That on the very first days the viewership figures have fallen far short of what has been expected on the most common streaming platform for esports, Amazon-owned Twitch, has only made the situation worse in the eyes of the fan base. Finally, there was also separate criticism over ESL forcing closures of DotaTV streams on Twitch.
Let’s tackle the closures first. Part of this is misunderstanding of Valve’s soft rules for what is, and is not, allowed. The company, which owns the intellectual property rights to both Dota 2 and Counter-Strike: Global Offensive, has stated the following on their website:
““To that end, in addition to the official, fully-produced streams from the tournament organizer itself, we believe that anyone should be able to broadcast a match from DotaTV for their audience. However, we don’t think they should do so in a commercial manner or in a way that directly competes with the tournament organizer’s stream. This means no advertising/branding overlays, and no sponsorships. It also means not using any of the official broadcast’s content such as caster audio, camerawork, overlays, interstitial content, and so on. Finally, this is not permission for studios to broadcast each other’s events. In general, everyone should play nice together, and we think the boundaries should be pretty clear.”
This misunderstanding seems to lie within the part about monetization – which is not very clear. Many take the above quote to mean that anyone is free to stream from DotaTV, but in practice any channel that has previously monetized viewers is likely to indirectly gain from it, not to mention those currently accepting subscribers or showing advertisements. Faulting ESL for shutting down streams on a competing platform for false reasons is silly, because any sensible company would do so, to the extent permitted by law. If you want to understand that side better, go through Bryce Blum’s reddit post
explaining the situation in detail. This issue should be short-lived, and have fewer implications for the industry as a whole.
The complaints over having to move to a new streaming platform are not new. In early 2017, both ESL and FACEIT announced plans to broadcast their respective flagship Counter-Strike: Global Offensive leagues, ESL Pro League and Esports Championship Series, on YouTube – then an upstart in esports streaming. Over the course of the year YouTube gradually improved their product, and while the website’s navigation made it hard to discover streams as if surfing TV channels on cable TV, the actual player is generally agreed to surpass that of Twitch’s now, with support for rewinding and slow-motion as additional features. Viewership figures have also grown throughout the year.
Similar issues are currently cited for Facebook. The company, without a doubt, has work ahead of itself to improve the streaming product and to add support for things fans have learned to take for granted, such as Smart TV apps, Chromecast, and Apple TV. But it is an investment like this that will allow them to collect important feedback from thousands and thousands of users and then improve their product. Already now Facebook has added support for 1080p 60fps streams and VR, as well as ability to watch streams on their platform without needing to login. That many still cite poor stream quality or requirement to login as issues simply shows their problem lies with prejudice, having not even tried the current product.
The reason behind moving from one broadcast partner to another is buried much deeper in the esports ecosystem. While financials for any company operating in esports are notoriously hard to come by as they are all either private companies or small-enough subsidiaries or larger firms that they need not be disclosed, it is a well-known fact among industry participants that much of the industry is still burning through cash – the firms are not money-making machines trying to extract the last cent out of the fans.
A good recent example of this is the announcement of ESforce, the parent company of top Counter-Strike: Global Offensive teams Virtus.pro and SK Gaming and operator of the EPICENTER tournament brand, being bought by Mail.Ru Group for a total consideration of $150 million, or $100 million excluding net debt. The announcement discloses limited financials for the acquisition, but states the company had negative EBITDA of roughly ($15mm) on estimated revenue of $19mm – a figure which includes many zero-to-mildly-positive margin line-items such as prize money, which only highlight the poor margins elsewhere. With such large losses, we can safely assume both the teams and events are operating at significant losses, though the company cites a positive outlook for the coming year.
On the event side of things, we reached out to ESL’s Senior Vice President Product Ulrich Schulze, who confirmed that ticket sales and sponsor booths only cover a fraction of what a stadium event costs, emphasizing the need for supplementary revenue to make the math work, or to at least come close to it.
