E Sports: Becoming The New Mainstream

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Introduction

With millions of players and thousands of tournaments each year, computer games have become one of the world’s biggest sport industry. E-Sports is growing to be a global phenomenon. It has a strong unified community and demographics with huge potential for market and business. Computer game tournaments are spectated by thousands and millions each year. These all-star players are treated as celebrities and have a chance to win cash prizes up toward the millions. However, with the promise of fame and glory, there is also the concerns and criticisms amongst the industry. In 2016, E-Sports is projected to be rapidly surpassing traditional sports with audiences and business revenue. [1]

League of Legends 2014 World Championship.[2]

Contents

What is E-Sport

E-Sports or electronic sports are games often played by multiple players in competitive matches and viewed online via streaming or in stadiums around the world. The games played can be anywhere from old school arcade games such as Pac-Man and Donkey Kong, to the more recently developed competitive titles such as Street Fighter, Call of Duty, Dota 2 and League of Legends. The competitive scenes of E-Sports have been around for the past 20 years and is experiencing unprecedented growth in the current digital world.

Gartner's Hype Cycle[1]

Gartner's Hype Cycle

The Gartner's Hype Cycle is a graphical evaluation of the adoption of technologies and applications. E-Sports is not evaluated on the report however it is most likely near the end of the innovation trigger phase of adoption. This is because E-sports as an industry is still growing rapidly as an emerging trend. The the controversies, growing demographic and the ease of access garnered unparalleled hype to the industry of E-Sports.

History

The First Recorded Video Game Competition

First Intergalactic Space War Olympics[2]

The first recorded video game competition was held at Stanford in October 19, 2000 and it was advertised as such:

The first “Intergalactic spacewar olympics” will be held here, Wednesday 19 October, 2000 hours. First prize will be a year’s subscription to “Rolling Stone”. The gala event will be reported by Stone Sports reporter Stewart Brand & photographed by Annie Liebowitz. Free Beer! [3]

With the allure of free beer and prizes, two dozen people gathered at Stanford to compete in the first recorded video game competition. Contestants competed on the Stanford University's Artificial Intelligence Laboratory. Two events were held: A Five-Man free for all and a team competition.

The Emergence of Online Gaming

E-Sports Earnings for Popular Games starting from 1998 [4]

With the introduction of the internet and the subsequent reduction in bandwidth prices, playing and competing in video games online with other players became a huge hit. People were able to play against other players without the need for physical proximity.

The first game that utilized the internet for online competition was Netrek. It allowed up to 16 people to compete against each other online. In 1993, it was considered “The First Online Sports Game” by Wired Magazine, and may have paved the way into what E-Sports is today.[5]


The Popularization of Competitive Games

By the late 90’s and early 2000’s, competitive gaming was gaining traction. Through continual support from game developers and the gaming community, the competitive video game scene thrived. What started off as a hobby for many, developed into financially capable career path for some. The prize money distributed to professional gamers consistently grew as the years went by. For example, the tournament earnings for the popular game,Defence of the Ancient 2, or DOTA 2 was $1,736.36 in 2005, and the earnings in 2015, a decade later, is at $29,544,631.32.[6]

League of Legends Grand Finals at Madison Square Garden [7]


The Recognition of E-Sports

After the popularization of the games, competition between the top players became something that was thrilling to watch. Tournament viewership gradually grew larger and larger reaching a peak of 8.9 million hours watched for just one game in a day.[8] What started off as small tournaments with small prize pools, grew into multi-million dollar tournaments. At last, with a thriving community around competitive video games, the term “E-Sports” was officially recognized as a word in the dictionary in May 2015.[9]



Current E-Sports

Community

Dota - We, The Community[10]

The E-Sports industry has a remarkably strong community backing its growth. Different parties from loyal fans, professional players, organizers, media streamers, developers, content creators, competitive leagues, tournament hosts, third party advertisements, and different associations all constitute this vast E-Sports gaming community. This community has grown into large number of groups that interact to discuss, play, create, watch or even work for E-Sports and the E-Sports industry.

In the beginning, E-Sports was a struggling industry due to its negative image. The view on video gamers were that they will rot your brains and the people who play games are isolated loners who play games in the basement all day. The E-Sports industry suffered as a result. The pros and their team did not have large sponsors. The industry was not big enough to be approached by big companies for sponsorship. During this trying time, the gamers and the E-Sports community endured. The community continued to support the competitive scene even with the limited reward. It was hobby that the community passionately took to the next level.

With the increased bandwidth and cheaper personal computer, players across the globe are able to effectively communicate and compete with one another online. This is how the community of E-Sport started growing exponentially. It began with a game with fans and players who just wants to watch, play and compete. It is through their dedication and their love for the game that caught the developers attention. The developers were able to communicate with its avid fan base and saw the opportunity of organized E-Sports tournament. Using their asset and actively listening to the community, many developers such as Riot Gaming, Valve and Icefrog are able to turn the passionate fan base and community into a billion dollar professional competitive industry. The E-Sports community created the backbone to this successful and rapid growing industry.

E-Sports is a national pass time within South Korea [1]

Culture

Jimmy Kimmel on E-Sports Gaming.[2]

In the past, the perception of gamers and the gaming community wasn’t too good – they were considered “basement dwellers” or “nerds.” [1] That was because the early demographic for videos games were such people; unemployed single males who spent most of their time at home -- sometimes in a basement.[2] However, the perception of a “gamer” has been slowly changing over the years.

As with the growing popularity of diverse games, there are also diverse groups of people playing those games. With hundreds of millions of gamers today, it is unreasonable to believe that all of them are unemployed and are a stain on society’s theoretical shoe. In fact, a 2014 study commissioned by Twitch TV found that gamers, generally, contribute more to society than their non-gamer counterpart. [3] One should note that the study defines a gamer as “anyone who has played a game on a digital device in the last 60 days.” When compared to their non-gamer counterpart, gamers: lead more social lives, have a closer relationship with their families, are more educated, are more optimistic, more likely to be employed full-time, work in a career they want to be in, and are more socially conscious. Also, the gaming community is no longer male dominant, in America, gamers were split 52% male and 48% female[4]

Korea and E-Sports

E-Sports has had the most profound impact to Korean culture. Korea is a nation that places high value on winners and strong performer. For this very reason, professional video gaming has been an integral part of many different cultures. In Korea, E-Sports is considered one of the biggest youth culture. The youth look up to the best of the best gamers of their favourite game. The industry is Government supported. There is a sector within the government that solely supports Korea’s E-Sports Industry. The entire industry has contributed over $1.1 Billion dollar to Korea’s GDP in 2014. In 2015, it is project the entire industry will generate over $4 Billion to the Industry. This number is projected to increase with the growth of the online population and gamers in Korea. It is estimated that a gamer spends on average $290.10 toward the E-Sports industry. The US is also considered to be one of the fastest growing audience base with a 21% growth in total viewers of E-Sports.


