EPT
Oversaturation
Please read this entire post before replying.
Introduction
The word ‘oversaturation’ has been in vogue within our community for the better part of a year now. Frankly, I am absolutely fed up with it. The term is problematic because its use belies a number of fundamental misconceptions about how to properly grow the activity. Crying about oversaturation has become a serious crutch. It hinders the progression and growth of the activity as a whole. Because discourse helps to shape human action, the following deconstruction of the word ‘oversaturation’ and its use is meant to try to get people to change their way of thinking about the term and question the motives of those who advocate it.
Defining oversaturation
Oversaturation, as a word in and of itself, is a corruption of the term ‘supersaturation,’ which denotes a state in which a chemical solution contains more of a dissolved material than can be dissolved by the solvent under normal circumstances. (1) Supersaturation also refers to a vapor of a compound that has a higher partial pressure than the vapor pressure of that compound. (2) The word itself is neutral, there is no implication of good or bad inherent in its definition, owing to its scientific origins. (3)
This is a far cry from how it has been used in the competitive gaming scene over the better part of a year. Oversaturation advocates argue the following points:
- That there are ‘too many’ tournaments and events existent in the scene right now.
- That the above kills ESPORTS.
- That to not kill ESPORTS, there should be substantially less tournaments and events existent in the scene.
The problem with oversaturation
Proponents of oversaturation myopically believe that we have enough demand now, and that this level of demand will remain unchanged despite changes in the price level and shocks to supply. This is hardly the case. It has been conceded time and time again that the current level of demand for competitive gaming is still at a low level. ESPORTS is still a small fraction of the actual gaming community, which itself remains a small fraction of the entire population as a whole.
The following shows a theoretical economy of ESPORTS:
![[image loading]](http://i.imgur.com/jLXxh.jpg)
The full loss area is actually the entire area until the vertical line finally meets AD1.
The aggregate supply curve (AS) denotes the total output of goods and services (in our case, events and tournaments), produced within an economy at a given overall price level in a given time period and its relationship between price levels and the quantity of output that firms are willing to provide. (4) The aggregate demand curves (AD1, 2, and 3) denote the total demand for goods and services within our ESPORTS economy at a given price level. In this theoretical economy, aggregate demand is made up of the sum total of: consumption of events and tournaments in the form of time, money, and engagement, investment into the scene in terms of marketing and promotion, and external spending in terms of injections of capital into the scene by the game developers. (5)
The points at which the aggregate supply curve meet the two levels of aggregate demand are equilibrium points. At these convergences of price and supply, an optimal level of events and tournaments are produced and consumed. The first point (PL1), denotes the current equilibrium level existent today. (6) The second point (PL2) denotes a theoretical equilibrium point reached when the aggregate demand curve shifts to the right. The third point (PL3) denoted on this graph denotes the a theoretical point to which the proponents of oversaturation seek to reduce production artificially. As you can see, it dramatically under-serves the current level of aggregate demand for the sole purpose of increasing the price level.
What happens to the people who would be under-served by this supply shock? When supply is restricted to this point, and everything becomes an $8.95 pay-per-view purchase, (7) people will simply drop out of the formal market. It must be understood that the ESPORTS market does not operate in a vacuum. A large number of things compete for the consumption of the audience our activity relies upon, and these things operate as extremely close substitutes. (8) This dropout factor is what creates the theoretical AD3 curve in the graphic above.
Supply-sided approaches to this matter ignore the fact that demand-side approaches make far more sense in the current environment. Rather than restrict supply (in restraint of trade) to such a level that aggregate demand will be forced to decrease to meet it, our community should focus all of its efforts into building aggregate demand to the point where supply will increase with it sustainably.
Proponents of oversaturation would imply that the problem is that total production right now is too large. They would seek to shift the supply curve to the left, as denoted in the following:
![[image loading]](http://i.imgur.com/Psr9U.jpg)
There are only two ways to constrict total output in this manner: some producers of events and tournaments must close shop and leave the economy or all current producers must agree to make less. The way by which this is accomplished can be elective on the part of the producers, coercive, in which larger producers engage in anticompetitive practices to force out competition, or a mixture of both approaches.
