MICROSOFT KEEPS THROWING MONEY AT ESPORTS AND IT'S SO SMART
TNL Take: The big headline around eSports currently are prize pools and in the case of the recently announced Gears of War Pro Circuit, it's a cool million.
But the what's the real story behind the new ten-month circuit between MLG, Gfinity and sponsored by Microsoft for the upcoming release of Gears of War 4?
It's an eSports monetization machine for Xbox.
And it’s so smart.
Let's go through why.
/01 Amateurs = Game Sales
Almost everyone I speak to that’s trying to get into eSports looks at it from the Professional angle.
And that totally makes sense if you’re new to eSports and even biased by being involved on the traditional Sports side.
But there’s an opportunity on the amateur side—and especially at the Collegiate level as I covered in The Next Level 008 back in April.
The new Gears of War Pro Circuit is open to both Pro Athletes and amateurs - but you need an actual copy of the game to participate.
Here's an estimate of how much Microsoft can make on this alone:
With just a 1% increase in Game Sales due to eSports, it already covers the Prize Pool with leftover for logistics and marketing. Yes, that's revenue and not profit to Microsoft but that's just one of the revenue streams.
/02 Tournament Structure
Here’s the next smart move.
In order for Amateurs to qualify, they will need to earn "Gears Pro Points" by competing in MLG's regional ladders on their GameBattles platform.
In these matches, players get Gears Points for playing well which then qualifies them for one of the international events.
There’s another revenue opportunity here but currently the entry fees are Free.
That’s not including any potential ancillary benefit that Activision-MLG get from new users to their platform.
/03 Exclusive eSports Maps and DLC
This is something that hasn't been announced and I'm including it to provide a scope on the overall monetization opportunity.
Microsoft could easily sell Gears of War 4 Map packs that are needed for eSports tournaments:
There's another potential million right there.
/04 Global and Regional Events
Outside of two dates in Columbus, which would be expected as the MLG Arena is based there, the interesting part is the international events:
Dec. 17-18, London, UK
Spring 2017, Mexico City, Mexico
Spring/Summer 2017, Paris, France
And another eSports event in Las Vegas in Summer 2017
While there are revenue opportunities via Tickets and Merchandise, events are ultimately a loss leader.
This is a perfect opportunity to use the whole program to not only promote Gears of War but Xbox eSports globally.
/05 Player Donated Prize Pools
You’ve probably seen the headlines of DoTA’s The International 6 recently surpassing a $20M total prize pool this past weekend with the winning Chinese team taking home $9M+ themselves.
Here's what no one mentions - but I'm going to more deeply soon - is that 92% of that $20M prize pool came from players themselves.
Valve contributes $1.6M to the prize pool and has remained the same amount the past few years.
It's super easy: Players buy in-game cosmetic items like an outfit or weapon skin for their character which doesn't help their gameplay at all and a part of that goes to the prize pool.
Microsoft will be hosting an October event where players will be able to buy Gears eSports themed in game content with proceeds going towards the tournament.
Some of that is going back to Microsoft.
Gears of War doesn’t draw big Twitch viewership and I’ve already shown how challenging it can be to get Brands associated with First Person Shooter content, but there should be some minimal revenue from Broadcasts as well.
And there you have it.
Now let's see if Microsoft does the same for Halo.
Last season of Halo Championship Series was less than $250K in prize money.