PWC Releases Realistic eSports Revenue Research

PWC RELEASES REALISTIC ESPORTS REVENUE RESEARCH

PWC's 2017 Global Entertainment and Media Outlook (Photo: PWC)

PWC's 2017 Global Entertainment and Media Outlook (Photo: PWC)

TNL Take: Over the weekend I received trademark # 87882149 from the USPTO for the acronym RRR™ for Ridiculous Research Report.

As the spotlight on eSports continues to grow and with further exposure to a "mainstream" audience, as with any new opportunity; there will be a rush for a slice of the pie.

I've lost count how many eSports RRR™'s I've read in the last month.

I'm not even going to bother to show the most recent one from Pacific Crest Securities but here are my tweets on its absurdity.

So I was pretty shocked when PWC released their latest Global Entertainment and Media Outlook for 2017-2021 and their eSports ad revenue estimates were actually in the ballpark.

Before getting to the current research, let's rewind the clock a bit. Last year, PWC released their first eSports study.

As I wrote, in The Next Level 003, I thought the research didn't make any sense and even spoke to Chris Lederer, a Principal at PWC about how they came to their findings.

While the previous report could be filed under the "research" category, PWC's annual Entertainment and Media Outlook is loaded with actual data and numbers.

While there has been a huge increase in Brands investing within eSports - which is a fantastic thing - the budgets are Belarusian Ruble's compared to the massive dollars those same Brands spend on TV or Facebook.

TNL Infographic 032: Q1 2017: The Brands That Invested In eSports (Graphic: Jordan Fragen)

TNL Infographic 032: Q1 2017: The Brands That Invested In eSports (Graphic: Jordan Fragen)

Here are PWC's estimates for 2016:

  • US Total Revenue: $108M
  • US Ad Streaming Revenue: $33M
  • US Ad Sponsorship Revenue: $44M

Those are by far the most realistic eSports ad revenue estimates I've seen. For perspective, the ludicrous Morgan Stanley Overwatch League research base case revenue estimate for Sponsorships is $30M - for just the league.

While we've hit 50 Brands investing within eSports so far this year - which is on pace to double 2016's total - the number that are investing over $1M+ are very small currently.  That will only continue to increase as we're already seeing several Brand renewals this year with increased spend.

Any research that reflects the true state of the industry is a welcome signal against a wall of noise.

[Ed: The trademark # is a joke. Please don't look it up.]

eSports Week In Review | Morgan Stanley's Joke Research, 17 Teams In NBA's eLeague and TV Ratings

ESPORTS WEEK IN REVIEW | MORGAN STANLEY'S JOKE RESEARCH, 17 TEAMS IN NBA'S ELEAGUE AND TV RATINGS

Activision-Blizzard's Overwatch League (Photo: Blizzard)

Activision-Blizzard's Overwatch League (Photo: Blizzard)

TNL Take: This week saw an explosion of rumors around Activision-Blizzard's upcoming Overwatch League and we looked at Morgan Stanley's ridiculous revenue research, 11 of the 17 teams in NBA's eLeague have already made eSports investments, Brand Deals and eSports TV Ratings update.

Here's what happened:

 

MONDAY 05/08

11 of the 17 Teams In The NBA's eLeague Have Already Invested In eSports

NBA Commissioner Adam Silver and Take Two CEO Strauss Zelnick Announce NBA 2K eLeague (Photo: NBA/Take Two)

NBA Commissioner Adam Silver and Take Two CEO Strauss Zelnick Announce NBA 2K eLeague (Photo: NBA/Take Two)

That's not anyone from Morgan Stanley. It's from "The Big Short" (Photo: Plan B Entertainment)

That's not anyone from Morgan Stanley. It's from "The Big Short" (Photo: Plan B Entertainment)

TNL eSports Brand Tracker 018: Burger King Spain and Playstation (Photo: Burger King)

TNL eSports Brand Tracker 018: Burger King Spain and Playstation (Photo: Burger King)

