Traditional gaming is having a pretty exciting fall season. Microsoft and Sony both launched new consoles. Developer Rockstar released a new Grand Theft Auto. Nintendo debuted new Mario and Zelda games. That’s a lot of entertainment, and it’s enough to keep most gamers happy.
Yet a huge gaming audience exists that doesn’t care about the Xbox One nearly as much as it cares about which Dota 2 or Call of Duty team is No. 1.
E-sports, which are the organized competitions between professionals in certain games, are growing at a rapid pace. Traditional publishers used to ignore and avoid them, but e-sports have slowly squeezed in from the edges of the industry and made their presence known and unavoidable. Today, companies like Valve and Activision incorporate competitive gaming into their marketing strategies.
The reason is obvious. Young men are scooping up competitive gaming content in huge chunks. Major League Gaming, one of the big organizations in e-sports, noted that its young male viewers often watch its broadcasts for 3.5 hours at a time without interruption, and that mythical demographic is attracting money from advertisers and publishers looking to market their products.
Today, the questions that surround e-sports are no longer about whether or not they are viable businesses. Now, it’s about what its future looks like and whether everyone responsible for creating this content will benefit.
Last weekend, Major League Gaming held its fall Championship in Columbus, Ohio. The event drew a huge in-person crowd, the top pro teams for Activision’s Call of Duty: Ghosts modern-military shooter and Valve’s Dota 2 action-strategy game, and a massive audience who viewed the event online.
GamesBeat spoke with pro players, developers, and MLG about the financial reality of e-sports, about where digital competition is now, and where it is headed in the future. While everyone is optimistic, we learned that no one is certain what e-sports will look like in five years.
The not-so-glamorous life of pro players and teams
It sounds like a dream job. Play games all day and make more than enough money to get by. Only most probably don’t make enough, and if they do, it’s likely because they’re more than just a pro gamer.
“Day to day, it’s not as glamorous as people think,” Matthew “OpticNadeshot” Hague told GamesBeat. “We’re living in a house with all of our teammates. I sleep on an air mattress in my room because when I’m in the house, it’s all about work.”
Hague is a member of team Optic and a star Call of Duty player.
Matthew “OpticNadeshot” Hague
On an average day, Hague wakes up, eats breakfast, makes two YouTube videos, and then starts livestreaming Call of Duty until 10 p.m. at night.
“That’s seven days a week,” he said. “That doesn’t change. The weekend isn’t really a factor. I lose track of days, just because I’m waking up and doing the same thing. It’s a serious grind, and people don’t understand the way of life that we actually live.”
Hague is one of the top-grossing pro players, and that grind is paying off. He’s making a six-figure income in 2013. Surprisingly, only a fraction of that money comes from his actual performance in Call of Duty.
“I have a couple of different revenue streams,” Hague said. “I monetize ad content on my YouTube videos. I also do that on my livestream. I have multiple [sponsors] that pay me to represent their products. There’s a lot of different ways to make money if you know what you’re doing and you know how to brand yourself correctly.”
For Hague, this model works pretty well, except for when he needs to take time off or even when he needs to attend an event like the MLG Championship.
“It’s very stressful, because if I take a day where I don’t upload a video, I know that day I’m not going to be making any money,” said Hague. “You have to stay focused and be self-motivated to make this happen.”
When I spoke with Hague, he hadn’t uploaded a video to his YouTube page in two days, and he said it was all he could think about.
“I feel like, well, those two days have been worthless,” he said. “If you’re having a bad day — if you’re sick and you can’t get anything done — you’re not going to make any money. It’s something that you need to stay focused on.”
While Hague is a member of Optic, the man who runs the organization is Hector Rodriguez, who is essentially the team manager.
“Every day is something different, which I appreciate because it keeps me on my toes,” Rodriguez told GamesBeat. “Every day, I wake up and go downstairs to my office and check everyone’s Twitter to make sure that nothing went wrong, that I didn’t miss anything during the night. Call of Duty players are young guys, and they sometimes like to say some things — inappropriate things.”
While outbursts like that from players could cause issues with advertisers, Rodriguez says that his concern is all about Optic’s standards.
“The guys that I bring in are fully aware of what they’re getting themselves into,” he said. “We all have the same vision, and we know what is and isn’t allowed.”
Beyond the code of conduct, Rodriguez runs the logistics of the team.
“A lot of money comes in, and a lot more goes out,” he said.
Rodriguez rents and maintains the team home. He also manages the team’s travel. He generates cash for himself by negotiating sponsorships for the team, which he then takes a chunk of. He does not, however, take a percentage of the revenue that his players create with their YouTube or Twitch channels.
It’s an interesting relationship, and it seems like the players and Rodriguez are making it up as they go along.
“I still consider myself a small business, but as far as my long-term goals — my vision — I believe that Optic gaming is going to be a very good franchise to be a part of,” said Rodriguez. “We’ve been here from the beginning. We’ve played since Call of Duty 2. We’ve created the mold and the model for a professional gamer, and it’s not just competing and winning championships. If you want to take this seriously and make a living, you have to do all of it.”
