A Conversation with Patrick Walker of EEDAR – Esports and the Industry
On October 28th 2015 we sat down with Patrick Walker to have a discussion about Esports, the future of the industry, and the gaming lexicon as a whole. Patrick is Vice President of insight and analytics at EEDAR, the largest specialty research firm in the world for the game industry. Their clients include EA, Activision/Blizzard, GameStop, Microsoft, Nintendo, and the Entertainment Software Association, as well as dozens of other AAA industry behemoths including developers and publishers. Patrick is a former analyst for Sony Online Entertainment and an industry veteran with years of experience, in the past he has presented at GDC and is currently EEDAR’s lead analyst on mobile gaming and Free2Play business models.
Brandon: So I think one of the first questions we had on the Blizzard/Activision news, Steve Bornstein who is former CEO of ESPN and NFL, he is heading up their new division for Esports. What kind of immediate and long-term impact do you think this new division is going to have on the industry in general?
Patrick: So it’s interesting right? I think that in part the reaction to this was “well what took so long?” It seemed like Activision for a while has been throwing money towards Esports, if you look at their tournament prize pools they are actually quite high for some of the Call of Duty tournaments that they’ve done in the multiple millions of dollars range; really only outranked by DOTA 2 and League of Legends Tournaments. But despite putting money towards it they still aren’t even the number one shooter in Esports. Valve has done a really good job in investing in the user experience, not just creating tournaments. It was like “Well when are they really going to invest heavily in the overall Esports experience?” and I think there is a short-term and a long-term play here. The short-term I think is just to get some of their titles more user engagement’s in the Esports scene. Activision/Blizzard, they’ve got the largest shooter brand, then they also have all the Blizzard titles that add really nice genres for what makes a successful Esport in terms of the type of competitive gameplay, but also the strategic elements that really make for a good user experience. So I think the short-term play is just to create some of the things that for instance Riot does really well in terms of providing structure around Esports in terms of taking it seriously, really rebalancing their games with an eye towards Esports, thinking about things like bringing in sponsors, really thinking about the rule book, high production value, who could broadcast, so it’s these things that create the feeling of almost like a real sports infrastructure in a way that will help them get their games up to the level of Valve or Riot.
Then I think the long-term play is if you look at the guys they are bringing in, they’re heavy hitters, and they’re heavy hitters at doing 2 things: one is running sports television, and that’s a guy (Bornstein) who has a lot of experience in television. The other one (Mike Sepso) is running a league, so you bring those two pieces together when you think about the Esports supply chain, and I think it’s a really interesting vertical within the game’s industry because it has so many different pieces. You have the consumption piece, which right now is really at Twitch, some of the major television networks are starting to dabble a little bit, so you’re bringing in somebody with that experience, then you’re bringing in someone with the experience of a league, then you assume that your publishers can handle the creation of the really high-level gaming content and maybe bring in the advertising piece to supply revenue throughout the chain. In that way they are almost creating what seems to be a long play for that kind of full stack of the ecosystem and the supply chain which you start to think “could they start to create deals with TV networks, start to think about their streaming network/also run their league?” and in a way they’re starting to have more control of the whole process which not only lets you control the user experience but it also lets you soak up more of the dollar bills. So when I look at those hires I said “Oh there’s a big play here” not just in terms of the obvious thing which would be “we want Call of Duty to be the number 1 shooter in Esports.” But there is much more of a long play that recognizes getting control of the full stack in Esports.
Brandon: Do you think Blizzard/Activision as a whole is lining up to take a much more active role in the Esports scene like how Riot has with LCS in League of Legends? They are heavily supporting Heroes of the Storm at the moment and they already have a ton of teams showing up for Overwatch just as it’s entering it’s closed beta. So do you think they’re preparing to take a much more active hand-on approach to the scene, because they have been hands-off for a lot of the series going back to GSL; they were really weary about making balance changes and things like that.
