle now bested, I assented to terms and conditions and was promptly ushered into the game lobby by way of the digital gift shop. 

Not wanting to screw around any longer, I hit play. The game loaded and there I stood, my avatar deposited on a virtual verdant island. I ran around for my life, such that it was, armed with only a pickaxe. I was dead 10 minutes later. I hadn’t killed anyone, nor was I smote by another player’s hand. I galloped free until enveloped by a lethal thunderstorm that slowly sapped my lifeforce. I keeled over beside a river. My body vanished, leaving behind only my weapons cache to be scavenged. 

This experience played out millions of times per day since September 2017, when “Fortnite” introduced its battle royale mode and sparked a worldwide phenomenon. This is the option that pits as many as 100 players against one another. It’s possible to collaborate in groups as large as four people, but the whole setup is essentially every person for himself. Kill or be killed; last one standing wins.

This basic formula proved wildly popular over the last year and a half. “Fortnite” developer Epic Games has switched up the environs a few times since then to keep things fresh, perhaps to prevent the brand from going the way of past flashes in the pan such as “Angry Birds” and “Pokémon Go.” I played Season 6 of “Fortnite Battle Royale,” in which developers added features that suspend gravity, allowing for pitched aerial battles and bird’s-eye assassinations. Season 2 was medieval-themed, Season 3 was set in outer space and Season 5 involved time travel. Every few months, Epic Games tinkers with the user experience just enough to keep people curious.

The desire to improve, coupled with the spectacle of stellar game play, fuels a robust secondary market on social media: Hard-core “Fortnite” gamers spend hours on sites such as Twitch, a live-streaming platform where the audience watches players. This is no small cult of viewers. Twitch reported a daily active audience of 15 million in May 2018. “Fortnite” became the No. 1 game streamed on Twitch in March 2018, and “Fortnite” hours watched have grown more 400% since the game debuted, according to numbers from SuperData, a Nielsen company. 

The most popular streaming gamers have paid contracts requiring them to be live a minimum number of hours each week, in addition to representing organized teams in gaming tournaments. The top 17,000 Twitch streamers are eligible to share ad revenue with the site, and the gamers decide when ads run during their marathon livestreams. Sometimes hip-hop celebrity Drake shows up.

“I have these two cousins—they’re very close in age—and everyone was very concerned about their well-being because they never left the basement,” says Paige Schoenfeld, associate vice president at Ipsos. “As soon as one of my cousins became a paid player, the attitude in our family changed.” 

Nielsen says “Fortnite” has grossed more than $1 billion since its release, a remarkable feat for a company offering a free product. Revenue comes from microtransactions, sales of digital items needed to customize characters and enhance game play. Microtransactions are not new in the gaming world (Kim Kardashian’s “Hollywood” app has relied on them to earn hundreds of millions of dollars since 2014), but “Fortnite” has advanced the nature of microtransactions. Similar to gamblers riding a hot streak, users are incentivized to play more for the chance to win free microtransactions. The revolving cache of items provides ample opportunity for native marketing; Marvel Studios has introduced skins for both Iron Man and Thanos into the “Fortnite” universe as tie-ins for “Avengers” movies.

 Blizzard Entertainment​​

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The microtransactions have allowed “Fortnite” to branch out into the world of competitive gaming, or esports. Epic Games, which did not respond to a request for comment, is currently organizing its first World Cup. The competition is open to all but has many qualifying stages. At stake is $100 million in prize money distributed at various events throughout the year. That money is backed by the huge revenue stream from microtransactions, as well as Epic Games’ new $1.25 billion round of investment funded by a group that includes the owners of the Los Angeles Dodgers, Golden State Warriors, Tampa Bay Lightning, Washington Wizards and Capitals, as well as Michael Jordan. The sheer amount of buzz attached to the World Cup debut will make it one of the most-watched gaming developments of 2019.

“There’s no denying the impact ‘Fortnite’ has had on the overall gaming industry, gaming video content and even pop culture this year,” says Nicole Pike, global managing director at Nielsen Esports. “All eyes will be on ‘Fortnite’ as an esport moving into 2019, and with it the types of sponsorship deals these new events attract.” “Fortnite” needs to deliver the large audiences that investors expect, but also maintain a high level of fan engagement to match other high-profile esports leagues and events. With its highlights, instructional videos, live competitions, reward money, ownership groups and marketing tie-ins, the whole ecosystem mirrors the traditional sports world. The line between esports and traditional sports is thin. It’s time for marketers to stop discriminating between the two.