The truth is that Rodriguez, Hague, and a lot of other team owners and players aren’t just in professional gaming. They are also creating their own media platforms, which are equally or more important than the competitions themselves.
While the recognition comes from winning, the money to pay bills is made from having a personality that attracts a following online.
Developers stuck between two worlds
When looking for a corollary to e-sports, it’s natural to jump to professional athletics. “Sports” is in the name, but these things are actually very different. E-sports use games, which are consumer products, and makes organized competitions out of them.
Turning something like Call of Duty into Major League Baseball or the Ultimate Fighting Championship is tough to pull off.
For one, the people that make the games are often barely associated with the organizations that put on the e-sports events. Another difficulty is that new versions of games like Call of Duty arrive on the market every year, and publisher Activision is interested in moving the competitive players from one game to the next regardless of what the community wants.
E-sports are like if the National Football League didn’t control the rules of football.
This means that developers like Infinity Ward, which produced Call of Duty: Ghosts, have to spend significant resources and time preparing their mass-market, blockbuster hit for e-sports competitions, while only getting tangential benefits from that work.
Ghosts made its competitive debut at MLG Columbus after releasing to stores earlier in November. Prior to the start of the event, Infinity Ward spent a significant amount of time patching in the broadcasting features so that MLG could properly call the plays and stream it to its audience.
These features came in hot, and Infinity Ward was actually updating the Xbox 360s on location in Columbus to make sure they would work properly.
“It’s really like making a game for two audiences,” Ghosts multiplayer designer Joe Cecot said. “They want different things, and we have to focus on each group individually.”
Where the public wants randomness and rewards — things like killstreaks — the pro players want something predictable and fair.
“There were a couple of months, way back, when we invited some pro players to turn up and play the game early, just so they could give us feedback,” Infinity Ward senior community manager Tina Palacios said. “We also work really closely with the MLG so they can give us what they would like to use as the rule sets for these kinds of events. Then we have to implement it into the game.”
Despite that, it’s obvious that some pro players and broadcasters aren’t as happy with Infinity Ward as they were with Treyarch and its Black Ops II. During the Major League Gaming broadcast of the Call of Duty event, the commentators seemed to struggle with the just-added broadcast mode.
“Infinity Ward knows that this game is played by a casual audience,” said Hague. “They know this game is played by high school kids and college kids that just want to hop on and game for an hour and have fun with their friends. It makes sense as to why they’re not focusing on competitive features for the game.”
Infinity Ward admits that it is a balancing act, one where Infinity Ward favors its traditional audience. As big as the audience for Call of Duty e-sports is, casual players greatly outnumber the pros.
Call of Duty: Ghosts was only one of two games featured at MLG Columbus. On the other side of the hall, Valve’s multiplayer online battle arena title Dota 2 was showing what can happen when a big company builds their game around the competitive e-sports audience.
Valve designed Dota 2 based on concepts that Riot Games introduced with League of Legends. These are both free-to-play PC games. They are both team-based strategic action games. Most importantly, Valve and Riot want to have control over their titles as e-sports.
The Dota 2 model means that Valve doesn’t have to concern itself with shuffling the crowd to a new release every year. It also doesn’t have to split up its development time between a casual and professional player base, since both audiences typically want the same thing.
It’s a better model for e-sports, and it’s making Valve and Riot a ton of money, although it’s probably still less than what Activision makes from Call of Duty … for now.
Major League Gaming’s changing priorities
Sundance DiGiovanni and Mike Sepso founded Major League Gaming in 2002. They’re both still with the company more than a decade later and have put it on a clear path toward the future.
Where the company once wanted to appear on television and held more than four major events each year, MLG is now focused on a few key aspects of its business. That includes a few big annual events, its MLG.tv online network, and its competition platform.
“Yes, we have the content creation and event business, but we also have the competition platform,” DiGiovanni told GamesBeat. “Where you see about a million matches a month in some of the games we run, both on the circuit and things that don’t make it to the circuit. That’s an amazing source of consumer revenue. Most of the people who are here participate in that as well. Just watching and playing. The business is built around both.”
That means people who are watching and attending the big, prestigious MLG events are also often the same people paying entry fees to compete in online tournaments for their favorite games. Then — when they’re not playing — they’re watching MLG.tv to follow their favorite teams and games.
Previously, MLG worked with companies like Twitch to stream its events. While that worked, DiGiovanni and Sepso knew they had to build their own platform.
“We had to do it,” said Sepso. “The consumer base is getting big. The elements and properties inside of it are maturing. We, as the biggest content producer inside the e-sports space, we need to monetize. We need to get that money back.”
It was difficult to get that money back from something like Twitch because of how that platform caters to user-generated content.
“It’s hard to sell premium content on a UGC platform,” said Sepso. “YouTube still has trouble with that.”
“It ends up creating downward price pressure,” said DiGiovanni. “There’s volume that’s available for pennies on the dollar compared to premium. To have those things live in the same revenue ecosystem just doesn’t really work.”