Patrick: Absolutely, that’s 100% the short-term play here. I think the long-term play like I said is some type of thinking about the platforms and maybe even bigger play outside of what we have seen looking towards bigger leagues and things like larger professional circuits. But the short-term term play is absolutely getting more involved in bringing in people with the expertise to do that. When you’re bringing in somebody with kind of experience within a league that’s what you’re looking to do; to provide a level of seriousness to it that makes people take it more seriously as an Esport. I think there’s a similar approach by Sony and interestingly I think that what you’re seeing is kind of 3 clusters of games, your kind of valve and riot and MOBAs, and your Activision games, and then it looks like you know the biggest thing for me with the Sony announcement was the idea that they were going to scoop up some of the big EA titles. Like FIFA,
Brandon: Battlefield.
Patrick: bingo yea Battlefield and FIFA. It looks we’re going to see these 3 stacks of titles, and obviously street fighter and the other fighters getting huge.
Brandon: So what it looks like is that you have the bigger organizations, the top-level publishers and the IP owners as well as the hardware manufactures themselves getting involved to build a better foundation for the circuits to exist. There are a lot of tournaments and leagues that didn’t have a very good foundation, and when it started to crack the entire thing just kind of slid off from my point of view.
Patrick: Well and that’s actually a real good point, one of the questions that we get a lot is “Is Esports a fad, is it a bubble that’s going to go away?” One of these pieces to the major publishers with deep-pockets committing heavily to the infrastructure is in my mind the 3rd piece that would really suggest that Esports isn’t a fad. Initially you have the organic growth of something that seems to be a really valuable experience for consumers, and the fact that it was kind of born through organic growth and built up and wasn’t driven so much by a publisher, as much as it’s kind of risen up trough popularity of the actual tournaments really suggests that there is a long-term lead. Because people will be like “oh what about music and rhythm games, or what about the Wii?” You have bubbles in video games that are very much driven by publishers, driven by advertising, driven by word of mouth.
There is a bigger opportunity for a bubble vs something where there is deep organic growth by the consumer and the consumer passion. Now once that happens there are a couple of things that you need: You need money to drive that product, and one of the really nice things that our data has shown, and we were really hoping to do with our report because there have been a lot of reports about Esports recently, the goal with our report was to look at who are these Esports viewers and why is everyone so excited about tapping into them as a user base. There were really 2 things that we found, one is that they spend a lot, not just on hardware and peripherals and stuff that would make a whole lot of sense, but they’re spending a lot generally I think in part because they are people with a lot of time, pretty good jobs, they are right in that demographic of 18-34 year old male. One of things is that they are slightly different from the typical audiences that are easy to get access to. There are a lot of 18-34 year olds that like sports, but this group, they’re not necessarily internet based so it’s like tapping into a new market of 18-34 year old males that might not be watching ESPN.
Brandon: That’s how I see it, and I think one of the biggest draws of Esports, the demographic term was “Multi-Media Male” 15-35, Upper Middle class, has a little bit more money to spend. Esports has a major draw to sponsors in my experience mainly because that demographic is very hard to reach otherwise, it’s very distributed going through other mediums. Which leads me into a question, based on your data are the advertisers, the sponsors, and the developers trying to go after more of the gaming scene in general or reaching out more into mainstream for that same demographic that may not be into the Esports scene, or maybe doesn’t know it exists, and are we seeing a little bit of both?
Patrick: I think there is a little bit of both, I think that advertisers are wrapping their hands around it. The other things is that they are hard to get at, the fact that it’s live is really exciting. In this world everything is DVRd, and everything is click. For me to have your captive attention is a really powerful thing, so that automatically is exciting to them off the bat. I think that they’re still learning, and their trying to understand just how broad the audience can be. Right off the bat the advertisers that come in early are the ones like a Razer.
Brandon: Like an Intel, or a hardware manufacture.
Patrick: Yea it’s just so obvious to them.