“[Esports] is definitely a sport,” says Jan Weber, spokesperson for international sports communications at Mercedes-Benz, a company that has invested branding dollars in esports. “Gaming at [the professional] level requires enormous concentration, teamwork, speed and skill, as well as a very strategic and tactical approach. These are attributes that constitute a sport. The stress level and physical strain are just as high as for top-class athletes in some traditional sports. Furthermore, the entry barriers for esports are much lower than for traditional sports. While clubs are looking for members, esports fans merely need to open a browser or client to take part.”

As the marketing industry waits to see how Epic Games’ grand esports experiment proceeds, rival leagues are growing. Outside of the U.S., esports has already arrived. Analysts at Goldman Sachs projects that esports will earn $3 billion and reach an audience of 300 million global viewers by 2022. That’s larger than the fanbases for the NHL and MLB. It’s 92% of the U.S. population.

The passion for esports was on full display in November 2018 at the League of Legends Championship, arguably the sport’s most prestigious competition. The event was won by the team Invictus, marking the first time a Chinese team took the league’s grand prize  and ending a five-year streak of tournament domination by South Korean squads. Worldwide peak viewers topped out at more than 200 million people, according to analytics agency Esports Charts, 99% watching from China. Non-Chinese streamers YouTube and Twitch reported a combined audience of 2 million. Despite the difference in the numbers, “League of Legends” isn’t just an Asian anomaly; it’s a worldwide sensation. The average number of non-Chinese viewers watching the tournament at any given time clocked in at 591,500, a 14% increase from the 2017 championship. “League of Legends” is the product of a Los Angeles development studio purchased by Chinese media giant Tencent. And on the same weekend the 2018 championship was played, “Fortnite” held its own live event, which also drew 2 million livestream viewers on YouTube and Twitch. 

Closer to home, but also carrying a global footprint, is the Overwatch League. Designed as the first city-based esports league, the organization mimics traditional sports franchises by cultivating regional followings for teams that compete in the “Overwatch” game. The inaugural season closed in July with an estimated audience of 10.8 million viewers, some watching on ABC and ESPN thanks to an agreement with Disney, which owns both channels. Overwatch League has already sold more than $200 million in sponsorships and broadcasting deals.

 

ANDY KING/GETTY IMAGES​

 

In 2019, Overwatch League is poised to grow larger. Activision Blizzard, the video game holding company that owns “Overwatch,” confirmed in September 2018 that the league will add eight new teams by next season’s kickoff on Valentine’s Day 2019. Two of the new squads are U.S.-based, three are in China, two in Canada and one in Europe. The price tag for the new franchises grew between 50% and 200%, compared with the inaugural franchises, according to ESPN, which reports individual ownership groups shelling out between $30 million and $60 million per franchise, versus $20 million each for the inaugural dozen. There’s talk that the league may one day contain as many as 28 teams, although there is no public time line to reach that number.

The Toronto Defiant is part of the current crop of new entrants. In late October, the team’s ownership, OverActive Media, unveiled its identity on YouTube with all the theatrical flair of a video game trailer. “For a long time, they told us our city had no soul. They called us ‘Hollywood north,’ ‘Little New York,’ ‘America-lite.’ And for a long time they told us our game had no game,” the video’s narrator reads over sweeping shots of the skyline. Team CEO Chris Overholt is new to esports, but not professional sports marketing. In 1995, he joined the Toronto Raptors as director of corporate marketing shortly after their debut season. He followed that up with CMO stints with the Florida Panthers and the Miami Dolphins. For the last eight years, he performed the dual roles of chief operating officer and CMO for the Canadian Olympic Committee.

 Overholt says that the work he’s doing for Overwatch League is the same as his previous gigs. He ticks off the whirlwind of activity that’s consumed his time since helming the franchise. “You’re building a brand,” he says. “You’re going to develop a strategy around how you’re going to market that brand and that franchise in your local market and work with your league partners.” 

