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Hello my name is Bagration, and welcome to my blog. In this blog, we shall be discussing ways in which we can grow the competitive SC2 scene, and Esports in general. With that said and done, let's begin:
Recently, I was watching the IPL stream where Mr. Ting had been taking questions on IPL 4. A statement that I found particularly concerning was the fact that IPL 3 had spent roughly $1 million dollars, yet had ended up losing hundreds of thousands of dollars.
From a business prospective, this is horrible news. If premier tournaments such as IPL cannot be profitable if they hold LAN events, companies are less willing to provide sponsorships and partnerships, and a vicious cycle begins, and eventually will lead to the collapse of the tournament.
In IPL's advantage is the fact that they do have a significant financial overhead in IGN. IGN acts as the umbrella entity over IPL, and IGN can dillute the financial losses from IPL from its other sources of revenue, and thus continue to sustain IPL longer than had IPL been a singular entity. But nevertheless, no company is willing to hold on to a division that consistently loses money.
Another advantage is that this tournament was IPL's LAN debut, and the overall response to the event was overwhelmingly positive. This is good news since it suggests that IPL is still attracting viewers, and thus sponsors will become more interested in IPL due to its growing viewship.
How do we solve such a structural financial problem? I do not work with IPL, and thus my ideas are merely suggestions from a lone individual. One way IPL can increase profitability is by cutting costs, as Mr. Ting notes that IPL 3 had spared no expense. Obviously, this is not something that many fans nor players would want to see: IPL 3 stood out from the pack because no expense was spared, and this perfectionist attitude will bring in more viewers and sponsorships. Still, while we can agree that this is probably an unwise business decision, it will almost certainly remain as an option for the IPL executives.
Another possibility is to diversify the product. League of Legends is often looked down upon by SC2 players, and one of the critiques that many made for IPL 3 was the LOL finals broadcast which delayed the SC2 finals. I too feel that this was a poor move on IPL's part, but their idea to diversify their product was a good idea. Whatever the community may feel about LOL, LOL is immensely popular, and in NA and EU, arguably more popular than SC2 (gasp). If LOL can match similar viewership numbers, this allows IPL to make additional revenue, but at a marginal increase in costs, since many large costs such as facility, production, staff, etc would been already largely paid for, and could increase total viewership numbers, which would also encourage sponsors.
TL;DR Financial viability is very important to the success for SC2 tournaments, and how we can improve this.
Thank you for taking the time to read my lengthy presentation. Of course, I now open the floor to the community. Any thoughts, comments or ideas? Thank you.
  
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Calgary25951 Posts
I agree. The thing is that a company can sustain massive losses for a year or two without really showing it. IPL lost money, I'm sure NASL is losing money. I'm hoping MLG is at least breaking even. Without seeing the balance sheets there's no way to know.
And there seems to be this huge "Esports is huge" push going on, but is it really? It seems like everybody but the very top players are just scraping by. Are these teams actually making money? I'm worried it's all smoke and in a year when we need to start seeing profits, everything will be gone. A similar thing happened at the start of BW everyone seems to forget (massive prize pools that were never done again).
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Without having any relevant insider knowledge, I think Sundance is on top of things with MLG, he knows he's running a business, and he knows he can't run a business without money. Just look at MLG's relatively low pricepools, and you'll see that they as an organization are taking a more careful approach to their finances than upstarts like IPL and NASL.
It's understandable, MLG is already a recognized brand, but the others desperately need to get their name out there.
I'm willing to bet Dreamhack is not run with major losses either, as another established organization, they almost definitely already have the financial infrastructure in place to support their events long-term. Remember that both MLG and Dreamhack have been around for a while.
So I don't really think there is a problem at the moment, the best run organizations and leagues will survive. It may be necessary for someone like IPL to take losses for a season or two in order to establish themselves in the scene, because no matter how you look at it, MLG is the major player in North America, Dreamhack in Europe and GSL in Korea.
What I think will happen is that we'll see less tournaments, as you can't run 10 different big leagues realistically, it doesn't even happen in sports much more popular than starcraft. But less tournaments isn't necessarily a bad thing, it just means those that are out there will be bigger and more prestigious.