The Ugly Side of Gaming Culture

With the growing audience base of E-Sports and the anonymity nature of the Internet, it is expected that there will be a few miscreants. These people are generally referred to as Internet Trolls and their purpose is to bait a reaction from people by provoking them in some sort of emotional way. While the gamer trolls encompass only a small segment of gamers, they are the vocal minority that is the most noticeable and contribute to the negative misconception of gamers.

Demographic

The popularity of E-Sports in the West [5]

There are over 1.7 Billion gamers in the world, but not all gamers are active viewers of E-sports. It has been speculated that over 70 million people watched E-Sports worldwide. Consumers of E-Sports are generally amateur gamers who enjoys watching the game they are playing and actively participate in the community. In the United States, 31.4 million people watch or participate in E-Sports. For all US gamers between the ages 10 to 50, 56% of them are aware of E-sports.[6] In Western Europe, there are 16.3million people who watches or participate in E-Sports and up to 50% of Western European gamers are aware of E-sports.[7]

Difference in gender among E-Sports viewer [8]

Currently, as many as 40% of E-Sports viewers do not play the games themselves.[9] This indicates that E-Sports is rapidly becomes a spectator sport similar to traditional sports. On top of that, the remaining 60% of E-Sports viewers only watch it sometimes, meaning that there is potential that they may become active viewers or participants in the future. They indicate the potential growth of the E-Sports platform. With the number of E-Sports viewership doubling almost year over year, the growth of E-Sports is is unmatched by anything within the traditional sports industry.[10] This highlights the reason why many investors and businesses are willing to investor capital and resources into this growing industry [11]


Gender While female gamers represent nearly half of the gaming community, they have a smaller E-Sports presence. Typically, E-Sports is male dominant and this is especially true in the US and Western Europe. In the US, female E-sports enthusiasts account for 31% of the total E-Sports population.[12] There is an even lower ratio of female to male E-sports enthusiasts in Western Europe where females only account for 24% of E-Sports Enthusiasts.[13]



Market

E-Sports Market Within North America [14]

With global viewership exceeding 134 millions, sponsorship in North America worth over $111 million in 2015 and over 12 million people to have attended live E-Sports Events, the E-Sports market is experiencing a tremendous rise in its value.[15]

In 2015, more than 4.6 million North American viewers tuned in for the grand finals of the Dota 2 tournament, The Intenationals 5. [16]

In 2015, more than 32 million global viewers tuned in to watch the League of Legends Worlds Championship.[17]

Within the estimated $612 global market of E-Sports, the Asia market, namely China and Korea, dominates more than half of the global market with #375 million.[18]

The E-Sports segment is expected to represents only a small portion of the video games market, with less than 1% of the total video games market. During the first half of 2015, E-Sports was expected to generate $612Million. However, that estimate has increased to $747.5Million just months later. This represents the unpredictable growth rate of the E-Sports market. It also highlights the fact that the market still has tremendous room for growth.





Popular E-Sports Genres

Though competitive gaming existed since the 1980s with the 1980 Space Invaders Tournament that attracted ten thousand participants, it was not until the 1990s, with the rise of arcade and console games when the first true E-sports competitions started gaining recognition, when large companies such as Nintendo and Blockbuster started sponsoring world championships.[19]

The five major genres that E-sports games fall into are fighting games, first person shooters, real time strategy, sports games, or multiplayer online battle arena games (MOBA). Most professional players spend their entire gaming career into a single game or genre, due to the drastic differences between video game genres.

CSGO Professional Gameplay [20]

Fighting Games
Fighting games are one of the earliest forms of E-sports to be played in professional tournaments, with the founding of the Evolution Championship Series in 1995. Games in this genre are generally played by two individuals who are providing input to the same machine. Notable game titles or series played at a professional level include the Street Fighter, The King of Fighters series, Mortal Kombat series, Marvel vs. Capcom series, Tekken series, Killer Instinct series, and Super Smash Bros. series. Important international level tournaments for this genre include Evolution Championship Series and Capcom Cup.

StarCraft 2 [21]

Shooting games
First person shooters (FPS) are predominant market for shooting games in E-sports. There are also a few other third-person shooters such as Splatoon that are rising to demand in E-sports. FPS games focus on simulating a shootout from a first person perspective, and it may be either individual or team based. Notable titles currently in the shooting game E-sports scene include Battlefield series, Call of Duty series, Counter-Strike series, and Halo series.

Real-time strategy
Real-time strategy (RTS) is a subgenre of strategy video games where the game and strategy progresses in real time in order to resemble reality more closely.[22] Since it is not a turn based strategy game, players must take heavy precautions, and react to make the correct decisions immediately in response to the opponent’s actions. Blizzard Entertainment's StarCraft: Brood War was the foundation in the establishment of E-sports. It first rose to prominence and success in South Korea where it began the professional gaming scene. Nearly 10 years later, the game is still popular with its hardcore fan base even at the face of the introduction to its sequel, StarCraft II. The StarCraft franchise still remains the most popular series in the RTS genre. Other notable titles in this genre include the Warcraft series, the Total Wars Series and the Age of Empires.

Sports Games
Sports games are video games that simulate an actual sport, such as hockey, football, and motor racing. A number of game series feature names and characteristics of real teams and players, and are updated annually to reflect real-world changes. FIFA Football, Madden NFL and NASCAR are notable games in the genre.

Multiplayer Online Battle Arena

Dota 2 - Together We Stand [23]

Multiplayer Online Battle Arena (MOBA) games are considered a subgenre of RTS games, but are different enough to be considered a separate genre on its own. While RTS focus on an individual player controlling multiple units, MOBAs are more team-oriented, usually played in a team of five, each person controlling a single character unit.

