It’s Not You, It’s Me: Be More Like George Costanza to Get More Money in Esports
George: You’re giving me the “it’s not you, it’s me” routine? I invented “it’s not you, it’s me”. Nobody tells me it’s them not me, if it’s anybody it’s me.Gwen: All right, George, it’s you.George: You’re *damn* right it’s me.
By Jonathan Pan and Jeff Browning
Disagreements between esports teams, leagues, and publishers have culminated into two major flash points in the past month. The first flash point was a public dispute centered around revenue sharing between Marc Merrill, Co-founder of Riot Games and esports team owner Andy “Reginald” Dinh. After much community outcry, Riot announced short-term plans to open up more digital sales to teams as well as long-term plans to align economic interests with teams.
The second flash point was the formation of the Professional Esports Association (PEA). The best way to describe PEA’s aspiration is to imagine an organization that sits on top of multiple sports leagues like the NBA, NFL, MLB, and NHL. PEA’s will launch its first league focused on CSGO in January 2017. Since PEA will become the fourth major CSGO league, there will be many negotiations and tensions in the coming months as teams and leagues figure out how to balance their schedules and lock down sponsorships.
A lot has been said and written about these two flash points but ultimately, they boil down to two things, power and money. Power is largely a zero-sum game with game publishers holding most of the cards since they own rights to their intellectual property and any extensions of it, be it content or leagues. Therefore, teams and third-party leagues have to find ways to generate leverage over game publishers. The court of public opinion seems to be their strongest card to date and we generally envision a long-term equilibrium being established like what we see in the NBA and other sports leagues.
The discussion around money and revenue sharing have centered around the concept of franchising. Teams want to get a guaranteed seat at the table and a bigger share of the pie. This makes sense as revenue has stayed relatively flat or linear depending on what games the team fields rosters for, while costs, especially player salaries, have skyrocketed. However, the revenue sharing discussion shouldn’t be viewed as a zero-sum game like power. Subsequently, the long-term focus shouldn’t be on the reallocation of money within the ecosystem. The industry needs to focus more on growing the pie instead.
Esports revenue streams fall into three main categories: media (sponsorships and advertising), digital sales, and merchandise. The media pie represents the largest source of revenue for esports teams and leagues today so we want to recommend three ways to grow that pie.
Growing the media pie has been a challenge because industry insiders look at the numbers of spectators and level of engagement and scratch their heads wondering why brands aren’t clamoring into the space.
Esports entities should aspire to be like George Costanza and realize that the lack of the desired level of investment is because of them.
First, it is important to understand that most of the media money esports entities want is already locked up in multi-year contracts (Olympics, World Cup, NFL, etc.). Other people have “your” money and they exercise enormous leverage to lock up these funds for multiple years. This contributes to the power of inertia that is working against you. The concept of “If you build it, they will come” just isn’t true. You will have to take it away from more powerful, more connected sales teams with deep pockets and solid relationships.
Recommendation: You must find the revenue anyway you can in every budget bucket there is. Yes, sports. But also entertainment, digital, linear, influencer and experiential. You must be nimble enough to compete on every playing field as the underdog. Over promise and then way over deliver. We may be still a year away from mainstream acceptance of esports, but you need to lay the foundation for what will eventually become your own inertia of revenue when the time works in your favor.
Second, become a solution to aging media empires. Brands are not the only companies who stand to benefit from the valuable esports audience. Traditional media companies are always looking for strategic partnerships to help both protect and grow their advertising dollars. From the largest media holding companies to the newer digital publishers, companies are hyper focused on preventing more media budgets being moved to Facebook and Google. Brands are demanding this type of innovative thinking from traditional media companies so the timing is excellent.
Recommendation: Partner with people who have the pipeline to dollars. We could take a page from Snapchat’s latest strategic partnership with Viacom. Viacom has exclusive third-party rights to directly sell advertising surrounding Snapchat’s owned and operated content. A few months after that deal was inked, Viacom’s Ad Sales Chief joined Snapchat. They have obviously seen the value of having traditional media connections combined with their incredibly valuable audience.
Third, be more client focused. Does esports represent a valuable elusive demographic? Yes, but the bar is significantly higher than that in the world of brand dollars. You need to look at the opportunities not only through the point of view of esports, but through the client’s point of view. What are their immediate needs? What is the brand trying to achieve? What are their KPIs? What are the long-term threats to their business?
Recommendation: Positioning esports as a solution and not the next big thing when you talk to brands is critical. Everyday, brands that are evaluating 75 other alternatives to esports, including Facebook and Snapchat. They may have not the bandwidth to care about the subtleties of your streamers, team, or league. They need to understand why you are the best solution to their needs. They do not care about your team, they do not care about how big esports is in Korea, they care about putting butts in seats on opening day at the movie or the fast food franchisees calling up corporate and telling them “we like the new combo promotion…keep it up” and so on and so on. This is how you move the needle and it requires being just as passionate about your brand partners success as your own.
Power and money will continue to be flash points for esports teams, leagues, and publishers in the near-term. We recommend that the industry focus on growing the pie through media revenue streams rather than fight over reallocating existing revenue streams. Media dollars want to come in because the esports audience will have magnificent purchasing power in the near future. Media dollars want to come in because no other programming opportunity, besides live sports, has so much access to this demographic. Media dollars want to come in because they want to talk the kid who doesn’t watch TV. It’s on the esports industry as a whole to help them get in.
Jonathan Pan is Head of Esports at BRaVe Ventures. He can be reached at jon@braveventures.com or @notvert.
Jeff Browning is Principal at Jeff Browning Media. He can be reached at jeffbrowning1@gmail.com.
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