Has the esports industry hit the "ceiling"?

Image source: @VisualChina

Text | Media circle, author | Zero One

On the morning of March 16, as soon as the news of the cancellation of the "Hearthstone" project of the Hangzhou Asian Games came out, many Blizzard national server players applauded.

After the cancellation of "Hearthstone", according to previously announced news, the Hangzhou Asian Games still has 7 e-sports competitions, namely "League of Legends", "Glory of Kings" (Asian Games version), "Peace Elite" (Asian Games version), "Dota 2", "Dream Three Kingdoms 2", "Street Fighter 5" and "FIFA Online 4".

At the 2018 Asian Games in Jakarta, six esports events debuted, and the Chinese team won gold medals in League of Legends and Honor of Kings (International Version). But esports in Jakarta as an exhibition event, and the Hangzhou Asian Games as an official event, the milestone is obviously different.

The Asian Games' embrace of esports events sends a positive signal. But what is less clear is the recent state of the industry.

Last year, Korean media reported that the T1 team's net loss in 2021 was 25.9 billion won (about 132.80 million yuan), and the head of another Korean e-sports giant, GenG (Samsung), also poured bitterness in an interview: "In fact, the vast majority of e-sports clubs are in a loss-making state, even if we can already be called giants in the e-sports industry, and the survival of other small clubs is even more difficult." ”

GenG's failure to renew the team's signature player Ruler may have been due to financial difficulties, and the latter chose to move to the market when he bluntly said that he "wanted to get the best treatment possible for the rest of his career", and Ruler joined the LPL's JDG. The domestic e-sports industry has attracted a large number of foreign aid to join, which shows that the "cold winter" atmosphere is not as obvious as Korean e-sports.

But the data is not optimistic. According to the "2022 China E-sports Industry Report", the revenue of China's e-sports industry was 144.503 billion yuan, down 14.01% year-on-year, the first decline in five years.

According to a 2018 report released by PwC, esports surpassed football in the ranking of the world's top ten projects with the most growth potential. However, in the past few years, the booming development of esports has hidden many problems in the industry, and in the "cold winter", the contradictions and limitations of the industry itself may be increasingly exposed.

For the first decline in the overall revenue of the industry in five years in 2022, some insiders expressed optimism.

An e-sports-related practitioner told the media industry that 2022 is still a special period affected by the epidemic, and although switching online does not delay the regular development of events, investors and sponsored advertisers in the entire industry ecology are losing money, which makes it impossible for the entire e-sports industry to be unaffected.

"After better policies and a recovery of the external market in 2023, I believe the esports industry will return to an upward period again."

Make the cake bigger: more space in brand marketing

First of all, we need to clarify a concept: the esports industry is not the same as the gaming industry.

Of the 144.503 billion yuan of revenue mentioned in the "E-sports Industry Report", 81.52% is the revenue of the game itself, 15.28% is the revenue of live broadcast of e-sports content (most likely covers the income of daily game live broadcast), while the revenue of e-sports events highly related to the e-sports industry is 1.9074 billion yuan, accounting for only 1.32%, and the revenue of e-sports clubs is 1.806 billion yuan, accounting for only 1.25%.

This means that the combined revenue of all domestic competitions and clubs is less than 4 billion yuan. The scale of South Korea's e-sports-related industry in 2021 was 149.6 billion won, a total of about 700 million yuan.

Compared with the limited scale of the industry, the influence of esports events is huge. IGS8 won the championship detonated the "first year fan" effect, UZI defeated Wang Yibo to the top of Weibo night, Ti event bonuses repeatedly hit new highs to occupy the headlines, or today's increasingly popular player discussion, with the young generation in the social network voice has greatly improved, the head league, clubs and players, host commentary have the influence in the current communication pattern can not be underestimated.

In the e-sports industry chain, the source of profit for teams is mainly composed of event bonuses, sponsors, peripheral sales, and live broadcast revenue. In recent years, Weibo, JD.com, Taobo, Station B, and Li Ning have acquired teams for the title, and we will find that marketing value is almost the most important attribute in the current e-sports industry.

The realization of the value of the current domestic e-sports teams represented by LPL is manifested in the fact that the downstream players put up bad seats, and the upstream players rely on the high traffic of players and teams to generate marketing value:

On the one hand, some teams with long-term results in the middle and lower reaches of the league and no star players will be more and more inclined to save money, because in the case of not grabbing traffic, the league's own sponsorship share and other income make the seats themselves have considerable value;

On the other hand, teams with greater influence have more room to tap into brand endorsements and fan economy. We will find that Nike and LPL contract expires and do not renew, but choose to complete the contract with the retired UZI, Uzi has become the world's first Nike signed e-sports athletes with high-topic players Jiang Chengzi, Yu Wenbo and other WBG, TES, its traffic attention is much higher than peers, the number of video broadcasts on the B station is usually five to ten times that of other teams, but the results of these two teams in the past two years are not ideal.