This is the logic of oversaturation: to reduce competition in the market substantially. Aggregate demand, to its proponents, is stable and inelastic. It is an approach which labels the entrance of new producers and competitors into the market as harmful to the overall economy. It is an approach that is fundamentally exclusionary and anti-democratic. Forcing producers out of the market is just as bad as forcing consumers out of the market, on both an economic and ethical level. This is especially so when an increase in aggregate demand would solve the supply ‘problem’ that proponents of oversaturation love to isolate in the first place.
Beyond oversaturation
All this focus on oversaturation also ignores the fact that a number of intervening factors (a number of which fall outside of the control of everybody in ESPORTS) can contribute significantly to the decline in engagement that oversaturation proponents point towards as proof of its existence.
Let’s talk about things we can somewhat influence first. Decreased engagement might be as a result of a number of deficiencies that may or may not exist in the status quo. Current tournament production might just not be doing a good enough job of producing storyline and hype in their product. Current progamers just might not be good enough to stir up hype and a following outside of creating petty drama. The current batch of good progamers just may not be ‘exciting enough’ for casual viewers. The solutions for these things are simple, and would be advantageous: (1) make a better product and ensure its quality, (2) play better at the game and show off skill, and (3) marketing deserving players based on skill regardless of their point of national origin. These actions, once again, move towards shifting the aggregate demand curve to the right rather than focusing on restricting supply and trade.
We also have to recognize that StarCraft II is not the only competitive game title which is enjoying an amount of success in the present. Other games exist, most notably Dota 2 and League of Legends, which compete for the viewership of our audience; and it might just be true that they are currently doing a better job of enticing that audience and keeping them engaged than the StarCraft community is doing.
The final intervening factor is something none of us can affect in any way, unless any of you reading this blog on Team Liquid actually happen to be ministers of finance or heads of state in the most powerful countries of the world. The fact is that the economy sucks and will continue to suck for quite some time. In the United States, unemployment has reached 7.8%, (9) and a great deal more are structurally unemployed, meaning they have given up on seeking work in the first place. In other economies, specifically in the Eurozone, the unemployment rate is far worse than what the United States is experiencing. This is coupled with an increased focus on austerity measures which aim at the reduction of sovereign debt and deficits at the expense of growth in at least the short- to medium-term. The euro itself is in danger of collapsing, and there are rumors abound in the market about a Chinese economic recession as their era of sustained double-digit growth eventually comes to an end. All of these things negatively impact the amount of time people have available to the consumption of ESPORTS.
Conclusion
Demand-side approaches are the way to solve the problems in competitive gaming, not supply-side restrictions in restraint of trade. Economics and ethics aside, our community seems to have forgotten the original goal of it all: to get more people involved in competitive gaming and to get more people passionate about competitive gaming. If it turns out that ESPORTS is actually unsustainable, then let it fall. The fans will still be there in the end, and growing their numbers now can only increase the likelihood of a resurgence in the future after a fall.
References and Notes:
- https://en.wikipedia.org/wiki/Supersaturation
- Ibid
- It does, however, assume steady-state.
- http://www.investopedia.com/terms/a/aggregatesupply.asp#axzz29Q6A6CMi
- In macroeconomics, aggregate demand is equal to the Gross Domestic Product (GDP) of a given economy. ‘External spending’ in the case of ESPORTS is close to the function of the government spending component of GDP. Because there is no real function of international trade and export in ESPORTS, this component is ignored in calculating our theoretical aggregate demand curves within the ESPORTS economy.
- Proponents of oversaturation would have you think that the current equilibrium level is not actually an ‘equilibrium.’ This is a useless value statement. The facts do not change, at the current level of production and consumption, this level remains the equilibrium point for the economy.
- Shoutouts to Canada Cup.
- Examples of alternatives include: movies, television shows, casual video games.
- http://www.bls.gov/
Previous blog: Inflation and Exchange Rates
I do personally agree that there is an overabundance of tournaments, but that is good for players who are looking for money and recognition, and entertaining for fans as well. However that does kind of cheapen the value of every tournament/win...so it's not a black and white issue by any means.