Brandon: Everybody we’re advertising to is going to know our product, we just want them to buy our product over Logitech or Corsair. They’re competing on this sub-level.
Patrick: And then those are the guys that are like “yea we’ll sponsor Esports teams, yea we’ll sponsor a player.” I think that the next step then are these larger brands that don’t really look at it as mainstream. It’s not even that they think of it as mainstream, they think of it as larger than they thought. We’re starting to see the numbers and it’s funny, because they aren’t necessarily churning through all the market data. Everybody looks at market data, but the numbers, it almost takes these images of these massive tournaments at Madison Square Garden to make marketers say “Whoa, this is a huge group of people who are super passionate.” Then they look into it and they think about the Twitch streaming numbers “we have 150 million people who watched this year, that’s a huge audience!” Then they dive in and say “these are 18-34 year old males that we want to talk to anyway.” So once that happened then all of a sudden VCs (Venture Capitalists) are excited, and a lot of the hype that’s going on was those major advertisers at the bottom of the supply chain realizing how large the audience was. So then Coke and Riot with League of Legends, they are doing a deal and energy drinks and getting into it. I think what happens is first the brands that make immediate sense start coming in,
Brandon: Intel, AMD, the usual.
Patrick: right then it starts to spread outside. I don’t necessarily think that brands think of it as “oh we are going to be able to tackle everybody through it.”. I think they do realize it as “oh, this is an audience I want to talk to anyway, these are real people with means outside of a hardcore gaming mouse.” They also drink energy drinks and soft drinks, right they’re people. That’s what our research is showing, these are human beings with full lives.
Brandon: It’s so hard to get advertisers to understand that! I’ve had a few times when I was working or going to events and was finally able to show these people what the scene looks like and I tell everyone LCS last year was broadcasted in 16 languages with 32 different broadcast partners. I think one of the things about Esports besides the demographics being really concentrated for the one advertisers want to target, is that not only is it international but there is an intrinsic value when it comes to watching live because of the nature of the internet. You have an immediate captive audience with a big incentive to watch it live on top of a huge international reach which you can’t really get outside of Esports, and it’s even harder to get when it comes to that demographic for such broad appeal. Coke sponsoring LCS is a big move for them simply because they have a product that’s available almost everywhere worldwide, and now they have an international market reach specifically to the demographic they want the most.
Patrick: It’s very similar, there are always going to be coke commercials during the super bowl right? So what’s cool is you see this kind of organic interest, you see the events, and then you see the advertisers come in. Once the advertisers come in then the deep pockets and the infrastructure, they start putting significant resources into it and the fact that Activision didn’t just say “oh, were going to create a league.” they said “no, we are going to start-up a whole division and we’re going to bring in heavy hitters.” that they are paying enough to constitute a significant investment which means they are going to give those guys pretty big teams. Which means they’re thinking about it as a long-term strategy as well, and then you look at VCs it’s interesting. There’s a lot of excitement around it and there’s a lot of buzz, but the overall money in it is actually relatively small right now.
Brandon: I had that feeling.
Patrick: The market is somewhere between 500 million and a billion dollars, let’s say on the high-end it’s a billion dollars, that’s less than Supercell makes in a year with Clash of Clans.
Brandon: Relatively compared to the gaming industry it’s very small.
Patrick: The overall gaming industry is around 80 billion dollars, so 1/80 is still a lot, but its way less than mobile gaming but that’s way more massive.
Brandon: Once you take a look at the macro environment then you can see the real size comparison.
Patrick: I think they’re are 2 reasons that people get so excited, A: it’s tough to predict the growth because a lot of the people who are playing are young consumers that you don’t know what their patterns in life are going to be as they grow up and move forward. So if you’re a 15-year-old you might not watch TV, you may not watch live sports when you get older. Anytime you have a big heavy audience of really young people you don’t know what they’re going to look like in 5 years.