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konadora
Singapore66063 Posts
in a BW-related show a couple of months back, called "After Talk", one of the BW commentators mentioned how e-sports is mainly a loss-based investment, but the only reason investors continue to pump money in is because of the increase in face value of the companies. by investing into something youths and the masses enjoy, even though they make financial loses, they increase reputation and improve their image. but yeah, as you pointed out, other than IPL, it's rather hard for companies to continue pumping money to be faced with losses which you really can't afford.
the idea of diversifying is not a bad idea. with the resources for streaming/broadcasting already at hand, all it needs will be just some adjustments and they're ready for another game.
chill has a good point though, something that i've been worried about ever since the launch of SC2. i felt that way too many companies are throwing ridiculous amount of sums of money into SC2, in the name of ESPORTS, without waiting to see it develop in the first place. it's like forcing steroids into a newborn and the whole process, to me, felt rather unnatural. there's no prejudice or anything of that sort when i say that the whole SC2 and ESPORTS bandwagon was fueled, at least initially, because there was tons of money involved. even one of the GSL winners (was it MVP?) said so that he played because of the money. (ok i think i went off tangent too much lol)
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they will continue to operate so long as the have a good prospective in the long run. like chill said, they can cover their losses relatively easily for the first little while, and SO LONG as they expect to see some sort of profit in the future it is worth it to keep going. the question is how long are they willing to wait before seeing a return?
people are definitely putting a lot of faith into the scene and its expected growth, hopefully that pays off for everyones sake.
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Great blog. I always wondered what the business expectations are for events like IPL / NASL / MLG.
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IPL audience on stream looked super tiny, the crowd shots when they the panel were stunning. It was like 5% full, i wonder why? I'd love to see stephano, select, mc, and incontrol talk o_o. I do think they made quite a mistake holding it in a 21+ venue rather than not. On the most basic level, the amount of people who wouldn't go to a tournament unless there was gambling and drinking involved (lol?) should be (i think) greatly surpassed by the number of people under 21 would have liked to go to the event.
Touching on the cutting costs thing a bit, I've always wondered if e-sports in it's current state is growing too fast. When they go on talk shows, people like Incontrol and others are always comparing "the best tournament". They're always talking about how great it was, how it could be better next time, what needs to happen, and while some of it is necessary, others may benefit from being pushed back a bit. To hold a bigger tournament means to put more money into it, and the only way to get your name into the scene is to throw a great tournament. Trying to directly compete with an MLG at this stage of the game may be fighting not to have a larger revenue share, but to survive. My main concern is that the prestige and cost associated with maintaining a premier tournament is growing faster than people are hearing about it. Secondly, the fan base. I think it's safe to say that the majority of new people who go to tournaments aren't new to starcraft, but rather already play and have decided to attend their first tournament. The increasing base is coming from a set population, not people as a whole.
Of course, it takes money to make money. If something is poorly set up and run, it's more unlikely for people to come back. Lan events also have really large sunk costs associated with computer and other tech equipment, which will take many tournaments to average out.
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I think people are seeing the viewer numbers and assuming there must be a business model that works. Part of the problem is that advertising dollars don't actually get spent rationally. Ads on websites pay a lot less than ads in newspapers/magazines, even when they have the same number of viewers, and I would assume the same is true for streams vs. tv. I think that's actually a big part of why the idea of putting SC2 on tv makes more sense than some people realize. My guess is that at some point advertisers will wake up to this and and the pressure to find cheap ad opportunities will push online advertising up to reasonable prices. But that's a huge industry change that we can't do anything about. We just have to hope it happens soon enough (or that we make the jump to tv).
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Katowice25012 Posts
On October 29 2011 01:41 phiinix wrote:
IPL audience on stream looked super tiny, the crowd shots when they the panel were stunning. It was like 5% full, i wonder why? I'd love to see stephano, select, mc, and incontrol talk o_o. I do think they made quite a mistake holding it in a 21+ venue rather than not. On the most basic level, the amount of people who wouldn't go to a tournament unless there was gambling and drinking involved (lol?) should be (i think) greatly surpassed by the number of people under 21 would have liked to go to the event.
For the finals the theater was nearly full, but in the days prior yeah it was pretty empty. I question IPL's strategy of hosting these at 21+ events but David Ting tweeted about having the next one in Vegas so I guess thats their thing. At this point I don't think a LAN can even start up and try to hang with 'the majors' without incurring a huge loss in their first few ventures, so we'll have to see if that causes problems in the next year.
We're in kind of a weird place right now because these kinds of things are making the ears of sponsors perk up, but a lot of them are a little uneasy because they have been burned in the past with the millions of failed LAN ventures. We'll have to see if people can monetize things appropriately to a point that is sustainable. I'm pretty interested in seeing how everything pans out over the next year, these events can't just run at a profit so it comes down to being able to find backers who think the investment is worth it to put their name out there.
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all three NA majors are losing money. The difference has always been at what viewer base scale do they plan to break even. Currently, NASL's break-even line is closest to our actual viewer-level; MLG is furthest. Things may change when MLG restructures (note the fact that MLG had to restructure).
As-is, the starcraft 2 population is too small, too spread out to sustain even our current level of activity. This is not doom-n-gloom, just that our industry is immature.
Additionally, we really haven't find a proper way to produce contents and materia that people will pay for, even for our existing, hardcore viewer base. The hardcore viewership - ones whose entertain are primarily based on eSports - have money, but nobody has properly utilized them. That's why you see these random fundraising that are highly successful. These kind of hijinks are not sustainable and an highly inefficient way to move money around.
