Hello esports, my name is macro-economic downturn. Turns out you're not exempt. You'll be alright though.
Esports 'business commentators' are hell-bent on the demise of the industry they claim to love, but blimey let's calm it a little.
If you’re politically engaged in the United Kingdom, and from an Economics background, you’ll know that it’s all gone to shit.
In the UK, we’re pretty lucky. We’ve ‘taken back control’ and given the Etonian overlords full power over our ‘laws’, dispatched the ‘red-tape’ that was holding back trade. We’ve got rid of the Common Agricultural Policy which subsidised our farmers to allow them to produce without having to destroy half their output.
Trussenomics has trickled so far down, that, despite Rishi’s Mrs’ best efforts, we’re going to be the worst performing economy in the G20 — including sanction hit Russia. Rejoice, let’s moan about esports organisations.
Again, I am going to keep this cursory because I don’t have time to scribe you 10,000 words about precisely what is going wrong, why it’s going wrong and how it’s going wrong. I am slightly disappointed that the coverage I’ve seen of the esports industry from a business perspective seems to miss the mark so dramatically.
The weird infatuation with blaming esports organisations for raising capital and aiming to be the best, without profitable return is completely bananas. They’re somehow being framed as the enemy, whilst the glaring joker in the room continues to watch these ‘marketing vehicles’ or ‘pawns’ dissipate while the ultimate IP holder sits there doing naff all.
I am doing an extensive comparison between football and esports but here’s a brief snapshot of the ‘best and most profitable league in the world’:
English Premier League: 2021 - 29% of clubs expect a profit before player trading and amortisation
English Championship 2021 - 9% of clubs expect a profit before player trading and amortisation
English League 1&2 - 14% of clubs expect a profit before player trading and amortisation
Tellingly, wages to turnover ratio:
Under 65%:
Premier League: 43% of clubs
Championship: 9% of clubs
League 1 and 2: 67% of clubs
66-70%:
Premier League: 0% of clubs
Championship: 18% of clubs
League 1 and 2: 17% of clubs
71-75%
Premier League: 29% of clubs
Championship: 9% of clubs
League 1 and 2: 0% of clubs
81-85%
Premier League: 0% of clubs
Championship: 9% of clubs
League 1 and 2: 9% of clubs
91-95%
Premier League: 29% of clubs
Championship: 9% of clubs
League 1 and 2: 0% of clubs
>110%
Championship: 45% of clubs
‘Esports lacks media rights’. Correct, but these lot above have the most lucrative in the world. The second echelon of British football has 45% of clubs operating at over 110% of wages to turnover. So yes, esports salaries are inflated, but this follows a model in traditional sports where success is imperative and having the best players is vital.
Top esports clubs don’t have ‘media rights’ but in their absence, they have an entire revenue channel cut-off by ‘ultimate IP holders’ which make it bloody difficult to generate profit.
Again, without delving too far - CR7 sells millions of shirts, and Adidas pay millions to have branding on advertising where he plays.
League of Legends has an entire field of play that could be branded digitally, but isn’t. League of Legends could provide each of its mammoth teams which promote and allow the game to continue its growth to have a digital store where they sell ‘Fnatic kit’ or ‘Fnatic skins’ but they don’t.
Let’s all herald the battlepass, or Valorant skins for their success. Or let’s just create Fnatic’s shop in the metaverse, or on the rift, where people can buy a FNC skin or jersey and represent the brand, with rev. share going directly to the team.
Or nah, let’s continue to abuse teams for trying to build a business with over 50% of potential revenue being withheld by stubborn greedy IP holders.
Sponsorship revenue is being withdrawn or reduced!
Unsurprising given the macro conditions of the world. These things were and are going to happen. Esports doesn’t need to differentiate as a result, it’s happening across the board.
The squeeze will continue now shirt sponsors are going to be banned in the EPL, but the fact that pundits in esports are surprised that shirt sponsorships are not as popular in esports is bonkers. You don’t see the players shirt sponsorship the whole game, you see their in-game avatar.
What’s the solution? Oh it’s in-game digital assets. Oh it’s the bloody USP of esports.
Unironically, Dota 2 came the closest when Valve just let people upload their own assets and the banners / river were adorned accordingly.
Look, Betway and co appearing in-game. You know, that area that people watch the entire duration of that best-of-three 45 minute per-game series. Kind of like a football pitch, and it’s digital hoarding.
There’s companies that facilitate in-game advertising. There’s the bloody Metaverse. Fortnite can bring an entire concert, brand, personality in-game and produce extraordinary value for brands and sponsor activations. Roblox and Minecraft can activate in a really innovative way for brands.
Yet it’s too difficult to put a few brands in and around the ‘competitive’ rift or map that Dota and League are played on?
GTA V has in-game adverts paid for by advertisers on in-game billboards. Football Manager has the same.
How on bloody earth is esports still crawling along without utilising the entire point of esports? Digital.
Use digital.
Create digital USP.
An NFT, a METAVERSE product, I don’t care what you call it, use what you have and stop hanging out all well-meaning businesses to dry because esports is but a drop in the ocean for your company as an overall strategic pillar.
Oh, and esports business pundits, start pointing the finger where it needs to be pointed. It’s not at the teams, it’s at the fucking publishers.