Brandon: It’s a very fickle audience especially when you combines things like Twitch and the internet in general where you can get on any of these sites for free. When you buy a cable subscription you feel the need to use it if you’re paying for it, most of the cable cutters don’t have that notion. Is there was going to be some big tournament for Overwatch or some other game and it was only going to be on Azubu, if there’s enough interest people are going to go over and watch it there instead of Twitch. But of course that can backfire depending on how much push they have and how they can get the audience to cooperate.
Patrick: So the upside is pretty exciting because it’s a young audience.
Brandon: The ESPN broadcast for the Heroes of the Dorm event was a really interesting idea. One of the other questions I had been do you think sponsors are going to realize at some point that they have to start pushing this mainstream? The reason I say that is because I have been looking at Redbull’s events, specifically the one they did next to X-games. They love to promote all the extreme sports during the Esports events, but they never push Esports into the mainstream. ESPN has actually gotten quote a lot of backlash both from their own network, on twitter, and through other social media channels because of that. So do you think they are going to make a decision along the lines of “we might have some backlash from fans and people who don’t understand the industry.” but are they going to decide at some point it’s worth it to push it to a more mainstream audience and not keep it inside an echo chamber?
Patrick: I think it will be a play where they test the market slowly then eventually decide that it’s time to do it. With ESPN their constantly thinking about what’s new and exciting but at the end of the day they also are incredibly receptive to their hardcore sports fans. They will protect the brand image of ESPN while they are also preparing for the future. That being said once we start to see this infrastructure, once we have those 3 things in place we’re going to keep moving forward. Especially because a lot of these people who are so interested in Esports and a lot of the viewers are so young that it generates a kind of rising momentum, and that will just push it more mainstream.
Brandon: It’s almost like a big honey pot for these advertisers.
Patrick: Well what’s interesting is I don’t know if it will necessarily be ESPN, because at the same time it’s usually not the big established players that take the most risks. When things disrupt, it’s because other people take the chance because they have less to risk. ESPN will probably be protective of their live stream sports brand identity and it will probably be their mainstream like TBS and companies like that will start to advance, it’s typically not the market leader that takes the most risks.
Brandon: One of the things I ran into with ESPN is that there is another layer of politics on top because ESPN’s parent company is Disney. I think a while back someone tried to do something with ESPN, and something in the media happened, one of those types of events where Disney pulled it and said “We are not putting this on our network.” I think while the industry is pushing towards things like ESPN trying to seek legitimacy, it may not be needed because the demographics they are trying to target probably aren’t watching. So I think we will either see less of that or see spinoffs. I don’t know if you have worked in cinema, but every time Disney makes a movie that may be a little bit too serious or they don’t want it having the stigma of a ‘Disney’ movie they will brand it Touchstone. Bridge of Spies, Nightmare before Christmas, Pearl Harbor, it’s all Disney proper but it’s branded Touchstone because of those built-in assumptions on behalf of consumers and what you think of when you think of Disney. I think maybe we will see less push into trying to legitimize it through the older mainstream channels.
Patrick: I could totally see that where it doesn’t get branded as ESPN, ESPN has like 5 networks right, so why wouldn’t you brand it as ESPN Esports? It’s funny the things that are looking for legitimacy try to push into the mainstream but at the end of the day legitimacy comes from user numbers and advertising dollars.
Brandon: It’s all perception. One of the articles I did was on the recent Starcraft scandal in South Korea, where 12 people were arrested. It’s kind of a double-edged sword especially with what’s going on with DraftKings and FanDuel right now; is Esports more legitimate because we are having these issues? Are we more serious now because we have people getting arrested, is someone going to do something stupid again? Is that better for us, is there such a thing as bad publicity? It’s all these interacting variables.
Patrick: That’s a great point and I would actually say yes, and the amphetamine stuff was the same way where it’s like we’re getting people for PEDs (Performance Enhancing Drugs).