Now, MLG will handle advertisers directly. That huge audience of young males with their eyes glued to gaming events is worth a lot to marketers, and MLG is the gatekeeper. This also helps the company make more revenue online. Previously, MLG was monetizing with major sponsors, but that was often more trouble than it was worth.
“It was hard to scale like that without having 12 events,” said DiGiovanni. “We’re not going to sign up for that. We did that in the past, because that was the only way to justify the investment that we were getting from the partners.”
Now, with MLG.tv, the company is much more focused in what it has online.
“As much as we love these events [like MLG Columbus], two a year is kind of enough,” said DiGiovanni. “It’s everything that leads into these events and out of those events and the consistency of viewing that we can create in between those big events that we throw.”
They plan to keep the big events around, but they’re now more about generating excitement and drawing in viewers to MLG.tv. The plan is then to keep new viewers watching the original content online.
To accomplish that, MLG is treating its online network like the ESPN of e-sports. The flagship show is eSports Report, which is a SportsCenter-like news program that airs live Thursdays at 7 p.m. Eastern. It covers MLG events, but host and creator Chris Puckett wants to use the show to cover all of e-sports.
Puckett is also MLG.tv’s director of programming. He has formed partnerships with Hector Rodriguez’s Optic gaming to bring Call of Duty-related broadcasts to the network, and he’s in talks to get other major content creators on the network. MLG.tv will even host tournaments from European e-sports league Gfinity.
“I want to turn MLG.tv into the video game network,” Puckett told GamesBeat. “If you’re interested in anything — whether it’s first-person shooters, a role-playing game, or a strategy game — that you can find all of that. I want it to be a gamer’s entertainment destination. In the end, I want — when a kid comes home from school — the first thing they do is turn on MLG.tv.”
Puckett doesn’t just want MLG’s partners to make basic webshows that you can find on Twitch or YouTube. Instead, MLG is giving each new show a producer and working with them to make something professional. It’s an ambitious plan, but the company has the audience, now it just needs the products to sell advertising against.
It’s a solid plan, and it MLG is very likely to keep growing. The viability of e-sports is no longer a question. During the 2013 GamesBeat conference in October, Sepso made a slight gaffe when he said that MLG will make more revenue than the National Hockey League in two years. Sepso later clarified to say that he meant all of e-sports. Regardless of that distinction, MLG is definitely expecting a major growth spurt.
“The forward-looking vision for our company is very healthy,” said DiGiovanni. “Our events, in terms of the young male audience, we are comparable to [college football] in terms of engagement time. We’re up there. We’re bigger than the [National Basketball Association] playoffs in terms of, again, 18- to 34-year-old male viewership. It compares really healthily to traditional cable sports broadcasts.
“But people look at it and say, well, how does that include me?”
That’s probably a question some pro players are asking themselves. The minimum salary for an NHL player is $525,000. Optic owner Hector Rodriguez told GamesBeat that he doesn’t know of any e-sports player making that much right now, although he does expect players will reach that level of success in two years. Still, it’s unlikely that pro gamers will reach that level for quite some time.
One reason for the difference in earnings is that MLG pros have more in common with Professional Golfer’s Association members or NASCAR teams than pro hockey players. In the PGA, golfers are self-employed contractors that pay for their own equipment and travel. They are only very loosely organized by the PGA Tour and tend to make most of their money from sponsorships. That’s how it works in the MLG and other e-sports leagues, although Puckett did say that he would love to have city-based teams like the major sports.
Another reason the NHL minimum is so much higher than what any MLG player is making is the NHL player union.
MLG is open to the idea of a union for e-sports gamers, but Sepso and DiGiovanni believe it is “too early” for that. But that doesn’t mean that MLG doesn’t feel a responsibility for the competitors.
“There’s a sense of responsibility in the fact that we’re dealing with young men,” said DiGiovanni. “We can’t be predatory. What’s beneficial for them is as important to us as what’s beneficial for our business, because in fact, our interests are perfectly aligned.”
DiGiovanni used his sons as an example.
“Whatever we do, whatever we’re building, in terms of the fans and the community and the players, I imagine that [my sons] are involved,” he said. “I’ll think, ‘Would I be OK with my sons signing that deal or being presented to advertisers that way?”
That’s a nice gesture, but it’s not a formalized policy. Again, MLG is too busy building a profitable business.
“Five or 10 years from now — mainstreaming the brand is something we talk about,” said DiGiovanni. “The level of growth that we see at every event, and our content consumption, is astronomical. The five- to 10-year plan is to continue that.”
“The platform’s proven,” said Sepso. “We’ve shown what we can do and what we’re capable of. We can help game sales. We can help DLC sales. We can help engagement time. Now it’s just a question of continuing to grow it in a way where it doesn’t topple over. It has to be scalable. We have seven hours a day. We have these big events. We’ll have more and more channel partners opening up after this event and into early next year.”
If you’re a player, the good news is that you have this really vibrant place to apply your skills. The bad news is that it is still an untamed frontier, and you have to make things up as you go along. People with good business sense are turning that into something life changing, but everyone else might get left behind.