TNL eSports Brand Tracker 019: McLaren (Photo: McLaren)

TNL eSports Brand Tracker 019: McLaren (Photo: McLaren)

ELEAGUE Street Fighter V Invitational (Photo: ELEAGUE)

ELEAGUE Street Fighter V Invitational (Photo: ELEAGUE)

TNL Infographic 036: Q2 eSports TV Ratings: Street Fighter Falls, FIFA On ESPN2 (Infographic: The Next Level)

TNL Infographic 036: Q2 eSports TV Ratings: Street Fighter Falls, FIFA On ESPN2 (Infographic: The Next Level)

NEXT WEEK ON THE NEXT LEVEL
 

  • EXCLUSIVE: THE NEXT LEVEL AND WUNDERMAN ESPORTS AND MARCH MADNESS BRAND RESEARCH STUDY
  • EXCLUSIVE: 2017 COLLEGIATE ESPORTS REPORT UPDATE: HOW MANY SCHOOLS WITH SCHOLARSHIPS NOW?
  • MORE BRANDS THAT SPONSORED EA MADDEN'S PRO TEAM CLUB SERIES
  • ESPORTS AND POLITICS

 

Have a great weekend!

Morgan Stanley's Overwatch League Research Is A Joke

MORGAN STANLEY'S OVERWATCH LEAGUE RESEARCH IS A JOKE

That's not anyone from Morgan Stanley. It's from "The Big Short" (Photo: Plan B Entertainment)

That's not anyone from Morgan Stanley. It's from "The Big Short" (Photo: Plan B Entertainment)

TNL Take:  Like everything in life, people always want to know the future: Is she going to like my Instagram pic? Will my son get into Princeton? Are the Warriors going to blow it again this year? Can I avoid any future meetings near Times Square?

The same thing goes for eSports.

For something that’s really just been born, people already want to know what it’s going to be when it grows up.

The reality is that it’s really, really, really hard to predict.

Yet many people are in the business of doing just that. I’ve made it clear how I feel about market estimates many times but a recent study by Morgan Stanley – although it’s still early in 2017 – could win the WTF Of The Year Award™.

[Note:  I reached out to the Morgan Stanley team that put together the report for comment on how they came to their estimates.  I was passed to their compliance team who said they would not comment on the data in the report or for this article]

Morgan Stanley’s report released at the end of March was titled:

Morgan Stanley eSports Research Report (Photo: Morgan Stanley)

Morgan Stanley eSports Research Report (Photo: Morgan Stanley)

But really focuses on the revenue potential of Activision-Blizzard's upcoming Overwatch League, aka the NFL of eSports.

 

Let's go through the divine comedy that is the Morgan Stanley study.

/01 REVENUE VARIANCE

The first thing that stands out in Morgan Stanley's report is that their Revenue estimates range from their “Bear” annual scenario of $20M to it’s “Bull” scenario of $720M.

Let me repeat that.

Between their worst and best case scenario is a difference of $700M.  If I did an analysis and gave a similar variance of $700M to my manager -  my work email would more than likely not be working by the end of the day.

Even the base estimate or "take your best guess" number is $100M - which is 7X lower than the best case scenario.  

That's a lot of spaghetti against the wall.

 

/02 AUDIENCE VIEWERSHIP

Morgan Stanley's base case estimate also assumes that each regular season game of the Overwatch League will average 72,000 viewers and 7.7M viewers for the playoff rounds.

How did their magic 8-ball come up with this number?

By taking a 19M MAU (Monthly Active User) figure - which is very high considering that Overwatch just hit 30M registered players - and taking "40% of those people watch eSports" and coming to the 7.7M figure for the playoffs.

If Riot's League of Legends massive World Championship Finals 1 day event really only draws ~7M US viewers, how is a game that's only about a year old going to draw more viewers across multiple playoffs and Finals games? 

