An Overview Of Console Esports - Nintendo

Industry Guest Post: Jonathan Pan is an Esports Instructor at the University of California, Irvine. He has over 13 years of experience in management, strategy, or business development roles across companies small and large. After serving as a Product Manager at Riot Games, he co-founded and served as CEO of Ember, an esports team. He has also delivered one of the most viewed TEDx talks on esports. 


It seems like records are being broken every other day in esports and streaming. The International 2017 had a record $24.8 million dollars in prize pool. The ELEAGUE Major broke the peak concurrent users record on Twitch two years in a row, with a peak of 1.13 million users watching the final match. Most recently, the Ninja — Drake stream has brought all of these topics into the attention of mainstream media.

All of this record-breaking is happening with PC games and console makers — Nintendo, Sony, and Microsoft — are looking to get a piece of the action too, each pursing a distinct strategy. Before we dive into each company’s strategy, we should take a look at what mobile esports has tried to do and is trying to do. It is arguable that mobile esports is the first non-PC platform to explore what esports means for their platform.

When I say mobile esports, I’m focusing on the big three — VaingloryClash Royale, and most recently Arena of Valor (the Western adaptation of Honor of Kings). Collectively, they’ve tried everything: pay esports teams to get involved, created leagues, hosted tournaments, created esports broadcasts, and more. Yet none of these efforts have gained as much traction as PC esports has.

And that’s okay, because the industry has yet to define what a successful “mobile esports” looks like. While I don’t have a definition, I offer the opinion that mobile esports is more suited as a participatory esport rather than a spectator esport. And as a participatory esport, mobile esports may be doing quite well. But it’ll probably never eclipse PC esports as a spectator esport.

Therefore, the biggest lesson learned that console esports can learn from mobile esports is to define it’s own success criteria.

 

STRATEGIC FRAMEWORK

Looking from the outside in, Nintendo, Sony, and Microsoft’s esports strategies seem to focus on one to three of these areas: first-party/exclusive games, input devices, and platform services.

  1. Creating an esport requires esports potential, financial investment, developer buy-in, and most importantly, community buy-in. In total, it’s a big commitment and only makes sense for first-party and exclusive third-party games where the publisher has influence or control over these inputs.
  2. Another lesson learned from mobile esports is that input devices matter. High-level and professional players of mobile games use keyboard and mouse when available because it offers more precision and complexity than the touch screen. We’ve seen this in the past with Vainglory and more recently with mobile PUBG. That’s also why arcade sticks are used by most professional fighting game players.
  3. Platform services make participating and watching tournaments easier. Tournament participation has demonstrated increased retention and monetization for some companies. For example, players in World of Tanks who participate in esports tournaments have 3x longer lifespan and 3.5x higher spending. Meanwhile, gamers watching esports on consoles can help console makers prove the case that watching esports can lead to increased engagement.

 

NINTENDO

Nintendo has taken an about face on esports. After years of actively suppressing the Super Smash Bros competitive community, most notably at Evo 2013, Nintendo recently announced hosting the first official Super Smash Bros tournament and the first Splatoon 2 World Championship tournament at E3 2018.

Nintendo’s esports strategy appears to be focused on growing their two first-party games, Smash and Splatoon 2, on the Switch. Smash already had a vibrant competitive community before Nintendo’s official involvement. If Smash represents Nintendo’s past, Splatoon 2 represents Nintendo’s future. The team-based, family-friendly, third-person shooter has a burgeoning competitive community with professional and amateur teams. The Switch trailer in October 2016 ends with two teams playing Splatoon 2 in front of a huge live audience.

The Switch is interesting as it seems to straddle the unique space between console and portable. If you recall the participatory esports distinction I made earlier, the Switch definitely enables participation as you can bring it to tournaments — enabling larger brackets. There’s much more friction in bringing a PS4 or Xbox One and their accessories around. Outside of being a unique input device, the Switch has been a major commercial success. Nintendo has sold 14.86 million units of the Switch in 2017 with 52.57 million units of software sold alongside the system. It broke the U.S. record for the fastest selling console ever, with 4.8 million units sold in just 10 months.

 

Tomorrow will continue with Sony's esports strategy.

Exclusive: Underworld eSports Raises $10M From Grizzlies Kaplan, Survivor's Dr. Zahalsky

EXCLUSIVE: UNDERWORLD ESPORTS RAISES $10M FROM GRIZZLIES KAPLAN, SURVIVOR'S DR. ZAHALSKY

Underworld eSports Raises $10M From Grizzlie's Kaplan, Survivor's Dr. Zahalsky (Photo: The Next Level)

Underworld eSports Raises $10M From Grizzlie's Kaplan, Survivor's Dr. Zahalsky (Photo: The Next Level)

TNL Take: Money continues to pour into eSports teams. 

The Next Level has learned that Memphis Grizzlies co-owner Jed Kaplan and current "Survivor" season member Dr. Mike Zahalsky have invested in Portland based Underworld eSports.  Kaplan is also an owner of Swansea City Football Club of the English Premier League.

While the overall investment total was not revealed, the rumored figure is as high as $10M - which is an extraordinary amount for a team which currently competes in four titles ranging from Call of Duty to Vainglory.

Two other interesting aspects of this investment.

First, we’re beginning to see the second wave of professional sports owners who are seeing big investment opportunities in eSports.  Stephen Kaplan, co-owner of the Memphis Grizzlies as well, previously invested in team Immortals back in November of 2015 via Oaktree Capital.

TNL Infographic 027: NBA eSport Investment (Infographic: Jordan Fragen)

TNL Infographic 027: NBA eSport Investment (Infographic: Jordan Fragen)

Second, as Pro Sports team owners continue their involvement within eSports, what's the new investment trend?

Athletes and celebrities.

From NRG's recent investment from both Marshawn Lynch and Jennifer Lopez, Underworld eSports investment also includes Dr. Mike Zahalsky from the current season of "Survivor".

The deal was brokered by Bill Yates of the Sports Advisory Group who has also been linked to other eSports team investments.

Microsoft Keeps Throwing Money At eSports And It's So Smart

MICROSOFT KEEPS THROWING MONEY AT ESPORTS AND IT'S SO SMART

(Photo: Microsoft)

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.

 

/06 Broadcast

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.