Brandon: What was funny about that its it wasn’t even that big of a problem from people I have talked to, the problem was because of the way the internet works you have one comment from Cloud9 and all of a sudden you have BBC articles and all of a sudden everyone is talking about a problem…
Patrick: it’s a great story, you have these kids that are all competitive and all jacked-up on Adderall.
Brandon: Getting off topic just a bit, do you think these industries are trying to create a monopoly on power. There was an article from Richard Lewis on Breitbart recently about Riot wanting more control over LCS, they want more control of the teams. It’s buried in one of their contracts if you criticize League of Legends, Riot, or any of their software that could negatively impact you. CPL specifically had a clause in their contract where if you were to disparage the league in any way you were liable to forfeit your prize money which I believe is why back in November 2006 (Editor’s note: it was 2007) basically all the teams at the time just announced they weren’t going to attend the events anymore.
Patrick: It’s an interesting question about the strategies of these different companies. In general if you think about it, companies always want to own their own platform. I have a good example of this, Digital Distribution for PC games. Companies always want to reach enough users while they’re doing it. Someone like EA is like “okay we’re going to make Origin.” and EA’s big enough to pull that off because they can get enough users and their platform and their games are big enough. And Ubisoft says “oh, we can do Uplay.” but they are also like “oh but we also have to integrate into Steam because we need to reach the 150 million users that Steam has.” Within Esports you will see a similar sort of thing in the beginning of it where we are at right now, that’s what companies are setting themselves up to do. Clearly with the creation of leagues Activision is trying to get more control over the ecosystem, Riot will try to get control of the ecosystem because if you can control your full supply chain for getting your product to consumers then you’re going to make more money, you can control more of the user experience.
The problem, this is almost like basic business, is it’s hard to 100% do everything well. So what ends up happening is well “are we really in a position to do the streaming service, or are we really in a position to do this?” And a lot of companies will end up saying “okay we are large enough to control these pieces, but in order to reach the most users we need to do it well and at the same time we are going to do this service.” And that’s got to be from a business perspective the fascinating piece of how this market grows over the next 5 years. You can already see people starting to line up in verticals.
Brandon: There’s 2 points that I’m seeing, the first is that all of a sudden there is a lot of centralization and there are a lot of single points of failure. The other point is I’m worried about conflicts of interest; nobody owns the IP rights behind Football, or Hockey or anything like that. I feel like the amount of authority the IP owners already exert over both the players and the leagues is just going to get exponentially worse as they come to control more power.
Patrick: So it’s great when infrastructure rolls in, because then you have more legitimacy, more money, higher quality events across the board, and more consistency. The downside is that companies look out for their best interests going in, part of that is protecting their IP and exerting as much influence over the ecosystem as they can. Luckily done right and done well, the market will typically correct as it’s over stepping. At the end of the day if consumers aren’t having as good of an experience it’s not healthy for the overall market and everyone doesn’t do as well. So in general these companies as they are doing the things you are worried about, they also are looking out for the overall experience of the consumer because the whole thing is dependent on that.
Brandon: So the consumers are acting as the industry watchdogs so to speak because they control the money flow.
Patrick: Absolutely. There are government regulations but in most cases the consumers act as the watchdog because if they aren’t happy it doesn’t work. There is a difference in my mind between single points of failure and what happens with market consolidation and companies starting to exert more control so there is one league for a certain type of game, almost looking like one vertical. When it comes to single points of failure, as long as you have the things that we talked about such as a stable foundation and a core experience that gamers want as well as a business model for providing the funding, as long as those things are there the single points of failure in the short-term that can create a poor user experience, the market will correct and others will step up to provide that opportunity. So you’re not going to have things go away, you’re just going to have things disrupted as the market figures itself out.