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On October 29 2011 00:53 Chill wrote:
I agree. The thing is that a company can sustain massive losses for a year or two without really showing it. IPL lost money, I'm sure NASL is losing money. I'm hoping MLG is at least breaking even. Without seeing the balance sheets there's no way to know.
And there seems to be this huge "Esports is huge" push going on, but is it really? It seems like everybody but the very top players are just scraping by. Are these teams actually making money? I'm worried it's all smoke and in a year when we need to start seeing profits, everything will be gone. A similar thing happened at the start of BW everyone seems to forget (massive prize pools that were never done again).
Can you elaborate on these prize pools? I don't know the really early live tournament history of BW but am interested (pre 2002 that is) in learning more from the financial side of it.
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On October 29 2011 02:54 Primadog wrote:
all three NA majors are losing money. The difference has always been at what viewer base scale do they plan to break even. Currently, NASL's break-even line is closest to our actual viewer-level; MLG is furthest.
As-is, the starcraft 2 population is too small, too spread out to sustain even our current level of activity. This is not doom-n-gloom, just that our industry is immature.
Additionally, we really haven't find a proper way to produce contents and materia that people will pay for, even for our existing, hardcore viewer base. The hardcore viewership - ones whose entertain are primarily based on eSports - have money, but nobody has properly utilized them. That's why you see these random fundraising that are highly successful. These kind of hijinks are not sustainable and an highly inefficient way to move money around.
Yeah monetizing it is difficult, especially when the most obvious way is pay-to-view but your main fans are going to be people who will be tech-savvy enough to find a way to get a pirated stream or something.
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Monetization has always been difficult for esports because we never really attract business-minded people in the industry, and the business-minded people that we attracts tend to be flight-by-night carpetbaggers that jump in and out and leave a trail of destruction in its wake.
To be sure, it's not impossible. BarCraft is a very obvious new concept that has been generating economic activity in esports. I just hope it can be properly harnessed to contribute back to the industry in some way. Before barcraft, there's also streaming and coaching - business concepts that fueled our economic engine for quite some time. Another bright spot is the Collegiate StarLeague. While it takes more long term to become a financial center, it can provide big dividends for the industry as it grow and prosper, and we're very close to that point.
We need more of these ideas.
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New, successful business concepts rarely happen in eSports. This is because when some business-major will come up with a business plan, we tend to kicked them right out of the community for "coming in to eSports to make money (fairly and unfairly)." We all seen it happens. ProVPro is an obvious example.
This is related to the dual business-community nature of eSports. To be successful in this space and not get rejected, you gotta be both a brilliant business-mind and understand what makes our community tick. How many people fulfill that criteria? Sundance is often cite, but many people forgot that he's not some miracle, instead he's a business guy with an team of media strategists behind him. He understand community relations is closer to politics than business, and treats it as such.
Starting a new business is hard enough already, but consider how much harder it is in eSports. Not only do you have to put together a viable business plan on paper, you have to communicate its feasibility to the community; not only you have to find and join the communities, you're also expected to provide all the details about your plans; It cannot be too financially successful, or else the community will say you're in it for the money; you have to locate community veterans to back your venture or else you're a scammer; etc;
Anyone who started a business before can see how much more hostile esports can be compared to more traditional ones.
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On October 29 2011 03:11 Primadog wrote:
Monetization has always been difficult for esports because we never really attract business-minded people in the industry, and the business-minded people that we attracts tend to be flight-by-night carpetbaggers that jump in and out and leave a trail of destruction in its wake.
To be sure, it's not impossible. BarCraft is a very obvious new concept that has been generating economic activity in esports. I just hope it can be properly harnessed to contribute back to the industry in some way. Before barcraft, there's also streaming and coaching - business concepts that fueled our economic engine for quite some time. Another bright spot is the Collegiate StarLeague. While it takes more long term to become a financial center, it can provide big dividends for the industry as it grow and prosper, and we're very close to that point.
We need more of these ideas.
Are you implying that the standard things established sports do can't work? The obvious idea seems to be the ones most people are trying - advertisements during tournaments, paying to watch the tournaments, endorsements, and tickets to events. Obviously there are details that are still unclear (sponsor teams or individuals? ban streaming to boost major event viewers?) Those things have clearly worked for other sports. Is there any reason they won't work here, other than just that the viewer numbers are lower? It seems to me that the real barrier isn't coming up with some clever way to monetize, but rather just in getting big enough numbers. (Part of the issue is maybe a lack of centralization. The NBA having a monopoly over basketball has a lot of downsides, but they make sure players don't play where you can see them without buying tickets to NBA games and so forth.)