TNL Infographic 028: 2017 Finals: Sports vs. League Of Legends Viewership (Infographic: The Next Level)

TNL Infographic 028: 2017 Finals: Sports vs. League Of Legends Viewership (Infographic: The Next Level)

So what about the 72,000 per regular season game?

By then taking the "magic metric" of 0.9% of the 7.7M playoff viewers to get to the 72,000 viewers across three digital channels - and considering how close Blizzard is with Facebook and their recent Exclusive deal, 3 digital deals seems high as well.

 I have zero idea where the 0.9% metric comes from but I do know data.

Here are the top Overwatch events by Average Viewers on Twitch since the game launched:

Overwatch Atlantic Showdown (Photo: Waypoint Twitch Dashboard)

Overwatch Atlantic Showdown (Photo: Waypoint Twitch Dashboard)

Overwatch Open (Photo: Waypoint Twitch Dashboard)

Overwatch Open (Photo: Waypoint Twitch Dashboard)

Not one major event on 1 digital platform has hit close to the 72K average viewer estimate. Getting to that total maybe potentially possible if 3 digital platforms deals are struck but it's still not accounting for two factors: Number of regular season games and International Audience %. 

The first is that not only does that 72K average need to be achieved but sustained across a much longer season than these shorter major events. The second affects the next the point, Ad Revenue.

 

/03 AD REVENUE

Morgan Stanley’s base case estimate also assumes that the majority of revenue – 62% will come from Advertising/Distribution (32%) and Sponsorships (30%). That means that 62% of the base case $100M revenue estimate will have to come from Brands.

That’s $60M+. Per Year. For One League. For One Game.

Further, the math used to come up with the $32M doesn't factor in the International viewing audience - I'd guess at least 1/3 - and a high average CPM, or the cost Brands pay per video ad.

The $30M+ expected for Sponsors like a Coca-Cola, McDonalds, Ford, etc. is potentially in reach if there are 16 teams by this Fall and the viewer numbers beat the current estimates.

Here's how Overwatch performed on TV last year:

TNL Infographic 020: 2016 eSports TV Ratings (Infographic: The Next Level)

TNL Infographic 020: 2016 eSports TV Ratings (Infographic: The Next Level)

 

For those keeping score: that's high audience and high ad expectations.

 

/04 TEAM PRICE

The report also estimates that Overwatch League franchise prices would be ~$3M each.

No way the price will be this low.

I spoke further about all these points on SiriusXM's eSports show the day the report was released:

In a somewhat surprising move, a few weeks after Morgan Stanley released the following "update" a few weeks later:

Morgan Stanley Update To Initial Overwatch League Report (Photo: Morgan Stanley)

Morgan Stanley Update To Initial Overwatch League Report (Photo: Morgan Stanley)

Here's what Morgan Stanley learned after apparently actually speaking to people in the industry:

/01 The $3M per team cost they "assumed" seemed low based on the wide variance of prices rumored, which is on the much higher side.

/02 Traditional sports teams are the targets to buy slots in the league.  Based on the little that's been released publicly, that's more than obvious.

/03 I'm just going to quote the headline they said for this point and translate:

"Non-Endemic Advertising/Sponsorships Will Require Customization and Investment from Brands/Agencies" or in other words: "Whoops, Our Ad Revenue Estimates Were Probably A Bit High. Sorry About That".

/04 Overwatch needs to become a better spectator sport. Or, their viewership estimates maybe inflated.

/05 Amazon Game Studios with Breakaway and Twitch are doing some cool things. 

 

But they didn't address the key data points and how they got to their original estimates.

 

In the Gaming world, games like Rocket League, H1Z1 and this years PlayerUnknown's Battlegrounds are titles that weren't marketed as eSports titles but are now very popular.

