The esports opportunity

Above: The esports opportunity

Image Credit: Newzoo

GamesBeat: It looks like the hardest thing to do right now is to build a new Overwatch team. The buy-in is somewhere over $40 million. Some esports are very hard to enter and some will be easier.

Maurer: On the Overwatch League, there are two ways of looking at it. The first it is that Blizzard is doing a hell of a job. The product and the way they’re selling it to the broadcasters and sponsors is insane. It’s a total success. I love the product. But the second way of seeing the Overwatch League is that there might be questions around the viewership. At the end of the day the money comes from the audience, and right now the Overwatch League viewership is not that high.

There’s a question mark around, will Blizzard be able to grow that audience, grow that viewership. I think that’s very likely, because the way they’re developing local fandom and local audiences by adding new teams to the roster is extremely interesting. But right now, from our perspective, there is a question. Is it worthwhile to spend $30-40 million to get a spot in the league? I couldn’t answer that with certainty. It’s something we’re exploring. Blizzard is doing a very interesting job, but questions still remain.

GamesBeat: As far as other news, investments and other things, what’s the most encouraging development you see right now in esports?

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Maurer: To me, I’d say first of all, contrary to popular belief, it’s the stability of esports. That’s something a lot of people worry about. They say, “Hey, if you invest X million in that title, what if it disappears next year?” It’s a valid concern. But if you look at the last 10 years, things haven’t really changed that much. League of Legends, Counter-Strike, and DOTA 2 are the biggest games.

Of course you have things like Fortnite evolving very quickly, but that’s still not a big esports title, because they haven’t figured out their competitive side yet. There’s a lot of change in the tier two, tier three games, but the top of the market is very stable. That’s interesting, because we can build our storytelling and build our infrastructure around those games and have a big success.

The other interesting thing is that esports is becoming more and more mainstream. The next step for esports, to me, is growing from out of its niche. It’s a big niche with a lot of passionate viewers, but if I watch esports with my mom or my grandmother—my mom knows I have a company in esports, so she’s a special case. But most people above 40 are only starting to hear about esports. They don’t really know anything about it.

The next step for esports is publishers working on games that are very accessible and easy to watch. If you look at the biggest esports games, DOTA 2 or League of Legends, these are very hard to watch if you don’t play the game yourself. Counter-Strike is easier, but most games are very complicated. The next step, the huge potential for esports, is when we find games that are an easy-to-watch experience, that you can watch with your whole family.

We’re not at that point yet, which means the potential for growth is insane. It’s not only linear growth that we can see with more and more fans. We could grow tenfold if we find a game that families and multiple generations can watch. That’s a huge area of potential for esports that’s not often addressed.

Kohli: This is not Bitcoin, something that’s relatively new. It’s been around. I think we’ve reached a point of no return, with the amount of viewers we have now. What do you think?

Above: The League of Legends World Championship in Beijing.

Image Credit: LOL Esports Photos

GamesBeat: I think the fans are there. The fans spending more money is the next milestone to hit. The game slate isn’t quite stable yet. I don’t know if it ever will be, but it should be more stable. That’ll help when that happens, if Fortnite becomes a number one platform and stays that way for many years. But if it keeps changing, from League of Legends to Overwatch to Fortnite to something else, that makes it more difficult. I think we still have a bit of risk from the hype cycle – big investment, big crash, and then a steady rise. That pattern is still possible.

Maurer: The team position used to be something that investors would consider dangerous. They’d say, “Well, the ecosystem is changing, so a team’s place in that ecosystem might be at risk.” But right now we’re in a very comfortable situation where we’re building a brand with a lot of fans, and then we can pick the games that matter to us. We can invest in infrastructure and training and facilities and so on, but our job at the end of the day our job is to be present in all of the tier one games, to field a team in the biggest leagues.

The situation might be complicated for publishers who compete for the top spots and the top audiences, but for us, once we establish ourselves as one of the biggest teams, it will be easy, in a way, for us to be present in all the bigger games. I think that perspective has changed over the past year. Now the key is just to make sure that we don’t miss new opportunities in new games. It’s a good situation, being a team owner right now.