But Overholt isn’t just helping to establish a new team, he’s introducing fans and marketers to an entirely new sport. He’s establishing a constellation of sponsorships and developing a new fan experience that caters to esports’ young and digitally engaged audience. 

“There is no doubt that our audience is young,” says Overholt. “The demographic for [the Overwatch League] is between the ages of 18 and 25. It extends out to 35, but the sweet spot is in the early 20s, versus an NBA franchise where the average age of the declared fan is in the mid- to late-40s.”

The Toronto Defiant will not play in Toronto for another year. Home games during the coming season will be staged in California as team executives scout a permanent venue in Toronto. Overholt says that the right location needs to reflect the digital environment in which core fans watch the games while also welcoming so-called “stretch fans” —those who are curious but not fully-steeped in streaming gamer culture. 

Standard sales and marketing operations need to fill a portfolio of corporate sponsorships. HP and Intel—both partners of Overwatch League—joined the Defiant for its launch event. Overholt believes that both companies could become long-term partners. 

But moving forward, there is pressure on Overholt to bring in more products and services not directly tied to game play. Overholt says he’s been talking to potential sponsors from traditional categories such as banking and quick-service restaurants.

“We need to find partners who have media and a willingness to engage with us around the team and the coach digitally and socially,” Overholt says.

Not only do the Defiant have to pitch esports as a platform for marketers, they also have to compete with rival leagues for opportunities. Brands can and do choose multileague sponsorships, but the marketing dollars are finite. Market Intelligence research firm Newzoo estimates that brands spent about $700 billion on the esports industry in 2018. 

Ramon Hermann, director of esports at Tencent America, says marketers should begin their foray into esports by identifing partners that share their values and communication objectives. “Authenticity matters most in esports so seek out partnerships that feel natural,” he says. “How to do that is the tough part so make sure games or leagues have product roadmaps that align with your own calendar and communications objectives.”

Consider Snickers’ entry to esports: The brand has deals with three separate esports titles. A year ago, Snickers became a sponsor of FlyQuest, a “League of Legends” franchise owned by Milwaukee Bucks co-owner Wes Edens. Before that, Snickers signed on to sponsor “ELEAGUE,” a multi-game esports series broadcasted on TBS and co-run by Turner Broadcasting and talent agency WME-IMG. Snickers brand director Josh Olken says that it also recently partnered with EA Sports’ Madden franchise and is open to more agreements. 

 

Blizzard Entertainment​

 

“We’re still very bullish about the future of esports and are constantly looking at plans and opportunities to expand our partnership with other teams and leagues,” Olken says, adding that Snickers might eventually sponsor individual gamers in the future.

Snickers has attached itself to athletics since at least the 1984 Olympics, when Mars paid $5 million to make Snickers and M&Ms the official snacks of that year’s Summer Games, only to be savaged by nutritionists as out of step with real-life Olympic diets. Since then, Snickers has inked endorsement deals with FIFA and NASCAR, run Super Bowl spots and partnered with sports entertainment company WWE to sponsor WrestleMania. 

Snickers turned its attention to esports a few years ago when it noticed something different about the fanbase. “The brand saw the growing popularity and innate connection with its shared fan base a few years ago,” Olken says. “The amount of esports players and game awareness continue to grow at record speed—plus, the teams and leagues are still developing, so there are more opportunities to tailor a partnership in esports than in some of the more established sponsorship environments.”

Emerging leagues are developing their own traditions. Brands teaming with leagues during these early years have an opportunity to shape the foundational myths and more closely embody the definition of a partner. When Mercedes-Benz signed up in 2017 to sponsor German-based esports league ESL, it helped create the Mercedes-Benz MVP trophy for best player in the league’s premier tournament. The winning player is selected, in part, by fans via Twitter poll and is rewarded with a Mercedes-Benz automobile.

“Esports is considerably more dynamic and, in a positive sense, also much more flexible than traditional sports disciplines,” says Mercedes-Benz’s Weber.Mercedes-Benz expanded its agreement with ESL in October 2018 and is now ESL’s “global mobility partner” until at least 2021. It celebrated the deal by releasing an ad on YouTube that opens with the first-generation computer game “Pong” projected on the side of a 1970s Mercedes-Benz 450 SEL. The spot follows the evolution of the company’s cars alongside the evolution of video games. 