Brandon: Do you think the publishers and the developers are collectively saying when it comes to the newer games they want to push as Esports that we have to be hands on and on-board to follow through. I think you can look at metrics for Twitch viewership and game population stats and you usually see one of 2 things, either a bell curve where there is a lot of hype for the first 6 or 7 months then it completely dies off. Or you see something like World of Warcraft where overtime you have a steady increase in viewership or players or whatever that metric may be and then it stay there. So with Starcraft 2 after League of Legends took over the scene after certain patches, big events, and the expansions is you have a small popularity spike then it dies down and I think one of the positions that Blizzard and the other heads are taking is “we want to start this thing out at the bottom and keep driving hype up and keep it consistent rather than just having a spike.” On the retail side a game like Call of Duty will have an amazing first couple of months, they will ship however many millions of units and then sales will trail off. When it comes to Free2Play and experiences that have to be persistent both in terms of consumer interaction and actual cash flow supporting the scene, they have to keep things sustainable.
Patrick: The model looks completely different. If you think about CS: GO, it’s a great example. Back in 2012 it’s kind of creeping along and getting a little bigger then all of a sudden around 2014 it just explodes and gets bigger and bigger. Clash of Clans is another great example, it comes out does pretty well, they start advertising on TV, they create clan wars and it explodes even more. Esports is a type of consumer experience that your game either fits well with or it doesn’t and if it fits well it has a chance to succeed but you still need to provide all the other things around it. The tournaments, constant growth, consistent advertising, growth of the user base over time.
Brandon: Things like balance changes, keeping the game in a playable state, being receptive to feedback. Riot and Blizzard have always taken crap over their games being imbalanced or having major issues. The biggest problem with Starcraft 2 at launch for the competitive scene was Terran was just too strong and the game wasn’t balanced correctly for small maps. I think we are seeing the first generation of games that are designed with Esports in mind as far as new IPs go and from the ground up they are being designed to fit within that ecosystem. Shootmania was an experience for Ubisoft in that you can’t just put something out that’s ultra-competitive into the scene and expect people to gravitate towards it.
Patrick: Esports is not DLC, Esports is not something you tack onto your game and then figure out what version of it works. With DLC if it’s a single player game, make a single player add-on, if it’s a multiplayer game add some maps. There is a DLC experience for everything that will work, for Esports you can’t just say “what’s out Esport?” and say “this title!” it doesn’t work that way and we actually have had this conversation with publishers.
Brandon: One of the things the developers are learning from Shootmania is that they have to build in a casual experience and a reason to play the game. There are 2 examples I have, and the first are games like League of Legends and Heroes of the Storm where you can play the game at a variety of different levels from ultra-hardcore to really casual experiences. Or you have games like DOTA 2 and CS: GO, very top-heavy, not necessarily elitist but games with a very high skill ceiling that have a built-in incentive that isn’t part of the games core mechanics, it exists outside the game itself. Items, trading, gambling, ways to interact with the game without necessarily actually playing it at that level. Shootmania failed to me because there wasn’t any reason for casual players to play it at all. It was a very ultra-hardcore experience where you either play the game competitively or you didn’t play it at all. I think that’s one of the reasons they couldn’t get any support because most of your viewership the way I see it for these games is going to come from people who have played the games before or are currently playing the game.
Patrick: It goes back to what we were talking about before where some of these games work really well as Esports because of the view they take. If you don’t understand at some level how the game works, a lot of times there will be Esports that work really well, they aren’t a fun viewing experience. Part of what makes Esports take off is it’s a lot like watching someone do a speed run, this impressive display of video game skill you can wrap your head around in 2 seconds. An Esports match, to really get the most out of it, it’s a level of play that you may not be able to do yourself, but you can appreciate it, you can watch the strategy of those group of 5 players together see what they are doing and recognize how amazingly difficult that was to pull off. I can see the meta strategy and the push of the overall teams against each other and follow the high level strategy of it, and that generally takes a degree of familiarity with the experience.
