Australia and Esports: The Challenges and Opportunity

Industry Guest Post: Dave Harris has spent over 15 years in traditional sports with his last major role being General Manager at National Rugby League.  Dave is currently the Managing Director of Guinevere Capital Esports & Entertainment with a portfolio including LG Dire Wolves, Supa-Stellar, SCG Esports High Performance Centre and The Next Gamer.


In Part 1, we looked at Australian esports focused on broadcasting partners, live events and Non-Endemic brands. In Part 2, we'll look at the challenges as well as the opportunity ahead.

 

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CHALLENGES

Infrastructure - Australia has a relatively small population (~24 million) spread across the world’s 6th largest country (5% of the world’s land area).  This combination of factors has meant the internet infrastructure has not been developed to the level one would expect for a first world country. 

Isolation - Aside from the infrastructure, the isolation of the country itself from the rest of the world means online completion against other countries (aside from the other main player in the Oceania region, New Zealand) isn’t practical.  This isn’t a technology problem but a “speed of light” problem due to the distances involved.

Developing under the microscope – There are many “developing regions” around the world but Australia is one with English as its native language, meaning that when something goes wrong - it is often pasted and debated in social media across NA, EU and beyond.  Aussie teams and players also sometimes generate international social media exposure by following the Australian tradition of not being intimidated by big name opposition (and making a point of telling them)

 

Gfinity In Australia (Photo: Joe Brady)

Gfinity In Australia (Photo: Joe Brady)

OPPORTUNITY

While its isolation and sparse population is in many ways a challenge, it means the Australian market is often used as a testing ground for western markets by global technology, sport and entertainment groups.  Twitter has run a number of esports broadcasts and collaborations with organisations such as Riot Oceania.  In traditional sport the country has also managed to “punch above its weight” over the years through innovation and the formation of programs such as the Australian Institute of Sport.  Without the same depth of talent in a small population, there is an imperative to develop and make the most of the talent which is present rather than having a “churn and burn” approach used elsewhere.

Playing Talent – Using Renegades in CS:GO as an example, Australian talent has previously felt the need to relocate overseas to be competitive.  Damien Chok is another example having won approximately $1m in 2017 playing DOTA2 - including winning The International with Chinese team Newbee.  However, with more direct access into global competition being opened up to Oceania, developing and playing domestically has become viable.  Some Australian teams are already managing to break through as top performers on the international stage such as Kanga Esports in Paladins.

Casting – One area Australia does over index in is casting where using League of Legends as an example, many of the biggest names are Australian such as Chris “PapaSmithy” Smith, Julian “Pastrytime” Carr and Max “Atlus” Anderson or cut their teeth in the region such as Indiana “Froskurinn” Black, Matthew “Fish” Stewart and many more.

Research & Education – The recently opened Esports High Performance Centre in the Sydney Cricket Ground precinct is an initiative mirroring the successful traditional sports model for developing talent.  A partnership is in place with the University of Technology Sydney sports science faculty with a number of programs being translated from their work and research from the sports world.  Similar facilities have been proposed by other Australian organisations including Legacy Esports at the Adelaide Crows base. 

Borderless Esports – Australia is a logical base to launch from into other underdeveloped market such as India and South Africa (through strong existing sporting links) or regional neighbours such as Malaysia and Philippines (with considerable internet penetration, English fluency and population).  The pyramid is upside down in esports compared to traditional sports, with amateur play financing professional leagues rather than vice versa.  The Australian population is not going to provide the same player base and opportunities that can be used to develop the scale that can be achieved elsewhere.

Governance – A global challenge of the industry is the perceived fragmentation and lack of governance, particularly when it comes to sponsors and governmental support.  The Esports Games Association Australia launched in late 2017 as a member based body aiming to unify the local industry using best practice principals from traditional sports governance.  Being at an earlier stage of the cycle, the opportunity is available to implement a self-governance system for key stakeholders in Australia.

 

CONCLUSION

While Australia has only just started its esports journey into the mainstream, there is a lot of optimism that the gap with other regions can be closed avoiding the pitfalls that have been experienced elsewhere.  Huge opportunities still remain in the region while people may feel they have missed the boat in other places.  2018 is going to be an exciting year down under and worth keeping an eye on!

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.