2018 was the year e-sports broke out of its comfort zone.
The world of competitive, organised gaming saw the inaugural championship of Blizzard’s Overwatch League on Disney’s ESPN last July. Aside from debuts in traditional spaces, rising prize pools reflect just how valuable these competitions have become, and with the exposure came institutional intervention. Government reared its regulatory head in China when the approval of new game licences was halted for most of the year. In North America, high schools and colleges continued to place their bets on student-level e-sports organisations while e-sports betting fell under the radar of state legislature.
E-sports’ industry-wide push was largely made possible by a year filled with successions of funding rounds, like long-running gaming organisation TeamSoloMid’s US$37 million series A round, and Team Liquid’s US$25 million series B. Later in the year, hip-hop artist Drake and entertainment company SB Projects’ Scooter Braun married the music industry and e-sports with a US$25 million series A funding round for e-sports lifestyle and apparel brand 100 Thieves.
The real MVP of e-sports
While funding may have pushed e-sports out of its comfort zone, its reach only scaled the way it did because of online streaming. Platforms are largely differentiated by the markets they focus on – while the US-based brands generally target PC and console gamers, the Chinese-based brands aim for mobile. Although Youtube made the most of its first mover advantage in 2017, Twitch caught up last year with its more than 55 million users and 43 per cent share of all live video streaming traffic. In China, Huya raised US$180 million in its Wall Street debut following a US$426 million Tencent-led series B round. Douyu, another Tencent-backed platform valued at US$1.51 billion, confirmed its plan to go public in the United States this month after ditching its original plan to go public in Hong Kong last year.
The clash at SEA
When it comes to streaming platforms, South-east Asia saw fierce competition in 2018. Bigo TV launched CubeTV, which saw two million active users even before its launch, while Huya’s global brand, NimoTV, has been expanding across South-east Asia with its community-focused features. Crowd favorite Tamago exited at the end of the year, crumbling under the weight of commercially infeasible operations. The battle for dominance has contributed to a siloed and heavyweight-dominated market, where there has yet to be any teams from the region competing in the big leagues, nor any platform breaking out of the region. With the region projected to expand its e-sports audience to over 31.9 people million this year, and the 2019 SEA Games on the calendar, there is space for the region’s e-sports industry to diversify and be more competitive.
Institutional forces shifting towards e-sports are turning things around. Last September, Jakarta-based conglomerate Salim Group, in a partnership with ESL, launched the ESL Indonesia National Championships to grow the country’s e-sports ecosystem, an effort followed up in December by Mineski’s US$2 million investment in Indonesia with the help of Telkomsel, Go-jek, and Tokopedia. In November, Malaysia’s Minister of Youth and Sports negotiated US$2.4 million from the country’s annual budget to be allocated to e-sports, which was matched by 2019 SEA Games official e-sports partner Razer and other tech enterprises.
The platform play
E-sports platforms now have institutional backing in full force, but to win the game, they must go beyond just live streaming channels and driving adoption through competition partnerships. The successful platform play must consciously integrate what the big leagues are doing right with team development; and what the streaming platforms are doing well with mass adoption in a conscious effort to scale.
- Stage One: Keep key talents and influencers on board
The first step is to create a platform that will attract key talents, game publishers, and influencers in the industry. Twitch did this to great effect for Respawn Entertainment’s Apex Legends by drawing in top streamers like Michael “Shroud” Grzesiek and Tyler “Ninja” Blevins, who won the platform’s first Apex Legends Tournament. With the record-breaking attention this breakout game drew in – 31.73 million hours watched in its first week, knocking out close rival Fortnite (which continues to rule Youtube and younger audiences) by around 18 million hours – the platform hosted the tournament’s second run on the 19th. Key to the success of Apex Legends was the 30-plus hours spent by Twitch’s top influencers on the game, even beyond the initial draw of advertising slots. This shows the power of an e-sports platform to generate adoption by matching key talents and influencers to the right games.
- Stage Two: Develop the talent to win
The next step is making the platform an environment to develop the skills and community reach of key talent and influencers through an array of tools, which could involve integrating artificial intelligence-based features to better monetise e-sports fans, producing original e-sports content to raise exposure, or designing reward infrastructures for top streamers. Aside from player development, what will make the platform competitive long-term is closing the market gap in proper talent management, ranging from addressing early player burnout to furnishing more professional gaming facilities for teams. Partnerships, like the multi-year sponsorship sales deal between Team Liquid and Twitch, can be leveraged to connect the platform to needed infrastructure for players and expose teams internationally. As talents grow and reap in the wins, it becomes easier to draw in more players in, sustaining growth on the platform.
- Stage Three: Adapting to the gamer, games, and growth
What will seal the deal for e-sports platforms in South-east Asia is developing for the South-east Asian gamer’s experience. Infrastructure needed to support services like streaming and payments remain latent across the region, with LTE and 4G speeds plateauing and credit card penetration only at 5 per cent vis-a-vis cash on delivery predominant in countries like Indonesia and Vietnam. Making game features more accessible will enable more gamers to go pro and compete globally, and this means working with local payment gateways and internet providers to boost platform usability.
Product-market fit also goes beyond the gamer. When Fortnite’s South-east Asia launch saw Epic Games successfully introducing sub-region matchmaking. Games entering South-east Asia are also leveraging on mobile with the new wave of gaming phones like Razer Black and Xiaomi Black Shark and the mobile gamers projected to be more than 250 million by 2021. What games are being played, how they are being played (localised) and where they are being played (mobile) affect user acquisition and gamer interactions on an e-sports platform, and working with these dynamics is crucial to scale.
- The writers are from Insignia Ventures Partners, a Singapore-based venture capital firm.