And there are no guarantees events will sell out. The Vice President of Tournament Operations for CS:GO at StarLadder, a well-known Kiev-based tournament organizer in both Dota 2 and CS:GO, confirmed the company struggles to sell out large events in the CIS region without lowering the price of tickets to single digits in USD terms, though obviously that represents a higher price for locals when taking purchase power parity into account. Across the pond ELEAGUE Boston, the $1,000,000 major Counter-Strike tournament backed by Valve that is finishing on Sunday, is selling tickets at the last-minute with a 25% discount to fill the seats of Agganis Arena.
None of this is new for those in the industry. The company who figures out the most effective way to skin the sheep – or in nicer terms, monetize the large and fast-growing fan base in esports – is going to make their shareholders incredibly wealthy. Unfortunately, it does not appear we are closing in on the elusive solution.
Looking at traditional sports for inspiration on fan monetization is tricky, because esports fans are used to watching all content for free, often even using AdBlock to avoid the few commercials tournament organizers show, and there is less physical attendance, even in the age of regular stadium esports events, than in any traditional sport. Without as much physical presence – something that Activision Blizzard’s Overwatch League, which just signed an exclusive broadcasting deal with Twitch for the first two seasons at a reported total of $90 million, is trying to change with OWL franchises based firmly in different cities – it is significantly harder to move merchandise effectively.
While the esports industry continues to look for solutions to make the businesses viable, the fans who are used to enjoying all the content for free should remain patient and be a little more understanding. Media rights are likely going to be the key negotiating chip that will drive most of the value in the near future, and while the growing pains hurt, we are in relatively good hands. As far as costs are concerned, all of Facebook, Amazon and Google have business models that rely on bringing in customers for free – though admittedly in Facebook’s case, this is a shift from user-provided content to content they must pay for. Contrast that to the large telecommunications players of today, and it is far more likely we will continue being showered with free content by the three technology giants – with potential future horseman Netflix still choosing to wait on the sidelines.
Facebook can also monetize users better than practically any other company on the planet – we will not get into why here – and thus afford to pay more for content than their competitors. If their offering becomes comparable to the other two juggernauts, more competition is all-but guaranteed to lead to a better outcome for the end-user. For now, it can make sense for Facebook to outbid other stream services to gain a foothold, which will allow the company to start the process of bringing more users over to its streaming platform. It will not happen overnight, but people tend to adapt. Plus, Facebook has the world’s by-far largest userbase to draw viewers from. We should not forget that.
Pay-per-view is not likely to be the answer to esports, because the industry has such deep roots in free content – even though market research shows esports fans generally have the money to spare for premium OTT content. Tournament organizers can circumvent the AdBlock issue by doing what the NBA is now doing, and playing commercials in picture-in-picture mode on the side of the game – they often do so during free throws – but fans are unlikely to be happy about that either.
Instead, the answer could be premium content, a live version for esports of what Netflix is for TV shows and movies. Tournament organizers could effectively separate a free stream, which might feature most games but with more commercials and less added production, and a premium stream that comes with all the bells and whistles, with plenty of OTT-type content before, during and after the event to make it worth the fans’ while. In fact, that is something former Counter-Strike legend Johan “vesslan” Ryman’s company Znipe.tv is currently working on.
People resist change, and in the era of reddit just about any move away from status quo tends to result in thousands of upvotes to threads raising concerns about whatever change has taken place. But fans should remember not to jump into conclusions too quick, because while the industry remains young and fragmented, these decisions are not taken lightly to make a quick buck. There are practically always valid reasons for every change, and this is one of the cases where we will almost certainly be better off once the initial shock of Facebook’s entrance is gone and forgotten.
About the author
Tomi Kovanen, more commonly known as "lurppis", is one of Finland's most prominent Counter-Strike experts. Kovanen started his career as a player back in 2004, retiring in early-2012. During his active years, Kovanen represented teams such as hoorai, Team ROCCAT, 4Kings and Evil Genuises.
Following his retirement, Kovanen has continued to be an influential member of the scene, sharing his expertise as a columnist, analyst, commentator and a frequent user of Twitter (@lurppis