The Big Business of eSports

A look at the business models of three of the largest eSports titles.

The business models of three of the largest titles in eSports, League of Legends, StarCraft II and DotA 2 have been a subject of much interest for some time. This topic has been at the forefront of my mind lately, with the impending finals in each of the games and the dreaded weekend approaching with three StarCraft II regional finals alongside DotA 2’s The International 3.

With so many games trying to get a piece of the eSports pie in the next year, here are my thoughts on the big three.

 Riot and League of Legends

While Riot wants League of Legends to grow, it also wants to keep people playing long enough for them to spend money on the game; the more people spend the greater their investment into that game, and the harder it becomes to stop--though this can be said for any free-to-play game.

Every time the metagame is getting a bit stale and viewers/players begin to drop off, a new champion is released alongside changes to game balance, keeping things fresh and interesting. There are also weekly LCS (League of Legends Championship Series) pro-games showcasing League of Legends when it is most exciting, played by the best of the best, inspiring people to play.

Influenced by their favorite players’ performances and a constantly shifting metagame people will buy champions, skins and the just released LCS Summoner Icons (respective teams receive 20% of LCS icon revenue).

Riot’s model works almost perfectly for eSports; people watch their favorite pros play and buy the champions and skins they use. Pro-player’s personal livestreams can accrue concurrent viewerships of 10-25k on any given day, depending on the pro; certainly enough to make a living from and definitely enough to flash numbers at potential sponsors.

Blizzard and StarCraft II

Blizzard’s traditional box price model doesn't work quite as well, even if somebody watches a tournament and enjoys it; it is hard to turn that momentum into a sale if they think twice about investing $40 into buying the game on impulse.

Most importantly, Blizzard has reintroduced the Spawning feature, allowing people to play with their friends for free. Then, just this week, on StarCraft II’s third birthday, it was announced all three races would be playable in a limited free installment of the game. Previously only Terran was available.

Most people are introduced to eSports by a friend, and probably watch with somebody who already plays. People want to play with their friends; they can try it for free and buy if their friends’ persuasion skills are any good.

Blizzard still has the problem of no micro transactions in StarCraft II, so people will continue to play after they buy the box but, unlike LoL, they won't be putting more money into the game. Since there are no expansions and no cash store to buy anything at all, they simply can’t.

Blizzard relies solely on new people coming in and buying the game, which is probably working pretty well while eSports is growing and new expansions are released, but when the scene isn’t growing and new people aren’t coming in, that model doesn’t work.

That said, as part of a progression update, Blizzard introduced unlockable unit skins. Could we see unit skins among other items purchasable through an item store in the future? After all, World of Warcraft has set the precedent for that.

Valve and DotA 2

Then you have Valve which snatched the mother of MOBA, DotA, right from under Blizzard’s nose, or more accurately it adopted the underappreciated child prodigy.

DotA is entirely free-to-play with all heroes unlocked. There is an exponentially growing community made market of skins, couriers and other items, which is encouraged by the revenue sharing from Valve, so it doesn’t even need to create the content itself and both parties benefit. Good guy Valve supporting its community.

But that’s not enough to keep a goliath like DotA afloat, where the real money is made is through Steam (also Valve’s service). Millions of players each month play through Steam, add all their friends on Steam and probably see their friends playing other games. They then go buy those other games to play with their friends. The sales come around and you accidently go into the red on your bank balance.

That's without even looking at what it has done directly with eSports. Players can buy viewer passes to watch tournaments from inside the game itself through DotATV, a feature that is every sports fan’s dream (the ability to control the camera). Again this revenue is split with the tournament organizers who now have a real revenue stream; something eSports has been lacking.

Of course, there are other ways DotA 2 helps the community. There are the Team Pennants for sale, which are essentially the same as LCS Summoner Icons but significantly cheaper. Another point goes to Valve in its recent partnership with Team Liquid, a long standing eSports community site and owner of the Team Liquid DotA 2 team, to become a licensed DotA 2 merchandise store.

Valve has also tapped into the popularity of crowd funding with The International 3 Compendiums. This is basically a super-value viewer package for arguably the biggest eSports tournament on the calendar, if not for eSports in its entirety then certainly for DotA 2. I like the analogy people have been throwing around likening The International 3 to the super bowl, the super bowl of DotA 2.

For every $9.99 Compendium sold $2.50 (25%) goes directly into the prize pool for TI3, raising the prize pool to over $2.6 million to date, crowning The International 3 as the single largest prized tournament in eSports history.

So here we have three different business models for the three largest eSports titles in the industry. StarCraft is one of if not the most successful strategy title ever. DotA 2 became the most played Steam game during beta. League of Legends is probably the most popular online game ever.

And of course I am only including these three titles; there are others if we look outside the PC gaming sphere. On the console we have the Fighting Game Community with a history as rich as eSports itself, international competition throughout the year and millions of eager fans.

The fighting game business model is much more traditional, but an example of a developer trying to change things is Double Helix Games with the return of Killer Instinct. This will have a low entry barrier, but each character you want to play will cost you, much like League of Legends. 

What can change?

StarCraft(1) was massive in South Korea, just as WarCraft III and DotA were in China. But Blizzard had a massive problem on its hands, and that was internet cafes where everybody met up to play would just give the game away for free, so Blizzard’s solution was to introduce a DRM in the form of requiring you to be logged in to play, so people had to have an authentic account, which seriously harmed the growth of the game.

While this isn’t the only factor leading to the stagnated growth of StarCraft II in Korea, it is certainly a major one. If StarCraft II had released with the free-to-play features it has now it would be a lot more popular.

People play what their friends are playing. A group of friends might just play League of Legends instead of StarCraft II if they aren’t all able to play because one or more people can’t afford the game. That is exactly what is happening in Korea at the moment, League of Legends is growing at an insane rate in South Korea, compared to the popularity of StarCraft: Brood War, which was broadcast on national TV and was a real part of pop-culture.

With the release of Heart of the Swarm, Blizzard has made massive improvements to the game, making the Arcade and playing with friends much easier. While StarCraft is known as a competitive game, many people play the game for its UMS (User Map Settings) maps, user created maps.

What if Blizzard decides to take the Valve approach of encouraging user made content by sharing revenue with them? Users would be able to play the game for free and buy popular mods for a few dollars each like an app store, the quality and quantity of maps would increase because creators could afford the time investment.

What Valve is doing with its in-game spectator mode, selling viewer passes, is obvious but also very important. Viewers/customers get a better experience, Valve and tournament organizers get an additional revenue stream. Both Blizzard and Riot should be looking to introduce this into their games. In combination with Blizzard and Riot’s own brand of compendium for their big tournaments and we’re in business.

eSports isn’t going anywhere and, to support titles as popular as League of Legends, DotA 2 and StarCraft II you need a good business model, one that allows you to scale with your player base. If you aren’t able to turn those viewers into customers because your business model doesn’t allow them to be,  you are hampering the growth of your eSport.

The combined prize pool of the three discussed games is easily in the tens of millions with hundreds of professional players, tournament organizer staff, team staff and various other persons.

Passionate gamers are flocking to convention centers and sports stadiums like the Staples Center to cheer for their favorite teams and players, millions watch tournaments each weekend online, and gaming culture is becoming more and more popular.

Chris Rainey, Columnist

Follow me on Twitter

Tags: News


Post Comment
Post Comment

Free account required to post

You must log in or create an account to post messages.