Brandon: I think one of the things that plays into that is what made professional poker watchable. If you go and watch older poker matches, they are all aimed at professionals. These days every single professional poker match starts with an explanation of how Hold em’ is played. Things like the hole cam, putting percentages on-screen, having the players tell jokes to break up the tension made the experience much more palatable and watchable to someone who probably doesn’t know very much about the game. On the VC guys, do they have an interest in growing the scene and making these pipe dreams more of a reality or they just interested on a return on investment?
Patrick: So VCs typically, they get pitched and they put money in based off of people who are more in the scene. Across industries in general the people who have the ideas of how to make the consumer experience better, how to make it grow, are passionate about Esports. They will a lot of times go to the VCs looking for money and they will take their idea and turn it into the ROI. Most VCs are interested in the ROI, the people who are typically pitching VCs are involved in the scene and understand it. VCs are going to be more interested in things like valuable audience, interest from different players, the infrastructure money flowing in, that gets them excited. Then it’s the people heavily involved in the scene that have the understanding of the consumers to come up with those ideas and make it better.
Brandon: You have to pitch all these different memetic concepts that are going to impact the scene, but you must have a guarantee there is a ROI to make it worth getting involved in the first place.
Patrick: Across a lot of industries it’s the same way. There’s a lot of money flowing into VR right now and it’s kind of the same thing. Down the road we know that VR could be a really big exciting experience for lots of different types of consumers both inside and outside of gaming, it could be education.
Then all of a sudden there’s competition, it’s not just Oculus. Now you have HTC Vive with Valve and a handful of other startups that are pushing into the VR scene. Are we even going to be able to recognize the VR space 5 years from now if it survives that long?
Patrick: The cool thing is that even though it can be viewed as them creating issues as they all come into the space, Sony coming in and them doing some things that are innovative, and Activision coming in doing some innovating of their own, everyone has different things that they do well to think about. I was really impressed with Counterstrike during ESL One. The overall prize money wasn’t that high when compared to other tournaments, around $250,000 which really isn’t that much for a DOTA or League of Legends tournament, but they did a really good job of what you were talking about earlier, what incentives are they giving viewers to participate in the event. They did a good job at the Twitch stuff and incentivizing players to engage in the match and possibly get stuff back in their regular Counterstrike experience. They had huge numbers in terms of the amount of people watching kind of rivaling the DOTA 2 International Tournament and maybe even significantly higher.
Brandon: I think that’s one of the unique things that Esports has going for it is that these are also interactive experiences. There’s playing football out in the backyard with your buddies; Blizzard is now doing automated tournaments in Legacy of the Void beta, are we going to see that in Overwatch? Challenger for League of Legends directly leads into the pro scene, are we going to see more pro/am and amateur type of stuff just to get people playing the game more and more dedicated to the scene?
Patrick: Absolutely, it’s basically like you’re watching it but your able to link that back to your amateur Sunday skirmish. I’m going to the game, but that somehow has an impact on my amateur soccer match on Sunday, including you.
Brandon: Exactly, there is a very low barrier to entry especially when it comes to Free2Play, I think that’s one of the reasons League of Legends got so big so fast. Blizzard games still have that barrier to entry, you still need to put down 30 or 40 bucks on Starcraft.
Patrick: That’s one of the things that blows me away about the CS: GO numbers when there is still a price point to enter. So one of the things we see when we look at Steam numbers is the active users are getting close to DOTA 2, but at the same time their percentage of users that are playing is super high. When you bring someone in at $15 even though it’s harder to do they are typically a way more invested player. It’s fun to look at the initial League of Legends numbers vs, what was the other MOBA that was out at the same time?
Brandon: Heroes of Newerth, HoN.
Patrick: So you look at the Newerth numbers vs the League of Legends numbers and Newerth had that premium price point and kind of took the early lead. For League of Legends it took them about 9 months to catch up and then they never looked back. They were on an exponential curve, every new user they got made it way easier to get another, while Newerth’s was a linear line and we saw how that turned out.