The genre began from a fan-made Warcraft III mode called Defense of the Ancients (DotA) in 2003. The popularity of this mod inspired Valve Corporation to create a stand-alone sequel, Dota 2. League of Legends, published by Riot Games, primarily inspired by DotA, and is currently the most played PC game in the world, with more than 23% of shared playing time in all PC games as of September 2015.[1] Other notable titles include Smite is a third-person MOBA, as opposed to the bird’s-eye view in regular MOBAs, Heroes of Newerth, and Heroes of the Storm.

Other

Hearthstone
Hearthstone is a free-to-play online collectible card game developed by Blizzard Entertainment, and it is quickly gaining popularity as an E-Sport with MLG and BlizzCon hosting tournaments.

Pokémon
The Pokémon video game series is a successful series of role playing games with an element of strategy, which are also played competitively.[2] World Championships sponsored by the Pokémon Company and organized by their Play! Pokémon division has been held for several years.

Tournament

League of Legends World Championships 2015 Semifinals in Brussels Expo, Brussels [3]

Similarly to traditional sports, viewers enjoy watching two skilled opponents struggle for victory in a high risk high reward setting where the outcome of the match is uncertain. The fast paced movement of E-Sports can be difficult for people unfamiliar with the game to understand. However, it has not stopped the growth of competitive E-Sports due to the viewer, the gamer and the community's relationship with gaming. The competitive E-Sports scene has gradually increased in the 2000s. It has grown tremendously in the last 3 years. The rapid rise in viewership was astonishing. E-Sports tournament have come a long way in a short amount of time due to the supportive community, better internet access, media streaming services and overall infrastructure. [4]

When Evolution Championships Series (EVO) began, it was a small community of 40 participants for the tournament in a single Street Fighter title at the time. EVO's community and prize pools have increased exponentially in the past three years, with over thousands of participants from all over the world and $303,500.00 in the prize pool in EVO 2015.[5]

Many E-sports championships take place at large traditional sports stadiums. Venues build for traditional sports and celebrities such as Staples Centre, Madison Square Garden,Key Arena have been used to host large E-Sports tournaments. The growth on E-Sport even reach a global scale. The League of Legends Season 5 World Championships took place in four different venues across Europe with the Grand Finale host in France on October in 2015.[6]

Not only are the venues for tournaments getting larger, the prize pool of popular E-Sports like Dota 2 and League of Legends have also grown exponentially. The prize pool of Dota 2's first official global tournament, The Internation 2011, has an impressive prize pool of $1.6 million. However, during The International 2015, the prize pool grew to be $16 million.[7] The reason for this huge growth is due to the crowd funding abilities of the E-Sports community.

In addition, collegiate tournaments are becoming increasing popular, to attract young adults to pursue E-sports as an alternative career. An example of such being League of Legends' North American Collegiate Championship, a tournament that only full-time students can register for, and compete for a grand prize of $180,000. The stream receives over 80,000 online viewers on Twitch.tv at its peak.

Team Evil Genius winning The International 2015 willing $6.6 Million Brussels [8]
The International 2015 hosted at Key Arena, Seattle [9]



Teams

The rise of the professional gaming industry can be credited to South Korea's efforts to level the playing field between physical sports and E-sports. While E-sports was largely a hobby in North America and Europe, Korea had a robust industry in Starcraft and Warcraft III that have featured licensed pro-players since 2000. These professional teams had players earning six- and seven-figure salaries, endorsements from major brands, and games broadcast on national television. After Korean eSports Association (KeSPA) partnered with America's Major League Gaming (MLG), E-sports continued to grow and started to legitimize with the same level of respect given to popular athletics.[10]

There are gaming organizations such as Evil Geniuses, Cloud9, Curse, and Team Solomid that specialize only in E-sports. There are also E-sports teams that are sponsored by corporations such as SK Telecom and Samsung whose operations had no affiliation with the E-Sports industry until now.

In the past, players generally stay in the region they reside in to represent their country or region. However, a new trend of interregional movement of Professional Players.[11] Professional players are imported from and exported to different parts of the world to stay help teams stay competitive within regions.





Media Streaming

In 2014, Twitch has a commanding lead over all other online streaming service [12]

While E-Sports grew consistently from 2010 to 2013, the market really took off in 2014. The growth was driven by the increasing population of players and video game streamers.

Twitch and Google

During the summer of 2014, there were rumors that Twitch was to be acquired by Google for $1Billion USD. Twitch [13], at the time, was struggling to keep up with massive growth of their business. This therefore, appeared to be the ideal acquisition for Google as they have only, at the time, recently tested live streaming capabilities through YouTube.[14] With two media streaming giants – YouTube and Twitch – working together, Google could have solidified their already dominant presence in distribution of content in the ever evolving gaming media streaming phenomenon. In the end however, the deal fell through and Twitch was acquired by Amazon for $970Million [15].

Twitch and Google: It was never meant to be

Many news sources were positive that Google was going to acquire Twitch, however, it did not end that way. While most of the negotiations between Google and Twitch are not disclosed, there are some speculations as to why Twitch ended up with Amazon, rather than Google.

With Google owning both YouTube and Twitch, two of the most dominant video content providers, Google had antitrust concerns. It is said that Google and Twitch could not come into terms on a breakup fee if the acquisition fails,[16] and as a result, this may have contributed to why the acquisition fell through.

Another reason why the acquisition fell through may be due to Google’s influence and control over Twitch. Twitch has been in a constant state of growth and the only problem being that they did not have the resources to keep up with the growth. Twitch may have been confident in their business outlook and did not want any additional risks. If Twitch were to be a part of Google, there was a high chance of Google+ being implemented in some form. This would cause much outrage in the Twitch community as there was a possibility of Google+ being required to use Twitch’s services. As a result, Twitch might have had to deal with backlash, the same as YouTube in the past.