GamesBeat: Virtual reality went through a cycle where I used to write three or four stories about VR while I was covering games. Now I do the same thing for esports. The share of attention and the number of business events happening has really picked up for esports. That’s a good thing for now, and yet—virtual reality only really had Facebook, HTC, and some other tech companies pushing it forward, whereas esports has the entire sports industry around the world wanting it to succeed. That’s a larger force behind it than VR had. The things that are going into motion are very impressive.

Kohli: Giving you my perspective, when we first started looking at esports a couple of years ago, my biggest concern was whether it would become a spectator sport. I was frankly quite shocked. I’ve seen my son, who’s 15-16 years old, play these games for the last few years, which is fascinating. I can’t get him off it. But to understand how this has become a spectator sport is what tilted us in favor of getting involved. We went to one of these stadiums and it was amazing to see people there, glued to the same things I’ve seen my son playing at home.

That was a turning point. This was something I couldn’t fathom until I saw it for myself. I was very impressed by how many people were in the stadium. It was packed. They paid to get in. And that can only get better for us. We’ll have better and better technology. We’re here to help Vitality do that. Rewired has hundreds of engineers working for them. These are some of the smartest people around. We’ll see how we can help the Vitality team improve their technology.

This isn’t just about the money. We’re here to help these young people come to the fore here in every way. Technologically it will get better. I have no doubt it will become a better spectator sport. It’s incumbent upon all of us to make this happen. Once that happens, it’s just a matter of time before it takes off even further. It’s a very exciting time to be involved in this, even for those of us who are relatively new.

GamesBeat: When you set up in the U.S., are you looking at someplace like Los Angeles, which is becoming a big esports center, or maybe more like New York?

Maurer: For Vitality at the moment North America is not a priority, at least not in the sense—it’s a very interesting market, but a lot of huge teams with very important backing are already in on the play. We will need a specific opportunity to move into that market. Esports is a business of opportunity. You can’t just say, “I’m going to have a team in Counter-Strike,” because then you might not be choosing a team at the right time. It’s a matter of opportunity.

It might be very interesting to move to North America if there’s a new league opening and we think it’s a worthwhile investment. But for the most part I can’t share much about North America. I do agree that Los Angeles is where everything is going on when it comes to esports. Most of the teams are based there. Most of the business looks to be happening there. We’re seeing arenas open up there on top of the existing facilities, as well as in Las Vegas. Los Angeles is a very interesting place for the esports business in North America.

Newzoo sees live esports viewership growing for some big events.

Above: Newzoo sees live esports viewership growing for some big events.

Image Credit: Newzoo

GamesBeat: Anything else you’d like to add?

Maurer: Right now we can see, like you say, that esports has a lot of hype when it comes to investment. People want to invest. But they often don’t properly understand the space. It’s good to have someone who shares our vision and perspective. It’s a long-term game. We’re not here to make quick money. We’re here to build one of the biggest teams in the world. It will take time and resources and energy, but finding someone that shares our vision is a joy. We’re very happy with this partnership.

Kohli: When we were talking about buying in to the company, I told Fabian and Nico, “My only advice, because I’m much older than the two of you, is that you should be allowed to follow your vision.” They have a dream. Fabian has lived this since he was 12 years old.

The worst thing that can happen to people like Fabian and Nico is they end up spending half of their time raising money and the other half explaining what the money is doing, where the returns are. My only plea to these guys is, just do what you do best. Tell us where you need our help. We’re in this for the long term as well. We believe in this area, and most of all, we believe in you guys. We want you to do whatever you do best, and come to us when you need help in terms of money or player recruitment or any other area.

Of course, we know a lot of people around the world. Our whole group, like I said, has 17 or 18 offices everywhere. We can help them in a lot of ways. They should be left alone to do what they want to do, not spend hours and hours answering questions from investors who don’t understand this thing. We’re here to help them and support them and do whatever it takes, for however long it takes.

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