- Twitch viewership doubles overall, but esports viewership isn’t following that trend
- Tournament organisers and teams suffering from loss of live event revenue
- Continuation of esports leagues helps with sponsors, but not with new business
As traditional sports rights-holders, broadcasters, clubs and agencies find themselves in an increasingly perilous position, there have been more than a few envious glances toward the esports industry, which is perceived to be thriving through this crisis.
Twitch, the Amazon-owned streaming platform that primarily hosts video game-related content, has massively benefitted from lockdowns in most major western markets.
The platform’s daily average and peak viewership numbers have been on a familiar upward curve ever since the crisis hit, with total average viewership leaping from 1.35 million people in January to almost 2.5 million in April. Peak viewership has also hit new highs this month at 4.33 million, eclipsing a record set back in August 2018.
There has also been a marked increase in esports activity from traditional rights-holders looking to plug the gap left by the global shutdown. Formula 1 and Nascar have been particularly successful and FIFA tournaments such as the Ultimate Quaran-team have also attracted huge amounts of attention and publicity.
Now that esports is the only form of professional competition in town and traditional sports have begun to explore the space, there is a widespread assumption that the industry is enjoying a purple patch as a result of increased exposure in the mainstream and an ability to reach new audiences. Scratch the surface, however, and a much more complex picture emerges.
ESL has enjoyed increased viewership across its Counter Strike: Global Offensive properties, but the reasons for that are more nuanced than the top line numbers suggest. The ESL Pro League has always held its regular season matches during the daytime on weekdays, meaning that much of its core audience is often unable to watch. With more of its core audience now at home, ESL’s numbers have been consistently higher.
For esports properties that usually broadcast during primetime and on weekends, the impact on viewership has been negligible. Top-tier League of Legends competitions played in Europe, North America and South Korea saw regular season viewership peak well before lockdowns began, and average viewership was also lower for regular season matches taking place during lockdown.
It’s true that social distancing and a lack of live sport has prompted a strong increase in the amount of time people spend watching content on Twitch. It has also resulted in more time spent playing video games, a higher number of video game purchases and an increase in the number of in-game items bought by players.
However, it is important to note that this rising tide is not lifting all boats. Asked whether increased viewership on Twitch is contributing any extra revenue to his business, Team Vitality chief executive Nicolas Maurer is unequivocal.
“No,” he replies with a wry laugh. “The direct effect of the crisis will be – and clearly is – reducing our income. Every esports team will say the same.”
The companies benefitting from the lockdown – streaming platforms and games publishers – are benefitting because people are buying, playing and watching more video game content. These trends signify growth in the video games industry, not esports. Increased viewership and exposure are useful, of course, but the financial upside barely trickles down to esports-reliant companies, which are far more vulnerable to the wider economic effects of the crisis.
Modern Times Group, owner of tournament organisers ESL and Dreamhack, expects revenue from esports to be down by as much as 45 per cent year-on-year. Live event revenue has been wiped out by Covid-19 and this forms a huge part of each business both in terms of direct revenue and providing exposure for sponsors.
“Based on the assumption that live events will be allowed starting Q3, MTG expects an improved operational performance in [the second half of] 2020, supported by rescheduled Master properties and festivals for both ESL and Dreamhack,” MTG said in a statement to investors. If its assumption is incorrect, the damage could be far worse.
Reduced income for tournament organisers such as ESL and Riot Games has a significant knock-on effect for teams. Income from revenue-sharing agreements has fallen drastically and teams are unable to apply for government relief as playing and operational staff are still in work.
Maurer says: “The ESL Pro League was reformatted over the course of a few days and we went through a process where we were constantly interacting with them. Not going into details, but of course we’re discussing impact on revenue and the way this all works.”
“It’s all amicable with Riot, we all appreciate the issues they’re going through and the issues the teams are going through,” says Kieran Holmes-Darby, chief gaming officer at League of Legends team Excel Esports. “In some areas, the issues that we’re experiencing are aligned with Riot. In other areas, they’re not. We’re having those open discussions.”
The fact most esports leagues and competitions have been able to continue in some shape or form, despite the loss of live event revenue, makes the situation manageable, but no better than that.
“All of the events part of the business is completely cancelled for now and impossible to do and the merchandising supply chain is hit, so it’s difficult to keep on going this side of the business,” Maurer says. “From a Vitality perspective, we are very well financed and we have plenty of time to adapt, but this will inflict a big hit on the smaller organisations. It will affect everyone to different degrees.”
Though stories of increased viewership and mainstream interest in esports may have been overstated in the media, the fact that most top-tier esports competitions have been able to continue has helped teams manage their existing partnerships.
Brands are aware that activations won’t be as polished as they were before the crisis, as tournaments are now played online instead of at an arena or dedicated studio. Tournament organisers and teams are working together to maximise exposure for their partners in any way they can.
Maurer says: “Sponsors understand the situation and they are also getting good exposure, even if it’s a bit different. We aren’t seeing the live action in a studio or arena, with players in the jerseys and branding in the arena.”
Holmes-Darby adds: “Riot Games has done really well to mitigate a lot of the on-screen losses. Wherever the players would have been on screen, they now have headshots or pictures in place which clearly show the partners.”
He continued: “Where a partner has expressed concerns, there is the ability to produce more digital content with players in the jersey, for instance. There is the opportunity to use social media engagement to get the right amount of brand exposure. There’s a whole host of digital assets which we already sell on that we can just ramp up a little bit more in these times, and we will do so where partners express consent.”
Increased digital activation is okay for the short-term and helps keep partnerships alive, but teams are hoping that things will change sooner rather than later. Esports teams aren’t purely digital entities and physical activations are important in connecting fans with existing partner brands.
“We have Paris Games Week in Q4, this is key for us,” Maurer says. “We will keep preparing as if it will happen. We’re crossing our fingers there.”
Events and physical activations are also crucial for securing new business, which has all but dried up as a result of the crisis.
“Tournament organisers are trying to adapt to make sure we still get exposure, so that part is mostly fine. What’s more concerning is new business,” Maurer says. “Right now, it’s completely…let’s say complicated to sign new sponsorship deals. Budgets are frozen or delayed at most companies.”
Holmes-Darby says: “New business is a bigger area of concern because brands aren’t too keen to spend marketing dollars right now. Sales agencies are struggling to get as much deal flow at the moment.”
For all the difficulties facing esports right now, it’s not all doom and gloom. Competitions are still active at a time when almost all professional sport has been cancelled and there is still the occasional new deal to give teams hope for the future.
On April 16, German car manufacturer BMW confirmed partnerships with five of the world’s top esports teams: Cloud9, Fnatic, FunPlus Phoenix, G2 Esports and T1 Entertainment. The car manufacturer had been working towards the partnerships since Q3 last year and decided to go ahead despite the current situation.
“There are brands big enough to continue marketing during times of crisis like this and for those brands who are keen to do so, one of the only forms of live content they can spend their marketing dollar on in this world is esports,” Holmes-Darby says.
“Sponsors understand where we are and they comprehend the situation, but on top of that we tell them it’s an opportunity – a big opportunity,” Maurer adds. “We give them the figures of the viewership of the competition and tell them they could be doing even more digital activation in esports, because they cannot activate their traditional sports sponsorships right now.”