With Amazon however, Twitch is able to be free and stay independent. Twitch’s CEO Emmett Shear stated, "We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence. But with Amazon’s support we’ll have the resources to bring you an even better Twitch."[17]

Twitch and YouTube: The Competition

The two major online media streaming platforms for games and related content are Twitch and Youtube. In 2014, the percentage of total global viewers for Youtube and Twitch in the game content segment is 73% and 53% respectively. [18] Although Youtube has more viewers, Twitch actually generates more revenue. Youtube only has 36% of market share, while Twitch has 43% of market share. [19] . In the United States, Twitch has, by far, the highest percentage of live streaming viewership. The top three are Twitch, WWE, and USTREAM, with 43.6%, 17.7%, and 10.9% respectively . [20]

Advertisement and Sponsorship

The E-Sports Market Size 2015 [21]
Different E-Sports Sponsors[22]

Due to the rapid growth and large viewer base of E-Sports, Investors has injected huge sums of money onto the E-Sports platform. E-Sport has become extremely attractive to different sponsors and advertisements as it provides an access to a specific segment of market that were previously hard to reach through traditional means of media advertising. These gamers and E-Sports viewers usually prefer streaming through online channels such as Youtube, Twitch and Netflix instead of the traditional cable channels. This valuable segment of market are usually the engaged PC gamers who spent more on hardware and software than average gamers.[23]

The E-Sports industry has created a viewing experience that makes viewers feel like they are also involved in the tournament. Betting, in-game items, merchandise, and microtransactions have all helped to drive this engagement with viewers. This has helped create an audience that spends almost as much on the competitive gaming hardware as the tournament players themselves - and is a goldmine for tournament sponsors.[24]

Similar to traditional sport industry, E-Sports relies heavily on product sponsorship and advertisement to gain revenue. Sponsorship contributes to over 75% of the entire E-Sports market.

Large advertisement can has dramatic impact on the growth of E-Sports. Recently, Coca-Cola has partnered up with E-Sports developer Riot Gaming to host a series of amateur League of Legend gamers to compete for a spot in the professional league. This advertisement project essentially created a minor league system for players to potentially graduate to the Big Leagues and compete for large prize money.

E-Sports is a mass phenomenon that has proven to be a advertising and sponsorship goldmine. Other large brands that have tapped into the E-Sports industry includes: Intel, IBM, Red Bull, Razer, AMD, Alienware, BenQ, Nissan McDonald and much more. [25]

Business

The revenue of F2P games vs. Subscription games[26]

Business Model

There are many business implications that comes with the rise of E-Sports. Historically, games are sold with a pay wall system where a physical copy of the game is bought and sold at a physical store or distribution centre. Without the game, you will not be able to play the game. However, an evolution within the game market are moving away from packaged games.

In recent years, there has been a rise in different business model for game developers such as the Free to Play, Freemium, Downloadable contents, Monthly Subscriptions and even advertisement revenue based gaming models. Amongst the many categories, most of the popular E-Sports game discussed are within the Free-to-Play business model. [27]

Free-To-Play is a business model and marketing decision. It aims to distribute the game as widely as possible by setting the price of the game at zero. Players will have the option to support the game with payments through Microtransaction if they see the value in the game's content. The difference between Free-To-Play games and traditional games is that the revenue comes after players have begin playing instead of before and that there is no upper limit on how much a player can spend to support the game's content.

Microtransaction

Microtransactions is a business model where users are able to make micropayments on virtual goods. Micropayments are payments that are supposedly small ranging starting from a few cents or a dollar. The idea behind this method is that consumers tend to be more willing to spend small sum of money on smaller payments on a game where they play often. Game developer and publisher Nexon created the model in order to open the game to more people by removing the subscription fee for its games but at the same time generate a revenue source for the developers through the microtransactions. [28] Following Nexon's example, the Free to play model becomes a reaction to games with subscription fees. Many subscription based games such as Elder Scroll Online[29], Star Wars: the Old Republic[30] have become free to play games with microtransactions due to poor subscription performance. Microtransaction provide a mean for the developers to create a stream of revenue outside of the subscription fees.

Microtransaction of Team Fortress 2[31]

The prime example of microtransaction are the current mobile game apps for phones. Many of the games will have mechanics that will restrict players in some way unless they purchase a special currency via microtransaction. Within the E-Sports genre, microtransaction are usually created for players to purchase cheap and affordable cosmetic items that does not provide any in-game advantage. However, some people are willing to spend up to hundred of thousands of dollars on rare virtual goods via the in game microtransaction. The microtransaction process has grown into a huge part of the gaming community. Microtransaction's huge economic impact on game developers is an integral cycle to many E-Sports industry such as the huge prize pool of Dota 2 and League of Legends tournaments.[32]

Games such as Team Fortress 2, League of Legends, Dota, CounterStrike all employee this method. Developers create virtual good such as gun skins, hats, armors, mounts or voice packages to attract users to purchase small and affordable amounts of cash per purchase.

In 2014, Riot Games made $1 Billion in revenue through League of Legends alone. The game generate its revenue through microtransactions of virtual items on an online in-game store. The virtual items are generally cosmetic items or items that provides a boost to the in game characters.[33]

Microtransaction started out as an idea to help customers and gather a larger audience. It has now become one of the the top grossing business methods in gaming history.

Microtransaction to purchase RP in League of Legends [34]

League of Legends RP system League of Legends adopted a system that utilizes two different types of currency. RP, Riot Points, or IP, Influence Points.

RP can only be obtained by spending real world money in the League of Legends Store. RP can be used to purchase almost anything within the store including Cosmetic Champion skins, Boosts, or even new champions.

IP, on the other hand, is received for playing the games. IP can only be used to purchase new champions.

The restrictive purchasing power of IP means player can only gain more champions playing the game. In order to look different and stand out form other, you will need ot purchase cosmetic items that can only be purchase with RP. The system incentives players to purchase their favourite cosmetics for their favourite champion wit hRP that can only be gained through microtransaction.


Selling Cosmetic Items on the Steam Community Market [35]

Steam Community Market The microtransaction platform allows for many different business opportunities. One such opportunity comes in the form of the Steam Community Market created by Valve Corporation, the developers of Dota 2.

The steam community market is a community based market ran by Valve. The Market is created by Yanis Varoufakis, an economist for Valve’s virtual economy. He has been hire to be Greece’s Minister of Finance as a consultant to help solve their economic crisis.[36] The Community Market is used on Valve’s PC gaming distribution platform known as Steam. The market is created for the use of microtransaction between different games that shares the same currency, the steam wallet.

Designing of cosmetics items for a Dota 2 hero [37]

Through the steam market, players are able to purchase with their steam wallet or sell virtual in-game goods that they have acquired or traded for the same type of currency. This currency is then able to be used for other microtransactions, or they can be used to purchase the 781 million registered games sold through Steam.

