BRYCE BLUM AUGUST 2023
In order to understand what is happening in the esports industry right now and where things go from here, we need to set the stage.
When the history of esports is written, we’ll refer to 2012-2014 as the dawning of the modern era of Western esports. [1]
The concept of playing video games competitively for a living became a reality in the 1990s, though it was niche to say the least. Esports began as a hobbyist subculture then slowly but surely transitioned into a marketing engine for the games industry. Beginning around 2013, that marketing engine transformed into a standalone, independently monetized set of spectator sports. Marketing was still a big part of the equation, but the industry had grown to a point where direct monetization of an esport showed real promise.
In 2011, this is what the worlds championships looked like in some of the biggest games (League of Legends and Dota 2):
https://lh3.googleusercontent.com/ZK5opRrycVdCziMCN38qCKGutdXVMpDncN5ZFFMslQKzc5BZCXG6MhfwZ2w-2eJSQn78ndA-VKM_gzgS7qpTcRluA7irH4Yl7LVYHRjPeJXhNZGfIcnSX0mX-rgM39SCXwQ2Zic96XWQqqv3wVphZi8
https://lh6.googleusercontent.com/UGzIOlBdj-1FtIdjn2MZu0HC1wb86Yr9dt9S0sWgGkIqLlllFo1QVX2MhG2DUZdNmSgejkj0dr4rsFAJkEN5p3cYgnGlvkmAW98PXSfsl8AlzdYMAJAMRD7mSBmqBtxFl5ZQZw1NYg4fBU7bjDxnpvg
Three years later, they looked like this:
https://lh4.googleusercontent.com/u2LL0l4lWpCBo_rxCdMiV4AhH6XRqUr-5HcPMHOBk5H01RcP0xPJ0oNYznWgXowSFXW9bNhGGvkTybvHkh8FCfHnTwQPngMkvtqCuN1SF7dtzJElliPF0MXr2Mi3SFQY8Qcy3D8y2fd1R5P8UE4g-bI
https://lh3.googleusercontent.com/YNJvQdPwfslRsiA1AK_ccykZl2swHJsyOuYEAxMxDiuD7rHP7JThFV54hT0XHlkIYmGxPQj7iDq3VPDD65qZIOrxq04T_zYSN5D4kiqU4qmdSbt4u5oJ40B98wXhKSITrH1pnTurpx2o1HDqNBoo88M
There are many reasons why this transition occurred between 2012-2014, and reasonable minds can disagree on which are the most important. [2] It’s impossible to encapsulate them all in a short oral history, but it’s worth outlining a few in more detail.
During this same period, Riot Games, a Los Angeles-based game studio founded by two hardcore gamers with high conviction in gaming trends in Asia, fully embraced esports as part of its core strategy for engagement with its flagship title, League of Legends.
After experimenting with a tournament-centric model for a few years, Riot launched multiple full-time esports leagues around the world, including the League Championship Series in North America and Europe, in January 2013. These leagues included minimum stipends for player salaries to ensure its pro players could focus on the game full-time. [3] Nine months later, it took less than an hour for Riot to sell out one of North America’s most famous sporting venues, the Staples Center, for its World Championship. [4] It also inked a global sponsorship deal with Coca-Cola [5] and began to more meaningfully commercialize its esports product.
Notably, Riot’s decision to heavily invest in a publisher-run esports ecosystem where it played an extremely active role in governance, product development, and monetization stood in stark contrast to the way in which other publishers handled the most popular esports before the rise of League of Legends, such as Valve’s Dota 2 and Counter-Strike, Nintendo’s Super Smash Bros., and Blizzard’s Starcraft. There are no public numbers on how much money Riot was burning on live event infrastructure and salaries for esports staff in 2013 to fund its esports ambitions, but it certainly eclipsed the revenue of ticket sales from selling out Staples and its sponsors for that year.
Twitch launched in 2011 as an offshoot of the YC-backed lifecasting platform Justin.tv and quickly became the primary hub for live-streamed gaming content in the West. Twitch’s growth was explosive in its earliest days, particularly in 2013 when the number of unique viewers, viewed minutes, and broadcasters on Twitch all more than doubled. [6] Twitch was originally intended to be a vertical underneath the more all-purpose Justin.tv, but gaming content dominated the platform to such a degree that Justin.tv shuttered its other services and transitioned its full focus (and company name) to Twitch by early 2014. [7]
As Twitch’s vice president of marketing Matthew DiPietro put it, "When video game historians look back on gaming a decade from now, 2013 will be the year they cite as the tipping point of streaming. Every major event, publisher, developer, and media outlet in the gaming industry had a presence on Twitch, and streaming became an ever-present piece of the gaming experience." [8]
Viewed in this light, it’s pretty easy to understand why Twitch was acquired by Amazon in August 2014 for roughly $1 Billion–the largest acquisition in the history of Amazon at the time. [9]
Counter-Strike: Global Offensive, which has remained one of the three largest esports for the past decade, was released in 2012. A year later, Valve effectively launched a second era of Counter-Strike esports by getting directly involved in the esports ecosystem and investing in Major championships. [10] This effort included a pivotal shift in Valve’s thinking, offering revenue sharing: “A portion of all sales from the eSports Weapon Case will be redirected to fund prize purses at upcoming CS:GO eSport events worldwide.”