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Cite "standard" implies there is anything that we (as an industry) haven't already attempted to copy wholesale from mainstream sports, besides getting on television. Copying mainstream sports (big and small) have got us so far, but it has not grown our sport to a sustained level. This is why many veterans has begun to reject calls like "let's get on tv" or "let's have KESPA."
Endorsements, advertisements, ticket-sales are already part of the industry revenue source, but their numbers pale in comparison (even in per-capita basis) to what any other sports rake in (mainstream or not). That's exactly why this blog was warranted.
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Calgary25951 Posts
On October 29 2011 03:04 cz wrote:Show nested quote +On October 29 2011 00:53 Chill wrote:
I agree. The thing is that a company can sustain massive losses for a year or two without really showing it. IPL lost money, I'm sure NASL is losing money. I'm hoping MLG is at least breaking even. Without seeing the balance sheets there's no way to know.
And there seems to be this huge "Esports is huge" push going on, but is it really? It seems like everybody but the very top players are just scraping by. Are these teams actually making money? I'm worried it's all smoke and in a year when we need to start seeing profits, everything will be gone. A similar thing happened at the start of BW everyone seems to forget (massive prize pools that were never done again). Can you elaborate on these prize pools? I don't know the really early live tournament history of BW but am interested (pre 2002 that is) in learning more from the financial side of it.
I may be mistaken, but I seem to remember there was a specific tournament in BW that TheBusDriver (or similar name...) won 10k with a 6 pool. My memory is hazy and it's hard to find information online about them  I hope someone who remembers can find in the blanks and correct me if I'm wrong.
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On October 29 2011 03:39 Primadog wrote:
Cite "standard" implies there is anything that we (as an industry) haven't already attempted to copy wholesale from mainstream sports, besides getting on television. Copying mainstream sports (big and small) have got us so far, but it has not grown our sport to a sustained level. This is why many veterans has begun to reject calls like "let's get on tv" or "let's have KESPA."
Endorsements, advertisements, ticket-sales are already part of the industry revenue source, but their numbers pale in comparison (in per capita basis) to what mainstream sports rake in. That's exactly why this blog was warranted.
Right, but I'm saying why? Is it just that the number of viewers is smaller? Or is there something about the community/sport/etc. that makes those models fundamentally work less well? It doesn't seem to me like starcraft viewers are somehow more bothered by commercials on streams than soccer or baseball viewers are. They seem to care *more* about companies that sponsor their favorite teams/players (or just anything in the industry, for that matter). My bet is that a higher percentage pay money in order to watch the game than do so for other sports (which are mostly available for free on tv/internet). So maybe I'm missing something, but it seems to me like it's just a lack of viewer numbers that keeps us from doing the same things that tennis does.
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On October 29 2011 03:40 Chill wrote:Show nested quote +On October 29 2011 03:04 cz wrote:On October 29 2011 00:53 Chill wrote:
I agree. The thing is that a company can sustain massive losses for a year or two without really showing it. IPL lost money, I'm sure NASL is losing money. I'm hoping MLG is at least breaking even. Without seeing the balance sheets there's no way to know.
And there seems to be this huge "Esports is huge" push going on, but is it really? It seems like everybody but the very top players are just scraping by. Are these teams actually making money? I'm worried it's all smoke and in a year when we need to start seeing profits, everything will be gone. A similar thing happened at the start of BW everyone seems to forget (massive prize pools that were never done again). Can you elaborate on these prize pools? I don't know the really early live tournament history of BW but am interested (pre 2002 that is) in learning more from the financial side of it. I may be mistaken, but I seem to remember there was a specific tournament in BW that TheBusDriver (or similar name...) won 10k with a 6 pool. My memory is hazy and it's hard to find information online about them I hope someone who remembers can find in the blanks and correct me if I'm wrong.
You might have been thinking of this tournament. http://pc.ign.com/articles/066/066321p1.html
I remember thinking it was too good to be true when it was announced.
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On October 29 2011 03:11 Primadog wrote:
Monetization has always been difficult for esports because we never really attract business-minded people in the industry, and the business-minded people that we attracts tend to be flight-by-night carpetbaggers that jump in and out and leave a trail of destruction in its wake.
To be sure, it's not impossible. BarCraft is a very obvious new concept that has been generating economic activity in esports. I just hope it can be properly harnessed to contribute back to the industry in some way. Before barcraft, there's also streaming and coaching - business concepts that fueled our economic engine for quite some time. Another bright spot is the Collegiate StarLeague. While it takes more long term to become a financial center, it can provide big dividends for the industry as it grow and prosper, and we're very close to that point.
We need more of these ideas.
And if we were to attract these people, what exactly would they do differently? What's so special about business-minded people as opposed to what we have now - what would be actual, observable differences that increase profits (or decrease losses)?
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EPT