Eventually in 2012, Valve introduced the Steam Workshop. The steam workshop allows players of Steam to source user created content. Players are able to use in-game discrete tools to construct and publish new maps, levels, modifications, cosmetic contents to support the games. These user generated content are then voted and hopefully implemented and sold as actual in game contents. Over $57 million has been paid to content creators using the Workshop to further the contents of the games. For Dota or CS:GO, 25% of the total profit from the skins goes to the users.[38]

Valve has essentially created a self sustaining microeconomy ran by and for the community. The community market allowed Valve to achieve its philosophy for trading where everybody wins: the buyers, the sellers and Valve as the service provider.





E-Sports Related Career and Business Opportunites

With E-Sports continuing to grow, not only do careers in E-Sports grow but surrounding industries start to change too. Products, jobs, and industries are emerging over time.

Dota 2 Merchandises [39]

Products

Many products are being introduced into the E-Sports scene. As one study has found, 47% of respondents reported that they would be more likely to purchase game related content after visiting an E-Sport event.[40] To take advantage of this, Valve opens up a merchandise shop every year at its annual tournament to sell game-related merchandise.[41] Companies like Valve and Riot have recently introduced their ways of distributing game related products through online retailing. Valve announced that they would partner with Betabrand (an online crowdsourced online retailer) to sell user generated products related to their game Counter-Strike: Global Offensive (CS:GO).[42] Similarly Riot has created in-house their own online retail store to sell their game related products.[43] Various teams also sell jerseys much like in regular sports teams sell their jerseys.

Jobs postings listed from Esportscareer.org [44]

Jobs

There are various jobs in the E-Sports industry. E-SportsCareers has job postings from different teams, game companies, league organizations and such. Many of the traditional sports related jobs such as analysts, game casters, coaches, team managers, event organizers, social media managers, video editors are all jobs in the E-Sports industry as well.[45]. Streaming oneself playing games on Youtube or Twitch can also generate a significant source of income for some individuals.[46]

MMR ad Elo Boosting

There is usually an Matchmaking Rating (MMR) or Elo system in a game, which is a system to rank players relative to other players in the user base which gives the game a competitive factor. The Dunning-Kruger effect, a cognitive bias where an individual assess themselves to be better than they should be, is very common in games with competitive play.[47] For example an individual may attribute a loss to having a bad team as opposed to having low skills themselves. Having a high MMR or Elo can also be a way to show that an individual is good at the game. It has become a status symbol within certain gaming community to show off that your are a skilled player. In many cases, individuals who believe that they are better than they are and can’t achieve a certain rating will pay for MMR or Elo boosting services. The service involves a skilled player playing on the purchaser's account to reach a certain level of MMR or Elo. These pricing for every game is different and also vary from their competitors. According to Dota2mmrboost, their pricing ranges from €8 to €499 from various increments of MMR boosted. The MMR and Elo boosting services are especially prominent in Asian countries.[48] This could be the case due to wages being lower in Asia, and therefore making the pay for these services worth the time. In some cases, the boosting services have become a popular E-Sport service that have significant income.

Due to Elo-Boosting as an act of dishonesty within the E-Sport Industry, many developers have been actively suspending players that have conducted or purchased Elo Boosting services. The most recent case involving the professional League of Legends player Yu "XiaoWeiXiao" Xian from Team Impulse. XiaoWeiXiao has breached the term and conditions of the game and was suspended from professional E-Sports by Riot mere weeks before the North American Regional Playoff. [49]

The Value Chain and Positions of E-Sports Industry [50]

Betting / Gambling

With the emergence of E-Sports, the gambling industry is starting to adopt E-Sports betting as part of their products. Some of the world’s biggest online sports betting websites like Bet365 and Pinnacle Sports have added many E-Sports games into their betting options. Aside from sportsbooks, fantasy sports contest providers have started appearing with E-Sports fantasy leagues. DraftKing has started providing fantasy league contests for E-sports.[51] With the the virtual currency created by the Steam Market, people have started using in-game skins to start betting. Sites like dota2lounge, csgojackpot, csgoblackjack, which all use in-game items instead of cash. Although the winnings will be in the form of in-game items, people do use these betting sites because they may like the items they get or because they can resell them for digital currency like paypal or bitcoins through trading individual players.

Ethics

E-Sportsmanship

Similar to professional athletes in traditional sports, E-Sports pro-gamers usually have to follow the rules set by tournaments, associations, and teams. They are also subjected to social obligation to behave appropriately. E-sportsmanship is the professional code of conduct for pro-gamers to promote and show consideration for the fairness, and respect to its competitors. Good etiquette include typing in chat “gg” (for “good game”) or “glhf” (for good luck have fun) to rival at the end or the beginning to show respect for rivals.[52]

One of great example of great E-sportsmanship where gamers seek fair competitions happened in a 2012 IEM StarCraft II game. Pro-gamers Feast and DeMusliM both voluntarily offered their game information to others because DeMusliM’s strategy was leaked to Feast during the game.[53]

On the other side, some Pro-gamers did not follow the E-sportsmanship professional code of ethics. Some players takes advantage of the games chat platform to verbally abuse the teammates or enemies. In 2013, StarCraft II player “Idra” was fired due to his display of poor etiquette. His habit of trash talk, vocalizing perceived game imbalance and in game toxicity has made him a controversial player during tournaments.[54].

Other display of poor E-sportsmanship include fixing matches and cheating. In 2012 MLG summer championship, Team Curse and Team Dignitas colluded during the game and allegedly planned to split the prize money.[55] Cheating is conduct of poor sportsmanship that damages the E-sports spirits. In 2012, Azubu Frost was allegedly cheating during the semi-final at LoL World Championship by looking at the screen meant for the viewers.[56] Actions like these not only disrespects the E-Sports professionalism, they are also clear violation to any type of competitive scene.

Drug and Exhilarant

In most sports league such as NHL, MLB and NBA or major sports event like Olympics, performance-enhancing drugs are strictly regulated. The use of performance-enhancing drugs is a common issue that is vaguely defined within the E-Sports scene.[57]Drugs such as Ritalin, Adderall and Vyvanse can significantly boost concentration, improve reaction time and prevent fatigue. This can provide a competitive edge to players during high intensity matches. Some Pro-gamers choose to use performance-enhancing drugs because the risk of getting caught is relatively low and the benefit from winning a game is much greater.

