eSports – The Wildcard of Broadcast Entertainment

I recently had the pleasure of attending the first eSports Industry Brand Summit hosted by Sparks and Honey at the Paley Center. For those not familiar with eSports it is one of the fastest growing spectator sports in the world. If you can believe it there are over 200 million people around the world who regularly watch other people play video games. Massive crowds pack into stadiums to spend hours watching two teams battle it out on giant TV screens.

Having witnessed this spectacle at the ‘League of Legend’ tournament at Madison Square Garden this past August I can honestly say it was unlike any event I’ve seen in the past twenty years. It was very interesting to see such a wide range of ages and nationalities represented, all seemingly rabid fans of the two competing teams. From what I could see the average age of most competitors was under the age of 21.

The Rise of Video Game Broadcasting

There appears to be an exciting new model of broadcasting emerging around video gaming. Over the past few years two web sites have rapidly emerged as the most popular destinations for eSports viewing namely Twitch.tv and YouTube. Twitch was acquired by Amazon in August 2014 for the astounding price of almost $1 billion dollars. According to Twitch, their audience watched approximately 96 billion minutes of game streams in 2014 and, given the appealing demographic of millennials, the price tag is probably justified. There are dozens of games hosted live on both YouTube and Twitch however only a small subset can truly be called eSports favorites. Screen Shot 2015-10-31 at 10.03.20 AMThe most famous games with the largest audiences include League of Legends, DOTA 2, Counter Strike and Hearthstone. Quite surprisingly many of these games like Counter Strike are more than ten years old yet provide the ideal platform for teams to compete in a hyper-kinetic battle royal.

Traditional Sports Losing Touch with Millennials

There is an argument making the rounds within the eSports community that traditional leagues (i.e. NFL, NBA) are losing touch with the next generation of viewers. One obvious reason is the extreme amount of money paid to pro-athletes. Traditional wisdom says that Millennials should aspire to the wealth and fame of a LeBron James or Tom Brady but the reality is that most young people today have very little in common with pro-athletes. The odds of becoming a top NBA player or NFL quarterback, given the incredible amount of physical training required, not to mention risk, doesn’t seem to be appealing to younger demographics.

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On the other hand any kid with a laptop or PS4 console can now build a loyal audience around their gaming skills. That said, it should be noted that current salaries of professional video gamers are miniscule compared to pro-athletes. Keep in mind however the level of audience engagement in gaming is astounding compared to football or basketball and may very well change the way advertisers perceive video gaming.

Twitch is Devouring the Internet 

In my opinion one of the most interesting aspects of the Twitch community is how many channels are actively streaming throughout the day. On an average day there are well over 1000 live channels just for ‘Counter Strike’. When watching one of these channels it can be a little odd to think the entire experience is live and unscripted yet surprisingly entertaining. Hollywood would be wise to pay close attention to this situation !

The bandwidth demands for a live video CDN delivering tens of thousands of streams are enormous. In the case of Twitch they have to both ingest and broadcast multiple of channels along with chat streams. Contrast that with Netflix and other OTT sites that cache a static movie and deliver it on a per stream basis. There will be significant challenges ahead for Twitch as it adapts to exponential growth rates and uncertain monetization mechanisms.wallstreet_deepfield_graph

Legacy Media Taking Notice

The rapid rise of eSports is not going unnoticed by legacy broadcasters like ESPN. eSports poses a potential threat to the cable sports business model mainly because the content is so incredible cheap to acquire compare to NFL, NBA etc.

Opportunities Galore

Judging by the job postings on the Twitch web site they look to be building an in-house team dedicated to engineering the next generation live video CDN platform. From what I gather Twitch has tried both Akamai and Amazon CloudFront but both fell short given the bi-directional nature of the Twitch ecosystem. Integration of Salesforce.com would likely mean more emphasis on B2B partnerships with advertisers and sponsors. Payments technology talent can only mean some form of Pay-Per-View offering is on the way.

I’ll end with the following questions that I’ll be thinking/writing about soon:

  1. How will game publishers adapt to the potential drop in sales as fans migrate to watching rather than playing games ?
  2. Will Twitch be able to monetize the ecosystem to offset what promises to be massive bandwidth costs going forward ?