The Future of Esports: A Paradigm Shift Toward Embracing the Massive Fan Base

Despite all the challenges, the foundation of the esports business is solid. Many people play games, and there's a significant audience for watching them. The global audience, which includes demographics that are typically hard to reach through traditional means, not only makes the industry popular but also leads to its rapid expansion. It's more than just a marketing platform, as commonly perceived. The key to ensure esports realizes its full potential is to establish a sustainable business model that is centered around the massive fan base at both the ecosystem and stakeholder levels. This involves focusing on two crucial factors: viewership and monetization.

Improve Viewing Experience

Continuously growing viewership requires strengthening connections with the extensive fan base and viewers. Therefore, it is essential for streaming platforms to continually enhance their platforms to deliver an improved viewing experience. By fostering better audience engagement, these platforms can replicate the passion of in-person events in the virtual world, enabling the massive global audience to feel truly immersed. Publishers recognize this importance, hence their efforts to enter the broadcast space, introducing customized features tailored to their specific titles for a more personalized fan experience and heightened engagement. The integration of VR/AR technology has the potential to significantly elevate the fan experience, leading to increased engagement in the future.

Creating Digital Revenue

To make the economics work, the esports ecosystem as a whole needs to work collectively to find a different way to monetize through the fans/viewers to grow the pie. The significant missed opportunity for esports lies in digital revenue. Esports is inherently digital, played on digital platforms. The primary source of revenue for esports should logically be digital since that's where the audience is and where they spend their money. However, the reality is that digital revenue remains surprisingly minimal, especially for esports teams. Game publishers did have a major chunk of their revenue from in-game microtransaction, but still there are many missed digital opportunities. The good news is that many players believe that digital revenue is going to be the focus in the future. In May, LCK introduced innovative digital collectibles (NFTs), called “LCK Legendaries”, which are digital cards with LCK highlights, players' information, and other match details that can be purchased, traded, collected, and cherished. This initiative aims to create fresh digital revenue streams and enhance fan engagement. Although initially launched and tested in Korea, it represents a significant stride in disrupting the existing ecosystem, potentially reshaping business models toward digital revenue for various players in the ecosystem. This showcases that being able to create digital products based on the endless gaming content and make it directly accessible to the fans and viewers can be a game changer for the esports industry as a whole.

On the stakeholder level, a couple of links within the ecosystem also need to be strengthened to support growth on the ecosystem level.

Game Publisher ---> Streaming Platform

It might not make sense for game publishers to create a streaming platform for gamers and fans/viewers. However, building a broadcast platform for esports competitions could bring game publishers much closer to fans and viewers. This is particularly relevant given that high-profile esports events can attract millions of viewers but generate minimal revenue from media and broadcast rights. By having their own broadcast platform, game publishers can be motivated to explore digital revenue opportunities. More people are watching the games than playing them as they grow older, making monetization on a watch platform potentially more effective. While this may further increase the power of game publishers in the ecosystem, it also shifts their incentives away from marketing to align more closely with other stakeholders, particularly esports teams. The pursuit of digital revenue opportunities, especially in collaboration with esports teams, has the potential to increase the power of esports teams as well.

Pro Gamers ---> Fans/Viewers Through Social Media

Pro gamers, despite being influential stakeholders, have the opportunity to connect with fans and cultivate their personal brand, akin to "celebrities." Currently, many players focus heavily on competition due to the industry's competitiveness, dedicating significant effort to practice for optimal performance. A more proactive approach can be adopted to enhance the social media presence of pro gamers, offering long-term benefits, especially considering their relatively early retirement. Esports teams can play a role in supporting pro gamers in this endeavor, creating a mutually beneficial scenario and lead to more power for both parties.

Esports teams ---> Fans/Viewers

Esports teams are in the weakest position, this is why it gets hit the hardest during the esports winter. However, it also has a lot of potential to become more powerful in the ecosystems. After dedicating years to optimizing relationships with sponsors, it's now crucial to focus on the extensive fan/viewer base, recognizing it as the key to growth and a source of power.

Esports teams can bolster their position by establishing a strong social media presence, building digital communities for its fandom. This is also not controlled by the game publisher, providing a unique avenue for increasing power within the ecosystem. Building a strong fan base through pro gamers can also be an effective strategy. While fans may exhibit greater loyalty to individual gamers than to teams, these loyalties are positively correlated. Recruiting star players, even on short-term contracts, can instantly elevate the team's brand in front of millions of fans. Supporting gamers' growth and treating them well leaves a positive impression on fans, enhancing their loyalty to the esports team.

Holding the closest relationship with fans increases the esports team's power, ensuring a larger share when collaborating with game publishers or streaming platforms, particularly as digital opportunities arise. The centralized fan base serves as an ideal platform for launching new products. Additionally, it opens avenues for exploring new revenue streams like membership or loyalty programs—a prospect worth experimenting with.

Reference

Riot Games, Building the Future of Sport at Riot Games. https://www.riotgames.com/en/news/building-the-future-of-sport-at-riot-games

LCK legendaries official website.(2023) https://lck.legendaries.com/en

Denisov, V., (2020). Development of digital marketing in Esports