Adderall pills [58]

Performance-enhancing drugs are banned and penalized by many professional sporting bodies and leagues such as NBL and MLB. Due to the relatively new industry of E-Sports, the International E-Sports federation have not outlawed any PEDs. Action have only been taken on the individual league level.

There are many example of drugs that are used within the E-Sports scene. Selegiline, a drug used to treat parkinson’s disease, is reportedly popular because it enhances mood and motivation. Propranolol, which blocks the effects of adrenaline, players will use it in order to remain calm under pressure.[59] In July 2015, Semphis, a CS player, admitted that he and his teammates were all using Adderall during a match and claim that everyone at ESEA league tournaments uses the same drug. [60]

Taking performance-enhancing drugs regularly will lead to a lot of negative effects. The unregulated use of such drugs can sometimes have counter productive effects on the players. In the long term, use of PED poses severe risks to competitors' health, including addiction, overdose and weight loss.[61] It can even have severe effect on psychological health of players.

The community supporting Cheon "Promise" Min-Ki who survived an attempted suicide after allegation of match fixing [62]
The negative Press following the introduction of Team Siren[63]

Player Exploitation

Pro-gamers’ life, contrary to the fans’ imagination, is not that glamorous. In an interview, League of legends player “Dade” said that "Korean players wake up at 1pm and play until 5am", and suggested that the daily 16 hour play schedule was a significant factor in causing burnout.[1] At the same time, some organizations refused to pay competitive salaries to the players. These unfair treatment to players stem from the lack of any regulation to this new and undefined industry. The lack of regulation and poor treatment has had serious impact on professional E-Sports players. In 2014, League of Legends player Cheon "Promise” Min-Ki attempted suicide due to an allegation of match fixing. Promise claimed he was forced into act by his manager. He faced enormous pressure from the fans and the public.[2] The good news is the E-Sports community and different organizations has begun working to solve this issue. The E-Sports community has shown tremendous support for Promise’s recovery who miraculously survived the attempt. Rito Games, a korean League of Legends team, were adoption of minimum salaries, requiring contracts and allowing players to stream individually for additional player revenue for 2015 season. [3] Due to the lack of regulations and protection, publishers and the E-Sports community must be diligent and help prevent any further player exploitation.

Sasha "Scarlett" winning the WCS tournament in 2012[4]

Gender Equality

2014 Gender Distribution[5]

Most of the pro-E-Sports gamers had been male dominant. Only 30% of E-Sports fans were female in 2013; this number was only 15% a year ago.

Sexual comments, sexual harassment and sexism are existed in the E-sports culture. There has been numerous allegations of gender discrimination within the E-Sports community and the Internet. It is assumed that few female plays can play at the same level as the male gamers. The level of sexism within the community is especially prominent with the emergence of the notorious Team Siren, a team of all female League of Legends professional players. The 2013 video trailer showcasing each member of the team was faced with harsh discrimination and sexist feedbacks from the community. The level of toxicity were mostly focused on the fact that they are an all girl team who cannot perform at the standard of other teams.

However, the discrimination are not always based on truth. Canadian StarCraft II player "Scarlette" Sasha has defeated top Korean players. She is one of the few non-Korean players, male or female, who is able to defeated the dominating Korean players in StarCraft II.[6]


Risks

Most Common Injury[7]

Injuries

They may be sat behind a desk instead of being out on a field or court smashing into other humans, but that doesn’t mean E-Sports players are immune from career-threatening injuries.

From an interview conducted by Motherboard, “Dr. Levi Harrison, a hand and arm surgeon based in Los Angeles. Harrison—who specializes in athlete injuries—tells the site that after MMA fighters, his most common customers are E-Sports players, who fly in from all over the world to seek treatment for problems associated with repetitive motion injuries like carpal tunnel syndrome, tennis elbow and trigger finger.” [8]

As with many other sports, players have a finite lifecycle in their respected fields, with wrist and hand injuries topping the list for E-Sport players. With countless hours and repetitive hand motion, it causes physical injuries that will put players out of the game.

Addiction

South Korean Rehab Camp.[9]

South Korea is the world’s most wired country where a staggering 10% of people between the ages of 10 and 19 are considered internet addicts. [1] To counter this sort of situation the government introduced the “Shutdown Law” which blocks gamers under the age of 16 from accessing game sites between midnight and 6am. [2] South Korea has an alarming addiction to the internet, and this may not be a country specific epidemic as the world gets increasingly more connected and reliant on the web.

The methods used in rehab centres across South Korea are largely unique and largely untested outside South Korea. Methods include anything from wilderness rehab centres where children are forced to participate in outdoor activities, to electric shock therapy. Patients are not treated the same as drug addicts, because they will still need to use the internet to be a member of South Korean society, but the point of these rehab centres is to train these patients not to spend too much time on the internet. [3]

Internet Gaming Addiction Led to Baby's Death[4]

Death

In a tragic story, we learn of an infant’s death caused from starvation, because the parents were both addicted to playing a game that was based on raising a virtual baby.[1] This sort of news may become more frequent if gaming and internet addiction go unnoticed in other parts of the world. The shocking aspect of this news is that the natural human instinct of raising a child, is now fostered so deeply within the virtual world that the parents prioritize the virtual baby over their own real baby. This may seem like a rare and freak accident, but as the growing number of internet and gaming addicts begins to have families, we may see a world filled with more unimaginable deaths due to the virtual world.

Psychological Distress E-Sports, much like most professions, are going to need to do a lot of self-educating on signs of psychological distress in their members. This is something that needs to be de-stigmatized, so that it can be brought into the light and players can support and encourage one another. Part of this is creating healthy environments for professional players to thrive in, where they are able to feel fulfilled outside of their careers and develop meaningful relationships both inside and outside the team.

Under-Aged Gambling As mentioned in the above, with the creation of the Steam Market and gambling websites using a virtual currency, users can easily be able to gamble. With the emergence of these kinds of gambling sites that are not regulated, there can be underaged users introduced to gambling. The implication is that when they are easily accessible for under-aged users, it may contribute to under-aged gambling addictions.


Controversies

The different opinions on the definition of Sports [2]

E-Sports as a Sport

One of the biggest controversies faced by the E-Sports industry is its use of the world “sport”. Whether E-sport is should really be considered a sport as garnered different stances on the subject matter ever since its rise to fame in recent years.

