BRYCE BLUM & AVI BHUIYAN AUGUST 2023
<aside> <img src="/icons/chevrons-vertical_gray.svg" alt="/icons/chevrons-vertical_gray.svg" width="40px" /> Consider this our equivalent of old school DVD Extra Content/Special Features!
While we were able to go deep on many topics that are important to us, there were a several we didn’t quite get to in the detail they deserve. Rather than leaving them on the cutting room floor, we decided to experiment with a conversational-style piece the generally mirrors our brainstorming sessions when were putting this project together.
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BRYCE:
When the history of esports is written 100 years from now, I think we’ll refer to the period we’re currently in as the publisher era of esports. We live in a world where Riot operates more than ten leagues across the globe and outlays more than $100 million on esports annually, and where Blizzard-Activision stood up two separate, large-scale franchised leagues for Overwatch and Call of Duty. We’ve also seen publishers from Ubisoft to Epic Games invest heavily in their esports ecosystems. In many ways, Valve remains a massive outlier in the current marketplace due to its largely hands-off approach to esports.
This wasn’t always the case, and it doesn’t have to be moving forward either. No matter how focused a publisher is on its esports ecosystem, a game’s revenue-generating potential will always far outstrip that of the game’s esports. It’s also a completely different line of business. Making and monetizing a great game is completely divorced from the exercise of making and monetizing a great sport. This is why Riot ultimately decided to separate esports from publishing in its organizational structure.
AVI:
Haha I think it’s more likely we’ll refer to this as the end of the “logo and dozen expiring contracts is worth $100M” era, or perhaps more charitably the “traditional sports era.”
There are so few 10,000+ hour games that we’re really talking about a tiny subset of publishers to begin with– owned-and-operated leagues are uncommon now and will be in the future IMO. That said, I have a hard time imagining an era that isn’t defined by publishers’ interests generally. The IP flywheel is too important.
Companies like Riot and Nintendo have game development in their core DNA, but they also view themselves as cultivators of IP. Arcane was the #1 show on Netflix across dozens of countries, while The Super Mario Bros. movie has grossed more than Frozen at the box office. K/DA has a #1 Billboard hit and Universal Studios’ latest flagship amusement park offering is Super Mario World.
These aren’t the side projects of game devs moonlighting between balance patches; these companies are working very methodically to build themselves into peers of Disney.
For stewards of iconic IP, any surface area where fans can interact with the IP has to be up to the quality bar, but that’s especially true for high-profile products. Whether it’s esports, music, theme parks, animation– bad headlines and poor product experiences gum up the entire flywheel, which is a much higher stakes issue than esports revenue.
Your point that esports aren’t a publisher’s core area of expertise is a fair one; Disney tried and failed to make video games in-house quite a few times before they finally gave up and started licensing IP out to third parties like EA and Second Dinner, which definitely seems like the correct decision long-term.
That said, I think that esports are closer to the flagship product (video games) for publishers than video games are to the flagship product for Disney (movies/parks.) I also think that if esports does figure out monetization at scale, publishers on the sidelines will come storming back into the picture (see: Disney opting to build and run their streaming service in-house rather than licensing content out to Netflix.)
BRYCE:
To be clear, it’s hard for me to envision Riot ever turning back. Esports are in the company’s DNA at this point. They’ve invested hundreds of millions to develop the expertise, acquire the equipment, and build an esports department within a game studio that maintains roles and responsibilities far more similar to that of the NBA than any game publisher. Riot’s example has inspired dozens of game publishers to follow in their footsteps, but as time goes on I think Riot’s approach to esports will become the exception, not the rule.
Esports represent a marketing and independent revenue generation opportunity for a game publisher. That opportunity shouldn’t be left on the table, but that doesn’t mean a publisher needs to operate the business. When Riot started on this path in 2012, the marketplace looked very different. They looked around and saw a wide array of third party esports competition organizers, none of which played at the level they envisioned. Riot wanted to create spectacle akin to the biggest and best traditional sports products. They wanted something worthy of garnering mainstream attention. Maybe some of those operators were capable of pulling it off, but there was no established track record to prove it and so Riot bet on themselves instead.
If a new game publisher emerges tomorrow with an esport that takes the gaming world by storm and ascends beyond any other, would they make the same decision? If we could wave a magic wand and create a world where Riot itself releases League of Legends today instead of in 2009, would they?
I’m not sure they would.