Sports, Esports, and Entertainment - Dispatches from LA Games Conference for 2019

Dispatches from LA Games Conference in Hollywood, California

Ned Sherman, founder of Digital Media Wire and Partner at Manatt Digital, and his team are putting on the LA Games Conference in Hollywood this week. This is Ned's 3rd event in the last 6 months focused on where games, technology, and entertainment converge. ePlay's CEO, Trevor Doerksen, participated in a panel discussion at Paramount Studios as part of the Digital Media Wire VRTL event in November 2018. LA Games Conference is the last big event before E3 games conference next month in Los Angeles.

Last week, Doerksen participated in an esports event in Toronto put on by Grit Capital and the Canadian Securities Exchange. The event was originally billed as an "eGaming and eSports" events representing two distinct business models in the USD$135B to USD$137.9 2018 gaming industry. According to NewZoo, eSports make up less than 1% of the overall gaming industry revenues. By the time 500+ people gathered in the Toronto theatre to learn more about the gaming industry the "eGaming" label was removed from the billing, however speakers did draw attention to the many different ways (advertising, paid transactions, merchandise, freemium apps, paid games, gambling, sponsorship, etc.) game publishers and other parts of the gaming industry earn revenues, in addition, to esports.

Analyst reports, updates, and statements attempt to help observers and investors determine where the opportunities for growth in the game industry might be found. As investors and industry insiders search for growth and revenues, some simply to understand, others to dive deep, there appears to be a lack of clarity around the opportunities in both gaming and esports. 

The LA Games Conference (LAGC) is a game industry conference where participants and speakers are clear about the industry, where eSports is aligned, and how the business and revenue model drivers contribute. Nicole Pike with Nielsen esports presented data and case studies differentiating gaming and esports and the great opportunities in both. Chris Hopper, head of eSports at Riot Games, acknowledged the fantastic growth and marketing opportunities for esports and how game developers and publishers can utilize for driving new revenues. In a town built on entertainment and content, participants are educating each other on where storytelling in gaming leads to profits and growth. 

The global games market now earns the majority (51%) of its revenue from mobile with over USD$70B on mobile. For storytellers (game developers, publishers, and streamers) and investors, this means that mobile gaming is bigger than PC and Console gaming combined. In terms of growth, PC and Console games are growing between 1.6% to 4.1% YoY. Mobile growth is 25.5% YoY. Storytellers and Investors at LAGC know that browser PC games shrunk in revenues by -13.9% in 2018. And with 5-6 panels on AR/VR/XR the game industry gathered here acknowledged the massive success of Pokémon Go and other location-based games and casual games from Roblox, Warner Bros, WWE, Skillz, Scopely, Jam City, Xperial, and ePlay. 

Many storytellers and investors know that mobile games not only have the majority of revenues and growth projected in 2019, but they will also have the majority of profits. Developers know that mobile games have relatively higher margins over PC and Console games in addition to the higher growth and revenues.

Layering in eSports often first requires a definition and common vocabulary. Analysts and industry are working with several definitions. Some have defined eSports as "multiplayer video gaming, played by professional gamers at a competitive level for spectators." This definition restricts storytellers and investors, in addition to esports revenues and opportunities. Using this definition around 10% of Twitch and YouTube Gaming video viewership would be considered eSports viewership. Constraining storytelling and investment to this ~ 10% viewership restricts opportunity and revenues.

When storytellers and investors choose to constrain themselves to the professional live event esports opportunities they will likely not be looking at mobile (the biggest and fastest growing part of the industry), China (the largest video game market in the world), game genres outside of first or third person shooting, fighting, strategy, and sports). This niche market in the gaming industry may not realize what participants at LAGC seemed to be keenly aware. Here are some data points driving storytelling and investors today:

April 20 here are top 10 revenue rankings for iOS and Android.

Canada iOS

1.Clash Royale

2. Pokemon Go #1 Android

3. Candy Crush #2 Android

Canada Android

1. Pokemon Go

2. Candy Crush

3. Slotmania

US iOS

1. Fortnite - banned from Monetization in China

2. Clash Royale

3. Candy Crush #1 Android

4. Pokemon Go #2 Android

US Android

1. Candy Crush

2. Pokemon Go

3. PUBG - banned from monetization is China

China (iOS)

1. King glory - multiplayer battle royale game

2. A perfect world - fantasy game

3. Fantasy Westward Journey - Fantasy game

4. Naruto - karate game

5. Let’s Hunt Monsters - Pokemon Go style game

China (Android MAU - Feb 2019)

1. PUBG - banned from Monetization in China

2. Honor of Kings

3. Anipop

4. Happy Lord

5. Happy Mahjong - new Mahjong titles recently banned in China

A careful review of recent investor analysis from multiple brokers in the last 30 days mentions only 1 of the above titles, Fortnite, in any substantive way. At LAGC attendees, storytellers and investors, are not only focused on the relatively low margin, less grossing, and less popular genres and platforms. They are also aware of the genres that make up the top 5 and the fastest growing revenues - the ranking data above.

eSports prize money

An oft reported statistic in esports, emphasizes the restrictive live professional event definition. This is the impressive and growing prize money statistic. In 2018 the data indicates USD$113m in esports prize money across 3933 tournaments. This translates to USD$28.7k per tournament across hundreds (growing to thousands) of eligible teams. It's not always clear what storytellers and investors are to take from the prize money in eSports. The growth and winning of competitions do make for great storytelling.

eSports Viewership

The top viewed eSports live pro event in 2018 had 1.1 million viewers. LeBron James had 6.6 million on 2 iPhone videos he shared on Instagram in March 2019. Sommer Ray and RiceGum playing Fortnite on the couch received 27 million viewers in a video they shared on YouTube. The restrictive live professional esports definition can never include the LeBron and Sommer Ray examples. For storytellers and investors, esports attracting big brands and dollars is a big opportunity - Hollywood gets that.

eSports is Gaming Streamed

The popular working definition of esports focuses on the lowest margin activities, the lowest margin games, the shrinking (or not growing as fast) part of the game ecosystem. The working definition ignores 90% of the viewership/revenue Twitch and Youtube gaming garner. Storytellers and investors that are looking for growth and big audiences may want to use a broader eSports definition. eSports will grow a lot more than most anybody anticipates this year if we use a more expansive definition - eSports is gaming streamed. This definition can include Kim Kardashian (and our mothers-in-law) playing Candy Crush, FazeClan playing Pokemon Go, and Sommer Ray playing Fortnite. Expanded and growing audiences and turning 2,2 billion video game players into viewers leads to new revenues for storytellers and investors - ultimately this is the goal of esports.