To understand these controversies, we must first understand the definition of Sports

Sports - an activity involving physical exertion and skill in which an individual or team competes against others for entertainment.

So how does E-Sport compared to traditional sport?

Strategy: Most E-Sports genres involve incredibly complicated strategies and teamwork similar to traditional sports. Both traditional and E-Sports competitors must determine an opponent's strength and weaknesses and be aware of all possible course of actions, and choose the correct action in real time. Some scientists believe certain computer games might give a better indication of exceptional intelligence than chess. E-Sports teams spend a huge amount of time working on strategy and communication which is almost always the difference between victory and defeat.

Fitness: E-Sports players are nowhere close to the physical conditioning and fitness of traditional sports athletes. Traditional athletes have superior stamina and strength from daily trainings, where as, E-Sports players have the stereotypical routine of sitting in front of a computer screen for up to 16 hours a day.However, recent studies have shown that a fitter body equates to a fitter mind. Many managers and coaches of top teams have made sure their players are eating healthy and exercising regularly.

Reaction Time: Similar to traditional athletes, E-Sports players are required to make decisions within a fraction of a second with excellent hand eye coordination. E-Sports players have exceptional mental agility, reflexes and multi-tasking abilities than the general population.[3]

From the assessing the different aspect of traditional sports and E-Sports, we can see that they have many similarities. The only main difference is within the aspect of fitness and physical exertion. However, arguments can be made for sports such a golf which require very little rigorous physical activity.

In the end, this controversies is still up for debate. The decision relies on individual and their definition of the level of physical exertion that is required for a competition to be labeled as a sport. Similar debate has been surrounding competitive activities such as chess, darts, cheerleading and parkour.

Security

A distributed denial-of-service (DDOS) attack is when multiple system floods a target to deny them of service for the users [4]. This has become an ongoing issue within E-sports. There have been many occurrences with players, or tournaments being DDOS’d [5]. This becomes a big problem within the industry because a DDOS attack can alter the performance of players and change the outcome of the game. When high value bets are in place, people can DDOS players to try to change the outcome of a match. For example, an anonymous user claimed to have bet $20,000 and DDOS’d the players to prevent him from losing his bet. [6]. With such high stake, DDOSing players would be a cheap method to prevent a loss.

Lack of Regulation

As E-Sports is still a young industry in its infancy. There are many uncertainties that still surrounds this new Industry. Some believe the industry is growing too fast to control and regulate. Rules and regulations are only slowly catching up to the fast changing landscape of E-Sports scene.

Longevity

Many people have questioned the longevity of the E-Sports industry. There is no doubt the E-Sports industry will continue to grow to be a global success within the next decade. However, it will have some hurdles to overcome if it wishes to remain relevant in the future.

It is important to note that individual games have very little longevity. Individual games do not age well; the graphics, mechanics and community will become outdated within years. Compared to traditional sporting events such as NFL or the World Cup which has remained largely unchanged throughout its life span for the past hundreds of years, E-Sports is constantly changing. Most E-Sports game are constantly evolving and changing to its players. E-Sports games are usually balanced every few month to ensure a fresh take on the game and creating new ways to strategize and play the game. The same game can become completely unrecognizable after a few large patches.

The former world chess champion Garry Kasparov commented on the longevity of E-Sports, “Tough for chess to overtake League of Legends, the most popular game here[in Seoul, Korea], but I don't think they’ll play that in 100 years. Chess, yes!” Kasparov also commented on the constant change of the E-Sports industry, "People get bored with a computer game as soon as a new one comes out with slightly better graphics. Chess has captivated us for centuries." [7] He believes that E-Sports as an industry have a long way to go before catching up to

However, some believe in the long term growth of E-Sport. They believe E-Sports and gaming in general will continuously evolve and adapt throughout the generation. The coming generation of developers will be able to create different genre or improvements that can cater toward future gamers and E-Sports enthusiasts.

The longevity of E-Sports is still largely uncertain. In the future, perhaps the compatibility and adaptability of E-Sports games might share the longevity of traditional sports. Or perhaps the E-Sports scene as a whole will not endure the test of time.

Future of E-Sports

“E-Sports is a disruptive phenomenon, the challenge is how existing companies will reach this growing demographic.”

The volume of consumers and stakeholders involved with E-Sports, as well as the sheer size of the market, cannot be ignored as the value is currently estimated to be over $612 million and growing rapidly.[8] With professional teams that compete for tournament prize pools, and numerous opportunities for sponsorship, there are plenty of marketing activities available for businesses to get involved in. There are a wide variety of thriving business models which have been outlined in this write-up, including companies directly involved in publishing games or organizing tournaments, as well as other revenues models that focus on streaming, merchandise, or advertising, among others.

As mentioned earlier, the demographic of E-Sport fans are predominantly affluent young males with a large disposable income. In addition, the segment is quite homogenous in a sense that they usually have similar interests. This could be a lucrative market for advertisers. However, brands at the moment are generally advertising using traditional methods such as physical banners and promotional videos. These methods typically are a one-way conversation whereby advertisers share their ideas and have low engagement rates. There is an opportunity for brands to make advertising an integral part of the gaming experience. By making it interactive and creating ads as part of the experience, user involvement will increase and lead to higher conversion rates.

Movie Theatres

Cineplex Theatres] [9]

Cineplex Entertainment on Sept 18, 2015 announced plans to buy 80% of WorldGaming, whose platform is used in tournaments and leagues across the competitive gaming world, for $10 million. The theatre chain will also invest another $5 million to create a new eSports league that will operate in Cineplex chains throughout Canada.[10]

With the new league, Cineplex hopes to tap into the growing interest in watching eSports. From the same article Cineplex CEO Ellis Jacob said “the investment will help the company reach a younger demographic whose attention is being pulled away from its movie theatres by the wealth of available digital content.” Cineplex has 162 theatres across Canada with 1,652 screens. Roughly 74 million people visit the theatres each year—a number that could substantially increase with eSports tournaments.[11] The article quotes Eric Handler, senior equity analyst for MKM Partners, “Historically 70-75% of a theatre’s business is done Friday through Sunday, so they are relatively inefficient operations Monday through Thursday,” These mid-week days are a perfect opportunity for movie theatres to tap into the growing E-Sports scene by offering services mentioned above.[12]