Snickers, Mercedes-Benz and other brands spending ad dollars on esports are trying to reach a young and engaged audience. “The main benefit right now is relevance, specifically with younger fans,” Olken says. “These partnerships give us a direct line to reach a highly engaged audience that simply doesn’t exist elsewhere.” The drawback, Olken says, is the absence of a playbook for maximizing an esports sponsorship. Snickers has taken an iterative approach, unlike its work with the NFL and WWE where insights play a role in delivering ROI, he says. But Hermann says that the lack of insights in espots can be beneficial, making it a low-risk, cost-effective marketing to iron out their pitches to Gen Z.

“Esports is still very much in its infancy as a business,” he says. “The industry is still learning how to monetize its audience and is well behind other, more mature forms of entertainment like [traditional] sports. There should be ample opportunities for marketers to test their content and get in front of the most passionate game fanbases.”

The uncertainty of esports as a marketing vehicle is reflected in a dearth of data. Market research companies have minimal tracking of esports. Newzoo, which has followed the sector for six years, is an outlier, as is Nielsen, which just ramped up its tracking of video games by acquiring gaming industry intelligence firm SuperData Research. 

Euromonitor does not track esports. Neither does IBISWorld, which considers the area too niche. The NPD Group has similar sentiments, even though it’s tracked video game sales since the 1990s. “Esports engagement is low among the U.S. gaming audience—only 35% report they have heard of esports and 11% have participated in some way (in the past year),” according to David Riley, executive director of marketing and PR at The NPD Group.

Ipsos, meanwhile, limits its game tracking to events that involve gambling, something that’s almost nonexistent in the esports world. The Luxor Las Vegas, however, just built a 30,000-square-foot multilevel esports arena designed to play host to professional esports competitions and casual gaming. But according to Ispos VP Jason Allsopp, concerns over the integrity of esports are stopping any significant investment by oddsmakers. Yet boxing, basketball and baseball have all endured fixing scandals. What makes esports’ integrity any different?

“I’m not going to answer that question,” Allsopp says. 

Despite the wait-and-see attitude of some market research companies, esports are inching closer to a mainstream tipping point. Viewership is climbing, with revenue and brands close behind. Perhaps the only thing holding esports back from the cultural threshold is an unambiguous stamp, such as inclusion in broader athletic competitions.

It just so happens a push is in the works. Esports were placed closer than ever to the athletic realm last summer when they were included as a so-called demonstration sport in the 2018 Asian Games. The event featured competitive esports, but medals won during game play did not count to the official medal tally. But esports will be a full-fledged medal event in 2022.

The Olympic organizers aren’t yet on the same page, at least not those planning the 2024 Summer Games in Paris. An announcement from the organizers in September 2018 definitively rejected that notion. The main hurdle is the gaming content: The president of the International Olympic Committee said the current crop as too violent. 

Until esports are legitimized by the livesport world, gamers will need to be content with their own tournaments, and marketers are welcome to join. It’s only a matter of time, Hermann says.

“More people game than ever before and often the biggest barrier for esports is that viewers don’t understand the game and what’s happening,” he says. “That’s a big reason why esports is such a win with the core gaming audience. They understand what makes a professional player so good. We can watch a sport like soccer or baseball and quickly understand what takes athletic talent and developed skills. But if you are watching ‘Arena of Valor’ for the first time, if you don’t understand strategy games, you likely won’t be able to appreciate the skill.” He says that as more gamers flood the market, there’s more cultural awareness—even among nonplayers. “American football is a great example. This is an incredibly complicated sport that most viewers have never played, but it’s culturally ingrained in large parts of U.S. society. Esports is getting there on a global scale.”


​Who’s Who?


» Activision ​Blizzard

A U.S.-based video game holding company formed in 2008 through the merger of two existing game developers. Traded on the S&P 500 since 2015, its popular titles fashioned into esports include “Call of Duty,” “Starcraft,” “Warcraft” and “Overwatch.” Activision Blizzard also controls the popular mobile game “Candy Crush Saga.”