Therefore, there is also a gap in the income of sponsors of different teams: taking WBG as an example, it not only has the title sponsorship from FAW Audi, but also a number of brands including Master Kong's Iced Tea, Panpan Food, Smelly Snail Powder, Razer, HP OMEN and so on; The EDG team that won the S11 championship has a more luxurious sponsorship list, and its sponsors include more than ten diversified brands such as Hechuang Automobile, Tissot, Red Bull, and Luckin. In contrast, the UP, IG, TT, AND WE brands that have been less popular in the past two years are pitiful, almost zero.

From this point of view, the current increase in the esports industry is mainly in the utilization rate of marketing value. In 2022, the advertising market has generally declined, but the esports industry has not been affected much, which shows that advertisers still have strong confidence in this emerging field, from the global data, Newzoo released the "2022 Esports Market Report" showing that sponsorship will bring in $837.3 million in revenue, accounting for nearly 60% of the entire market.

Therefore, the goal of the head esports club is obvious, to tap into more space in the marketing market, not just the regular gameplay of team titles. The personality and characteristics of the players, the style of the team, and the title brand all need to be more refined and long-term integrated with marketing goals, find and try more cross-border opportunities, and create more value.

For example, a few days ago, the League of Legends branch of the iG E-sports Club announced its cooperation with the classic game adaptation movie "Dungeons and Dragons" and will open a series of activities. iG served as the movie Dragon and Dungeon China Running Team, and the club's Weibo also said that "there is still work to be done in the future, and it is recommended that everyone insert their eyes and continue to pay attention". This kind of cross-border propaganda cooperation has not yet reached a large scale, but it may be one of the directions.

This has to do with the scope of the capacity of the capital behind the club. "Esports" magazine reported that "JDG has a large number of sponsors in the digital 3C space. The reason for this result is that the digital 3C category has always been JDG's capital JD.com's advantage in e-commerce. JDG provides exposure and JD.com guarantees conversion rates. This is a model that only the JDG can do. The same is true for the cooperation between Tongbo and sports brands. ”

Traffic, connections, club brand, competition results, these elements are indispensable in the process of mining marketing value.

Esports is similar to traditional sports, but not so similar

The huge gap between the scale and influence of the event industry is largely due to the fact that e-sports events must serve the commercial value of games, and most of them must also be concentrated in upstream manufacturers, which actually reflects the biggest difference between e-sports events and traditional sports commercial events - game companies have absolute control over e-sports projects. No one owns all the commercial rights and rule-making rights in basketball, football, and tennis, but game makers must own everything in their esports program.

"If traditional sports can monopolize control over their ecosystems, they will become esports-like." Will Padding, an esports industry consultant, said, "Esports is like a special version of sports, and game manufacturers are promoting esports because it is completely in their own financial interest. Foreign media Kotaku wrote in the analysis (Touchle translation).

If we look back at the history of esports, it's not hard to see the changes. The logic of early e-sports events was actually the same as that of sports events, with expert players gathering for small competitions, Internet cafes and local small businesses becoming sponsors, which was almost consistent with the early development logic of traditional sports leagues: the popularity of project play - the establishment of sports organizations and clubs - the emergence of sports associations - modern commercial operation.

Therefore, we will find that in the early days of e-sports development, e-sports events, like traditional sports, were also organized and developed around events, and WCG (World Electronic Sports Competition), founded in 2000, once had the name of the e-sports Olympic Games.

However, with the growth of the influence of the e-sports industry, several major comprehensive e-sports events, including WCG, have all disappeared, and with the establishment of Ti by V Company, large-scale events dominated by game companies have become the absolute mainstream of the industry.

Because esports events are one of the best ways to help the game itself expand revenue, why give the cake to other stakeholders when the manufacturer owns the game?

So we can also understand why former LPL player Donib was quickly stopped by the league official when he spontaneously organized the game "LBL" during the gap period of the League of Legends event, because from a commercial point of view, the five-year broadcast rights of League of Legends LPL League, LDL League and other events were purchased by Huya for a huge amount of 2 billion, how can LPL professional players and even official teams be allowed to steal traffic from their own leagues? All the commercial esports events we can see now must be officially licensed by the game company.

From the perspective of competition rules and operations, it has also led to great uncertainty. When we look back at the news that Blizzard did not negotiate domestic agency cooperation, resulting in the displacement of national server players and the inability of servers to run the Asian Games canceling the project, it is not difficult to find that this manufacturer-led model is fundamentally unstable, which is fundamentally different from traditional sports such as basketball and football.