Here's April's top Twitch games by Hours Viewed:

April Top Twitch Games By Hours Viewed (Photo: Gamoloco)

April Top Twitch Games By Hours Viewed (Photo: Gamoloco)

I'm rooting for the Overwatch League to bring some much needed structure, support and a large company running the show - I just hope that the early expectations are tempered.

eSports Week In Review | Auto Brands Race Into eSports, TNL Podcast 021

WEEK IN REVIEW | AUTO BRANDS RACE INTO ESPORTS, TNL ESPORTS PODCAST 021: BEYOND THE WHISTLE INTERVIEW

An eSports Event (Photo: alistdaily)

An eSports Event (Photo: alistdaily)

TNL Take: It was a short week on The Next Level in preparation for this week's 3 big Exclusive stories:

/01 Incredible eSports and March Madness Brand research study in conjunction with a top global Ad Agency Wunderman, part of the WPP Family

/02 An analysis of Morgan Stanley's "research" on their Year 1 revenue estimates for Activision-Blizzard's Overwatch League aka the NFL for eSports

/03 Every Brand involved with EA Madden's NFL's Club Series with Pro Teams

and maybe something even more....

 

Here's what we covered this week:

 

MONDAY 4/24

TNL ESPORTS PODCAST 021: BEYOND THE WHISTLE INTERVIEW

TNL eSports Podcast 021: Beyond The Whistle (Photo: The Next Level)

TNL eSports Podcast 021: Beyond The Whistle (Photo: The Next Level)

TNL Take: These are the best Podcast show notes I've ever seen so it's a direct copy from the McCants Sports website  run by President Odell McCant's and was a fantastic chat. Hope you enjoy it.

TNL Take: Last June, I wrote in The Next Level 012 about the lack of eSports investment from Auto Brands, considering the massive amount the category spends in overall Advertising and Sponsorship to the exact demographic that eSports reaches: Young Males.

Outside of the partnership that Turtle Wax did with OpTic Gaming - and GEICO's ownership of the Insurance space within eSports - almost no other spending had been done. 

Turtle Wax First Partnership With OpTic Gaming (Photo: Turtle Wax)

Turtle Wax First Partnership With OpTic Gaming (Photo: Turtle Wax)

Ford and Forza (Photo: Turn 10 Studios)

Ford and Forza (Photo: Turn 10 Studios)

Things are only accelerating - no pun intended - in 2017.

Audi signed a rumored $750,000 to sponsor Danish team Astralis - although that price tag is probably overestimated - it's still a big move for the Auto industry and Audi's 2nd eSports investment year-over-year.

Audi and Astralis Sponsorship (Photo: Astralis)

Audi and Astralis Sponsorship (Photo: Astralis)

In a super smart move, Audi also picked up the team in their cars on the way to the ELEAGUE Major.

Astralis Getting Picked Up In Audi's (Photo: Audi)

Astralis Getting Picked Up In Audi's (Photo: Audi)

Based on TNL's 2017 Q1 Brand Tracker report, in addition to repeat Brands like Audi and Geico, Turtle Wax re-signed their deal with OpTic Gaming  and new Brands like NAPA Auto Parts took part in the EA Madden Club Series.

TNL Infographic 032: Q1 2017 Brands and eSports (Source: The Next Level, Graphic: Jordan Fragen)

TNL Infographic 032: Q1 2017 Brands and eSports (Source: The Next Level, Graphic: Jordan Fragen)

[Ed: In an Exclusive Research study between Wunderman and The Next Level to be released shortly, there's extraordinary data that reinforces the ROI and reason that Auto Brands should invest further in eSports]

 

NEXT WEEK ON THE NEXT LEVEL
 

  • EXCLUSIVE: WUNDERMAN AND THE NEXT LEVEL ESPORTS AND MADNESS RESEARCH
  • MORGAN STANLEY'S "RESEARCH" ON THE OVERWATCH LEAGUE
  • ALL BRANDS THAT SPONSORED EA MADDEN'S CLUB SERIES
  • 2017 COLLEGIATE ESPORTS REPORT: PART 3

And more.......