Despite how big esports might seem, it’s still just a very big niche.
That’s according to Mike Sepso, the vice president of publisher Activision’s Media Networks. Before joining Activision, Sepso cofounded Major League Gaming (MLG), the first big esports league in the U.S. He’s seen esports grow over the past 14 years into a $892 million market. During a panel at the GamesBeat 2016 conference, Sepso talked about the next steps esports needs to take to be a mainstream business.
Online streams of esports matches regularly bring in millions of viewers who watch it for many hours at a time — 800 million total in a 10 month period, livestreaming site Twitch said in June. This audience is one of the industry’s greatest strengths, but Sepso said it can be hard to get into if you’re not already looking for it.
“For me, mainstream means how do you make [esports] something everyone is aware of?” said Sepso. “We’ve done some research recently that shows that, in the U.S., only about 15 percent of consumers are even aware of esports. But that 15 percent is probably watching hours of it every week.”
The goal is to make esports become a common household activity and to make the professional players as popular and as loved as traditional athletes. But first, Sepso said, the business needs to overcome a few obstacles.
For one thing, esports doesn’t have a huge event like the Super Bowl or the NBA Finals that draws in both fans and casual onlookers alike. Individually, each of the major competitive games in esports have passionate fanbases, and when added together, they make up a huge number.
“I think the core audiences are great, and our job is to make sure we’re really entertaining and celebrating them,” said Sepso. “But also, [it’s our responsibility to] explain the sports and build personalities to a much wider audience.”
Another piece is luring in big brands and advertisers. Lately, they’ve had a hard time marketing to male millennials because that audience doesn’t really watch TV — they’re not even cordcutters because they never had a cable or satellite. And according to Sepso, women are the fastest growing fanbase in esports right now.
He used the recent Counter-Strike: Go tournament in Columbus, Ohio, as an example. It was happening at the same time as the NCAA March Madness tournament, one of the biggest TV draws in college sports. MLG found that in total, viewers watched 45 million hours of the tournament online. Some brands are starting to see that they’re missing out on a huge number of people.
“They were watching esports, not basketball,” said Sepso.
Esports itself needs to change the way it operates. Sepso said it needs to get rid of its reliance on publisher’s marketing budgets and become a business in and of itself. The Media Networks team is trying to figure out how to make that a reality.
“Sports, generally speaking, are driven by broadcast-rights fees … it’s ticketing, merchandising, sponsorships — it’s all of that full plethora of revenue streams,” said Sepso. “We’re trying to make sure we’re optimizing those when we’re thinking about how to produce and distribute content.”
The distribution side eventually needs to change as well. Twitch and YouTube aren’t made for premium content creators who “spend a lot of money creating content.”
“You’re not going to see Game of Thrones, for instance, with its production budgets, be distributed on free [user-generated] platforms,” said Sepso. “You need a way to monetize that effectively.”
The path to mainstream business is three-fold: convince big advertisers to jump onboard, attract and retain a lot of new consumers, and make the core fanbase satisfied with some form of limited distribution. That last part is important because it’ll allow companies to better monetize the content and then re-invest that money to produce even more content.