Another fact that is often overlooked is that although they are classified in the field of e-sports, the iteration and update of e-sports game projects are much faster than traditional sports projects, and large-scale projects such as LOL and CSGO are still stable, and the subdivided e-sports events derived from new games that appear every year often appear a number of events that do not live for more than two years.

The tournament is not long, players are facing unemployment or transformation, the industrialization of e-sports has become empty talk, and the youth training system is even more impossible to talk about. More often than a dozen players at the head carry 99% of the exposure, the actual industry opportunities are far less than imagined, but e-sports is an industry that must show their talents from teenagers, and the contradictions will lead to many difficulties in the long-term development of the industry.

For example, SKY Li Xiaofeng, a representative of Chinese e-sports, once said that he has two businesses in running e-sports training classes: one is to pan for gold in Shali and unearth real e-sports seedlings; The second is to gently persuade the child, let the child recognize the reality, and choose a more secure path early.

"More often, I will communicate with parents, often when parents find me, they have reached a consensus with their children, that is, I support you to take this path, but when you can't get through, you have to listen to our suggestions and arrangements, such as going back to school, often this situation is more."

Necessity: The ability to scale up the industry is a matter of survival for esports

Before the Jakarta Asian Games were added to e-sports performances, the Asian Games events suffered a significant snub, with South Korea's average viewership rating of only 5.6%, and according to the results of the pre-match survey by Gallup, a well-known South Korean opinion research agency, 53% of respondents said they were almost not interested or not interested in the Asian Games. The addition of esports events is largely to regain the attention of the event among young people.

"As the audience, especially young people, is paying less attention to the Asian Games, the organizers of the Games have to consider including sports activities that young people like to see in order to retain these young people, which is a last resort." Liu Qing, consultant of the Organizing Committee of the State Asian Games and professor at the Shanghai Institute of Sport, said in an interview with the media "China Youth Daily".

Local governments and enterprises have also seen the extended value of e-sports beyond the scale figures, and cities such as Xi'an, Qingdao, and Shanghai have invested heavily in building e-sports industrial parks, trying to combine local cultural tourism business cards with the e-sports industry to generate greater communication potential.

Source: Qujiang Cultural Industry Group public account

The combined revenue of e-sports events and clubs is less than 4 billion, but it can affect hundreds of millions of young audiences. This kind of communication capacity far beyond the scale of the industry is the fundamental reason why all forces are enthusiastic about the e-sports industry, and it is also the fundamental reason why the e-sports industry must make the cake bigger - if the league clubs and players have limited sources of income, it is often easy to generate fake matches, which in turn disrupts the value of the entire e-sports ecosystem.

Overall, the success of the e-sports industry comes from many factors: the popularity and durability of the game itself, the long-term determination of game companies to build regular leagues, the patience of cultivating the middle and lower reaches of the industry chain, and the support of local policies.

This is actually quite difficult, there are only a few competitive games that have been able to continue to occupy the center of the market in the past decade, and there are very few companies willing to dive into the league.

Like V Society obviously has enough ability to build the Dota 2 league, but is only satisfied with the enthusiasm and money of consumer players to run TI, the cup model with high prize money and little major income is difficult to support the high investment of the club, and the problem of betting has become extremely serious, and even the sponsors of the club are bookmakers. Recently, V Club and Perfect finally began to vigorously rectify, 46 players who interfered with fair competition were banned and punished, and they will be strictly banned from participating in all Dota 2 events hosted by Valve and Perfect World Esports during the ban, and the domestic early team EHOME was also removed, which can be called "bone scraping cure".

If clubs lack sufficient profitability, players and other insiders will almost certainly move into gray areas like betting and match-fixing. This is why the LPL, which has just passed its tenth anniversary, is extremely valuable to the current esports industry, and a relatively mature commercial league needs to be maintained by the entire industry. But the same problem will also occur in the less profitable League of Legends second-level tournament, the talented player BO who once appeared on the LPL stage was directly banned for having had an LDL fake match, and eventually had to go to Europe to find a job, and the LDL fake game phenomenon behind the BO was exposed is obviously the tip of the iceberg.

Therefore, "making the cake bigger" is not only about money itself, but also a long-term survival issue for the esports industry.

Looking back at the past decade, the esports industry in China and the world has undergone tremendous changes. In the early period represented by WCG, confused teenagers like SKY Li Xiaofeng found sustenance in competitive games, and the love from players constituted almost everything in this industry, in which money and business were almost never the protagonists.

But that doesn't mean the industry should return to purity and niche. Without the investment of the rich second generation in the early stage of development, it is only reasonable that the e-sports industry can maintain its self-growth momentum, and the sign of the establishment of a healthy ecology lies in the ability to self-virtuous circle. The more the e-sports industry gets its name and the more it enters the big stage of public opinion, the more important it is to improve and sustain the industrial chain.