» ELEAGUE

An esports league, also called EL, launched in 2016 and aired on television. Formed in a partnership between Turner Broadcasting and talent agency AME/IMG, its matches are broadcast live on TBS on Fridays during the season, but they are also available through Twitch and YouTube. Several different titles have been played on the show, and the program signed a fall 2018 partnership with gaming giant Nintendo to feature footage from a “Super Smash Bros. Ultimate” tournament. 

» ESL

This European-based esports organization and gaming company launched in 2000, making it the oldest operator still in existence. In 2015, Swedish digital entertainment giant Modern Times Group (MTG) acquired a 74% stake in the company for $86.4 million. ESL hosts tournaments for “Battlefield Earth,” “Dota 2,” “Counter-Strike,” “StarCraft II,” “Mortal Kombat” and “Hearthstone.” 

» Fortnite

The gaming darling of the moment. Its first iteration of game play was structured around a story mode and released on July 25, 2017, but the “Fortnite” phenomenon truly developed in September 2017 with the introduction of a battle royale mode, which allowed players to fight each other to the death in free-for-all sprints. Epic Games announced in a June 2018 blog post that membership surpassed 125 million. Nearly 80 million people played “Fortnite” in August 2018 alone, when the game still wasn’t available to Android users (this version available in October 2018). The company is expected to launch a World Cup this year.

» League of Legends

Before “Fortnite,” “League of Legends” was considered the largest esport in the world based on viewership. Its 2018 World Championship drew 200 million viewers. The original video game was released in 2009, with esports leagues beginning in 2011. Riot Games revealed in September 2016 that 100 million people played each month. Infrequent updates to those numbers have generated speculation that activity has tapered off.

» Overwatch

A first-person shooter game released by Blizzard Entertainment in 2016. Game revenue surpassed $1 billion in May 2017, according to parent company Activision Blizzard, and more than 40 million people played as of May 2018. Chris Overholt, club president of the Overwatch League, says that the game was “purpose-built” for esports. Overwatch League was founded in 2017 and—unlike other esports—the league comprised permanent city-based clubs. The debut season began with 12 teams. The Overwatch League two-day championship in July drew an audience of 10.8 million across all channels, according to Activision Blizzard. Numbers weren’t provided for each specific channel, but TV broadcasts were considered soft. The first night’s broadcast earned a 0.18 Nielsen rating on ESPN, and a Sunday afternoon recap on ABC had a 0.3 rating. The sophomore season, kicking off on Feb. 14, will feature 20 professional clubs. New teams are based in Atlanta, Toronto, Washington, D.C., Vancouver and Paris, along with the Chinese cities of Chengdu, Guangzhou and Hangzhou.

» Tencent

A Chinese holding company that specializes in tech and media. Bloomberg says that Tencent is one of the 10 largest companies in the world with an estimated $50 billion in revenue. In 2017, Tencent announced a $15 billion esports investment plan that would roll out over the next five years. It already owns Riot Games and has minority stakes in Epic Games, Activision Blizzard and others. Partnerships are in place with Under Armour and the NBA to develop a show featuring the best gamers. Plans are underway to open an esports business park and 6,000-seat esports arena in Shanghai in 2020. The Chinese government might be a stumbling block to future growth, as it has hinted at regulating video games to curb addictive behavior.

» Twitch

A live-streaming video platform that hosts esports tournaments. As of May 2018, it had 2.2 million broadcasters monthly and 15 million daily active users. In 2014, Amazon acquired it for $970 million.


 
ABOUT THE AUTHOR:
Zach Brooke
Zach Brooke is a staff writer for the AMA’s magazines and e-newsletters. He can be reached at zbrooke@ama.org or on Twitter at @Zach_Brooke.

COMMENT:
 

Displaying 1 Comments
Shawn Lockwood
January 9, 2019

I appreciate this topic being covered. I ran a panel at Twitchcon back in October on the role of esports vs traditional sports, which included Minnesota Twins Pitcher, Trevor May (who is coincidentally pictured above). There's a lot to unpack, and you did a very good job tightening it down into an easy-to-consume write-up. I hope we'll see more on this in the future as esports organizations grow on the regional/local levels.