The term “esports bubble” is being thrown around more and more frequently, but is there actually a bubble? If it’s not a bubble then what is it that concerns the people talking about it?
Considering the Fortnite World Cup has just passed and DoTA2 have announced their ground-breaking crowdfunded prize pool that broke $30m, talking about a bubble seems poorly timed. Even with these factors there are still plenty of industry veterans that believe there is a bubble surrounding esports and it’s about to burst. Kotaku’s senior journalist Cecilia D’Anastasio wrote a fantastic article: Shady Numbers and Bad Business: Inside the esports bubble in said article she interviewed a range of industry experts (many anonymous) on their perceptions of the industry alongside analysis of the stats and culture surrounding viewership inflation.
The biggest problem that esports faces is it’s profits and monetising the industry, there is a huge amount of money being invested, but there is little return. Investors are now starting to realise that they need to very careful with their investments, as the hype doesn’t match the profits, this is largely due to being uneducated in how the industry is meant to be monetised. Although these issues are to be expected considering that esports itself is still very much in it’s infancy. A great example of an investment that promised the world but crashed and burned, was the Championship Gaming Series (CGS).
Birmingham Salvo, UK winning CGS 2008
The CGS modelled itself after the US National Football League, complete with full-time team managers, qualifiers, and a player draft. The competition was broken into six regions: US/Canada, Latin America, Europe, Middle East/Africa/South Asia, China/East Asia, and Australia. Drafted players received a base salary of $30,000 with potential bonuses based on performance. So it was regional franchising which you see in formats such as the OWL on a more mainstream platform. Due to the expenditures on the entire project it didn’t see the return in profit and after just two seasons closed it doors whilst sending a ripple effect through many different esport titles.
Kotaku asked over a dozen esports professionals if they believe there is a path towards making money that is on par with the level of investment going into esports right now. Most of them said they really don’t know. “No one’s solved it yet,” said Daniel Herz, the chief revenue officer of Complexity Gaming. “We’re all racing to figure out how we can solve it.”
Paul “Redeye” Chaloner spoke on GinxTV discussing about PPV in esport tournaments, to which he can’t confirm on what title or company will be going forward with the business model, he did say that sometime this year we would see it. Now a lot of people are going to be angry about this form of business model, but if these people truly love esports they may see the good it could do for the industry, this could be a good way for investors to see more return for their investment. I don’t personally believe the industry as a whole should go PPV but with the Overwatch Franchising model what seems to be coming to Call of Duty, making the franchised events PPV whilst your tier 2/tier 3 events can stay free.
In conclusion I don’t think there is a bubble in my own opinion, but there does need to be some re-consolidation in the value that it’s currently sat at, we need to see the crazy amounts of money balance itself back out instead of trying to compete with traditional sports because we are two different entities altogether.