Brandon: Leo did you have any other questions?
Leo: I was kind of curious what you think about over-saturation of the MOBA market. Do you think there are too many MOBAs, with “FPS MOBAs” from Gearbox like Battleborn and even Overwatch to a lesser extent coming onto the scene? Everyone is trying to advertise as competitive, where is this whole thing going?
Patrick: I think too many is an interesting word since there’s always going to be too many of a product. Any developer will tell you there are too many indie games on steam that are trying to get green-lit. I think it’s a tougher market to have multiple winners, because as you said it’s Free2Play, and it’s a game as a service. You have a game as a service where you continue to increase your knowledge of gameplay over a long period of time which keeps the game fresh. MOBAs have a long-term player engagement longer than almost any other type of game in this state. One thing that’s pretty interesting to look at is the high-end of user engagement when it comes to player stats and experience on Steam.
So we’ll look at Call of Duty multiplayer vs Skyrim and they are kind of similar when it comes to people playing, and then we look at out of this world crazy high engagement in MOBAs where there are thousands and thousands of hours into it. Naturally that’s going to make a market where there’s going to be market leaders soaking up more of the market, and we see that in mobile where Clash of Clans and Candy Crush are soaking up so much of the revenue. That being said in a saturated market, typically what that means is more innovation is required to make an entrance, or it requires huge brands like Blizzard who was one of the few people who tried to enter the market when they did and get significant penetration.
Brandon: One last question, do you think that these guys will finally start talking to each other and not overlap tournaments when they are putting so much money into it? Now you have even just with Blizzard/Activision Overwatch and Call of Duty competing, along with Halo and all these other games. Right now you have a CS tournament going on in Romania on top of a whole bunch of other events.
Patrick: It’s interesting because it’s a full stack so you’re going to have different people who are the best in different ways and if there’s a powerful player that’s invested across all these different types of experiences they might throw their weight around to sort that out. An example would be something like GameStop; so GameStop controls all of the retail flow for all these games, so they will help people space their release timing around something like a Call of Duty. But what it takes to happen in markets and a lot of what we expect to happen is there will just be more awareness of when these things are happening and the market will sort itself out. In general the biggest dog picks the best timing, and then everyone gets out of it’s way.
Once there’s more money in it, once there’s more investment, once executives get involved, they start to ask more questions about stuff like that. “Why are we releasing on top of this?” they just do a lot more strategic planning around something they are investing in. So what you will start to see is people being smarter about Esports. Markets suggest that there isn’t a benefit to working together unless there is a vested interest across the board. Twitch had become the big winner and got a huge contact was like “Hey guys, it’s better for everyone if we stay out of each other’s way.” similar to a GameStop which will keep Call of Duty and Battlefield from launching right on top of each other. It’s not good for them, and it’s not good for either game but what tends to happen is Call of Duty will say “Hey, we’re dropping now!” and everyone will get out-of-the-way.
Brandon: I guess Blizzard and Bethesda didn’t get that memo.
Patrick: Heheh, exactly. But then one of the things that we have seen at Twitch is really interesting games will take audience away from other games. World of Warcraft will pull an audience away from Hearthstone, it’s real interesting. When Call of Duty launches it will pull people away from Counterstrike and so we see that in the retail world where shooters don’t want to launch on top of each other, but an RPG fan is going to buy that RPG.
Brandon: I foresee a lot of industry communication about not wanting to step on each other’s shoes, it’s going to be better for all of us if we work together and it’s mutually beneficial.
Patrick: There’s communication but the way that markets typically work now is the bigger title will drive the conversation.
Brandon: I’d love to talk more but I believe we are just about out of time.
Patrick: It was a great conversation, I’d say you guys taught me a lot today.
Brandon: Thank you very much for your time.
We at Gaming Instincts would like to thank Patrick and Kathy at EEDAR for this amazing and insightful opportunity.