Another article from fortune mentioned how Coke and Cinemark movie theatres are offering big-screen viewing parties in 11 cities across the U.S. For the world championship, they added a fan voting tool to select the last three locations. Europe received the bulk of the promotion this year, with Cinemark viewing parties in 80 locations spread across multiple countries.[13]

University/College

Robert Morris University Facility] [14]

Robert Morris University and the University of Pikeville are two schools expanding the concept of college sports to include video games—not only creating eSports teams, but also offering scholarships to gamers and building eSports facilities. [15]

When Riot Games posted a story that RMU was accepting League of Legends scholarships, Kurt Melcher, associate athletic director at RMU, said he was inundated with 2,000 emails from gamers interested in the program. He was also flooded with inquiries by 35 other schools, each interested in how RMU had set up its program. One of those schools was UPike.[16]

Similar to any business, a university relies on students to grow and become successful, and one way to increase students in the future will have to be through gaming enthusiasts. In a few years there will surely be more schools that follow the footsteps of RMU and Upike and offer E-Sport Scholarships to attract more students from around the world.

Branding

Coke E-Sports Ad] [17]

With millions of viewers and high growth, E-Sports is too big for big brands to ignore. As mentioned earlier, advertisement and sponsorship through big brand name company’s such as Coca Cola and Samsung are prevalent in the E-Sports world. This segment is unique and capturing and retaining customers has become extremely attractive to different sponsors and advertisers. E-Sports provides an access to a specific segment of market that were previously hard to reach through traditional means of media advertising, such as TV.

Brands such as Coke, Nissan, and Red Bull have all sponsored tournaments [18], but besides direct advertisement and sponsorship, other opportunity channels exist for brands to make positive exposure. This could include selling complimentary goods in tournaments, internet cafes, and movie theatres.

Mainstream Media

ESPN E-Sports Edition] [19]

Mainstream Media has perhaps been the area where E-Sports has been most disruptive, with most of the segment using online media to connect, there is little for traditional mainstream media such as TV channels. Furthermore, channels such as ESPN have been reluctant to include E-Sports coverage in the past, because they didn’t classify E-Sports as a real sport.

In a recent news article from USA Today, video game publisher Activision is adding a division devoted to competitive electronic sports, with the former chief of ESPN and the NFL Network at the helm.[20] Steve Bornstein, who ran the NFL Network from 2003 to 2014 after becoming ESPN's youngest CEO in the 1990s. He also served as the president of ABC Television. Bornstein will serve as the chairman of Activision's eSports division, while co-founder and former president of Major League Gaming, Mike Sepso, joins as senior vice president.[21]

Bornstein said in a statement, “I believe eSports will rival the biggest traditional sports leagues in terms of future opportunities, and between advertising, ticket sales, licensing, sponsorships and merchandising, there are tremendous growth areas for this nascent industry,".[22] Coming from a former CEO of ESPN, this supports the reality that E-Sports will be a very large sport scene in the near future. The eSports market already has the attention of big media outlets including ESPN, which aired The International Dota 2 Championships and Blizzard's Heroes of the Dorm tournament. Meanwhile, cable network TBS will start airing eSports matches during primetime every Friday.[23]

Direct from ESPN, they explain why they made a magazine entirely dedicated to E-Sport, "For the first time in generations, we’re witnessing the birth of a new major sport, and it’s happening with unprecedented speed. E-Sports is way past cult status at this point — if it’s not already the dominant cultural force of the moment, it’s pretty close to it. But there’s this weird divide that doesn’t exist in any other kind of sport or culture: The people who aren’t entirely immersed in that world have almost no idea that it exists. And although there’s been some media coverage of eSports over the past year or two, nothing went as deep as we knew we could go in a full issue. Once we saw the data — that the industry is bigger than Hollywood, that there are $5 million prizes and college scholarships and athletic visas on the line — we knew this was a world that demanded a Mag treatment." [24]

Entertainment

E-Sports Weekly With Coca Cola.[25]

There has been very big news recently in the area of entertainment for E-Sports fans. Since this segment is largely absent in traditional media, such as TV, they turn to alternative media such as Twitch, YouTube, and Netflix to name a few. However, there has been new ventures that are more geared towards E-Sports fans that are mentioned below.

E-Sports weekly with Coca Cola

IGN and Coca Cola have partnered to make a weekly E-Sports show in early October 2015, with discussions and topics about the latest E-Sports news and behind the scene specials. They are still deciding the theme of the show, and are taking feedback from their viewers. The final version of this show should be made sometime in 2016. [1]

Legends Rising

Legends Rising Trailor.[2]

Legends Rising is a new documentary series about the biggest professional League of Legends players from around the world. This type of documentary or series will most likely become larger as other games start making similar documentaries. The significance of this series is putting a face behind a familiar name. Similar to any sports fans that want to learn more about the journey of a famous player, so do E-Sport fans. This is also significant because it could give a glimpse of the sacrifices that one needs to get through in order to make it to such a high level.[1]


Madden NFL Live] [2]

Twitch & EA sports create Madden NFL Live

The National Football League is teaming with game-casting service Twitch and publisher Electronic Arts on a weekly digital series covering news, tips and tricks about EA Sports’ popular “Madden NFL” title. This show will be hosted by NFL Media host Adam Rank and former Pro Bowl running back Maurice Jones-Drew . They’ll be joined by Scott “Coltrane” Cole, one of Twitch’s top E-Sports broadcasters and a top-ranked “Madden” competitive gamer, who will provide analysis and commentary.[3]

This series will cater to the cross-section of two extremely passionate communities — NFL fans and gamers. This is an important milestone, in that this virtual video game of a popular sport now has the full suite of the real version. Where virtual player are being commented the same as a regular game would. This enhances the experience between both communities (i.e. the gamers and fans). This method will provide a great example for other games, such as FIFA.



References

  1. http://www.pastemagazine.com/articles/2015/09/riot-games-legends-rising-documentary-released-tod.html [Accessed: Dec 6, 2015]
  2. http://www.usatoday.com/story/tech/gaming/2015/09/25/nfl-twitch-teaming-up-madden-series/72796772/ [Access: Dec 6, 2015]
  3. http://variety.com/2015/digital/news/nfl-twitch-hitch-for-ea-sports-madden-nfl-live-weekly-digital-show-1201602636/ [Accessed: Dec 6, 2015]
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