Jean-Charles Lacoste, MD of sports monetisation experts InPlayer, discusses what eSports businesses can do to generate better income
Newzoo's recent white paper said that eSports is now worth $200m and that this will more than double by 2017.
Audience-wise, pro-gaming is predicted to match the 190m annual audiences achieved by ice hockey and American football by 2017. But when it comes to revenue, there's an imbalance between sports and eSports.
Currently, over one third of eSports revenue is sourced from online advertising and the industry is reliant on investment from publishers for the remainder. Sponsorship and consumer contributions are growing. But compared to sports broadcasting, that contribution is minimal, currently standing at an estimated $2.20 a year per person compared to the $20 a year contributed by sports fans.
This overreliance on advertising and the low income from end users is holding eSports back from achieving its potential. It's something that can be resolved easily if eSports broadcasters looked at other sports broadcasting.
When BSkyB launched in November 1990 some claimed that viewers wouldn't pay for content when they already had access to TV for free (although obviously it wasn't free). Viewers didn't need more choice and would certainly not pay for it, they said. Then Sky won the broadcasting rights to the Premiership in 1992 – cue same objections. Pay-per-view on individual sports events followed. Repeat to fade...
We now know those objections were short-lived. Viewers did – and do – pay for quality, relevance and exclusivity. In 2013, the US broadcast of [boxers] Floyd Mayweather versus Robert Guerrero secured 2.2m pay-per-view buy-ins. In 2007, HBO sold 4.8m PPV buy-ins raising $255m – more than $5 per customer.
The birth of streaming services like Netflix introduced viewers to the concepts of both appointment and mobile viewing. Their success has shown that viewers are not just happy to pay for quality, relevance and exclusivity, but they're also happy to pay for immediacy, convenience, customisation and an advertising-free experience. Viewers want more choice and are happy to pay for it.
"Introducing a fee for live-streaming
matches doesn't automatically offend
or split a community."
Jean-Charles Lacoste, InPlayer
My question is: ‘when will eSports start monetising its content in a more efficient and profitable way?' I've heard the argument that channel owners feel they can't introduce PPV because publishers don't want to upset the community. I don't buy it. Introducing a fee for live-streamed matches or tournaments does not automatically offend or split a hard-built community.
What it will do is give the community a choice, for example: to pay for an ad-free experience, to watch in HD, or for additional, exclusive content. It doesn't have to be an ‘all or nothing' offering.
For the channel owner, introducing a paywall also makes sense. Advertising is not the most effective form of monetisation. Broadcasters receive 2 to 3 CPM (cost per thousand) from online advertising yet if they introduced a PPV fee of 1 per person with a two per cent conversion rate this rises to an income of 20 CPM.
In 2014, a Canadian Ice Hockey League partnered with EverSports to monetise its online league championship and, using InPlayer technology, it generated $100,000 in its first four weeks based on an audience of 234,000 and 7,000 paid for tickets. This was an 89 per cent increase year-on-year and vastly more than if it had funded the stream through online advertising, which - based on a $3 CPM rate and 234,000 users – would have generated just $702.
A paywall can also capture donations mid-game for a charity that's close to the developer's or the community's heart – such as GamesAid – thereby further instilling a sense of communal purpose. Users can also be invited to donate to the channel or to the players, which is called tipping.
eSports broadcasters are on the cusp of something massive, but it could be even bigger. We need just one brave player to adopt an alternative revenue model.
Jean-Charles Lacoste is MD of InPlayer. He's a video monetisation expert who has worked with clients in sports, music and religious broadcast industries