2023-10-30 08:52:49
Published on Oct. 27, 2023 at 11:06 a.m. Updated on Oct. 30, 2023 at 9:38 a.m.
With more and more events on French soil, e-sports (competitive practice of video games) seems to be taking hold on the national territory. For the BLAST TV Major Counter Strike in the spring and the LEC Season Finals 2023 At the beginning of September, two major international events in the discipline, Paris and Montpellier, welcomed tens of thousands of spectators, not to mention a large online audience.
E-sports even seems to be taken very seriously by the French government, which announced, on the sidelines of the 2024 Olympic Games, an esports event around the racing game Trackmania. While perhaps waiting for Olympic medals to reward the greatest controller aces. Since September 2023, the IOC has had a commission working on the subject, headed by Frenchman David Lappartient, former president of the International Cycling Union. Parliament also recently voted to lower VAT to 5.5% for e-sport ticketing, aligning this rate with that applied to other sporting and cultural events.
E-sport represents revenues estimated at more than $1.38 billion in 2022, 5% more than in 2021. It also represents more than 530 million spectators worldwide. However, despite these positive figures, the dynamic seems to be slowing, and recent events suggest that it might soon find itself in a complex economic situation. Many issues related to the sustainability and viability of the system have also been highlighted as well as avenues for reflection to deal with it, like those resulting from our work.
Unprofitable structures
The very structure of this market is the source of numerous difficulties. Different actors, in particular, are stakeholders in the sector, with completely unbalanced power relationships.
On one side we find video game publishers, such as Riot Games, Valve or Epic Games. We might very schematically compare them to sports federations having the intellectual property of their sport: they can, at any time, modify all the rules and practices put in place in their competitions.
On the other side, we have esports teams, players, tournament organizers, and fan communities that adapt to publishers’ rules in order to survive in the ecosystem. Finally, there are external stakeholders, mainly sponsors and the media, who are there to finance the teams, tournaments, and players with the aim of visibility or brand image, thus allowing the structures in place to survive.
Currently, the vast majority of e-sports teams, even the largest, are not profitable from a financial point of view. They need fundraising and a strong presence of sponsors in order to survive. Vitality, one of the largest French e-sports structures, had for example raised 50 million euros over three years at the start of 2022 in order to continue to develop in the Counter Strike: Global Offensive action game scene.
If the promises of future profitability seemed enough to attract many sponsors to the biggest teams until recently, the Covid crisis and the lack of medium-term vision now seem to discourage them. Some sponsors and investors do not hesitate to cut their funding. The most striking example is that of BMW which announced its gradual withdrawal from e-sport at the start of 2023 while they were highly invested through 5 of the largest international structures since 2019 (G2 and Fnatic in Europe, T1 in South Korea, Cloud 9 in North America and Fun Plus Phoenix in China).
Other large structures, such as TeamSoloMid and 100 Thieves, two American structures valued in 2021 at more than $400 million each according to Forbes in 2022, have also terminated several contracts following financial problems. Evil Genius, one of the biggest American teams, even relocated some of its operations to South America in order to survive. In France, LDLC OL, a historic association of e-sport in France linked to Olympique Lyonnais, has announced the total cessation of all its e-sport operations in May 2023.
Three avenues of reconfiguration
Alarmist in appearance, these cases might also be the first indicators of an entire overhaul of the system. The publishers, owners of the games, seem to hold possible answer keys to allow economic stability for the big teams. Indeed, while in traditional sports media rights represent the majority of revenue for teams and leagues, they are almost non-existent in e-sport. Tournaments are mainly broadcast on streaming platforms where access is free. Publishers might then opt for a better redistribution of the money generated by the games and indirectly the competitions, in order to ensure the sustainability of the teams and their leagues.
Another element of the solution might come from the e-sports communities themselves. Spectators seem to be increasingly organizing themselves into groups of supporters, like in classic sport. They seem ready to consume and organize to support their favorite teams and players. To meet their expectations and push them to get even more involved, teams might think regarding innovative experiences in order to ensure a form of fixed income. This includes taking care of being seen as a sport. As we show in our work, This strengthens, for brands, consumer engagement, perceived value, and purchase intention for related products.
Finally, the very structure of the teams seems to need to be revised in order to ensure their sustainability. For example, despite the crisis, ENCE, a Finnish e-sports structure, managed to generate a profit of around 1 million euros in 2022. This profit is, according to the CEO, largely due to the constant performance of the structure on Counter Strikes and has good management of its payroll. The crisis might therefore be an opportunity for e-sports teams to reintroduce salaries in line with the market and the profits of e-sport. Publishers such as Riot Games, which notably develops League of Legends battle arenas, are also considering implementing a salary cap in some of their competitions in order to avoid excessively high remuneration that does not allow teams to be profitable.
This article is republished from The Conversation under a Creative Commons license. Read the original article ici.
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