typ3kal
04-03-2010, 01:50 PM
Disclaimer: No answers are given as to what the future will be or will look like; instead, I present a different analysis to E-Sports that should be heeded by fans, owners, and organizers.
In the mid 90's I thought with the rise of Thresh that competitive gaming would explode. It didn't. I figured the rise of Fatal1ty, cheap computers, and broadband would lead to the E-Sports revolution. Nope. Then I thought the allure of competitive CS in the early 00's would be E-Sports time- wrong again. CPL? WSVG? ESWC? WCG? WEG? CGS? Kode5? DigiLan? Nope. Nope. Nope.
Some might say that competitive gaming suffers from a deficit of financial support, I say it's a deficit of opportunity, organization, and hope.
I remember on the old coL forums I brought up a topic that Jason commented in about the future of E-Sports. I contended that consoles were too big of a market to look over and many of the forum were provincial and claimed consoles will never be as big as PC E-Sports.
/Facepalm.
I'm not going to write this post and contend that MLG is the future. I don't really know if it is. It seemed as though CPL was made after the World Tour and sponsors such as Pizza Hut, Intel, and Razer. Nope.
Perhaps the CGS would work.
Nope, it disenfranchized many communities, wrecked a lot of working team organizations, and set E-Sports back.
CPL
Nope, great sponsors but ultimately showed the sponsor model for organizations is not sustainable.
WSVG
Same story.
ESWC
Same story.
What is the sponsorship model?
The business model of many esports teams and tournaments is one in which advertising and sponsorship of the event pay for the costs- which are immense and often unforseen. Cost of equipment, venue, staff, promotion, and prizes can make a tournament that may only pay out $20,000 cost its organizers $60,000 or more.
But even for the industry juggernaut MLG, all is not well.
http://img694.imageshack.us/img694/2757/halo3blows.jpg
I'll stick with the original topic, as I have followed MLG's web traffic for awhile.
Defense against criticism:
Just analyzing the overall page views is misleading, look at their search volume and unique users- those are the money drivers for web advertisers. Searching of MLG is up significantly, overall users is slightly lower.
I wouldn't credit H3 as the reason for the decrease in traffic volume. I think a lot of it has to do with perceptions about the economy and people moving on to new games. Additionally, MLG got a huge user boost from buying out eSports heavy hitters like GotFrag and MMOChamp. Yet after being purchased both of these sites have stopped producing the amount of new content that would add to their advertising earnings.
In terms of advertising web dollars, GotFrag is a much more valuable site than MLG, but the MLG brand is worth a lot more than GotFrag. You can't just look at MLG.com and determine how the company is performing, you need to look at their ancillary sites as well.
Moreover, even if their daily users are down, it doesn't affect their advertising significantly as MLG's sales pitch has always been to companies to sponsor their title events. Because the Championship drew in 700k unique users to their site last year, sponsors are willing to fork out the cash. Of the roughly 50 Million in revenue MLG brought in last year, about 41 million of it was from direct sponsor advertising on the web and at events.
On an earlier post in the forum someone mentioned that MLG is an organization built around running tournaments and that they put every dollar they earned back into the organization. This is not true at all. Sundance and Mike financed the company on credit and then secured venture capital which to my knowledge has reached $47 million at this point.
Directly Mike's mouth in April 2008:
Quote: Q.: How does MLG make money?
I get this one a lot and I see it misunderstood everywhere.
MLG makes most of its money from advertising. Our Sponsors are advertisers that commit a year or more of advertising across everything we do - events, the website, TV, player or team endorsement deals and anything else. Sponsors typically come on at the beginning of a new season and stay with us for several years (like GameStop). This year we've added some great ones like Dr. Pepper, Stride Gum, Old Spice, Panasonic and HP. In exchange for their big commitment, we agree not to allow any of their competitors to advertise within MLG. These are the best relationships because these companies really dig in and get to understand our community and support MLG's growth (so please continue to support them!).
Some advertisers are shorter term and only buy advertising on MLG's websites. Lately as our websites have started to get very large and we have started to hire a full team of online sales specialists, there are more and more online-only advertisers (such as the Army and Navy).
The rest - a pretty small portion - comes from licensing (selling the rights to our brand or media - like the Astro Headsets or ESPN distribution of MLG content) and selling things directly to the community (everything including event registrations, online tournament fees, t-shirts and whatever else we can think of). That's it.
Q.: Does MLG make money or lose a ton on Pro Circuit events?
Pro Circuit events are not profitable on their own - and they're not really meant to be. Registration fees don't even come close to covering the prize money we pay out, let alone the millions of dollars in production staffing (there are now over 100 people working at MLG Pro Circuit Events), etc. However, without live competitions, there is no league. So we have to create as much media as possible out of the Pro Circuit and use them to make sure the top MLG Pros get as much exposure as possible.
Q.: Why doesn't prize money go up a lot every year? Who pays the prize money?
Prize money is just like any other expense at MLG. As much as we want to keep increasing prize money, we can't always do that, just like we can't keep buying Sundance gold-lined, purple velour track suits every month. More than anything else, we are focused on running MLG like the successful business it is to ensure that we will be around for many years. Unfortunately that means we have to make tough decisions about where and what and how much to spend on different things and prize money is one of those.
Q.: I heard MLG got investors, how does that work and when does that money have to be paid back?
In 2006, MLG took investment money from two venture capital firms - once in January and once in October. We received a total investment of $35 million. This money was an investment in the company, not a loan, so it doesn't have to be paid back. The firms bought a piece of the company in exchange for the investment, so they will only make money when at some point in the future MLG is sold to a bigger company or goes public.
The basic idea for a company like MLG is that you need to invest a lot of money up front to build something very big before you can start making money. We're just starting to get to that tipping point. The good news is we have put together a great team of people and the company is run extremely well. A lot of other companies have tried to compete with MLG over the years, but none have had the capital, the history, the strong community or the team we have here, so they're all pretty much gone at this point, or on their way out.
Many of these companies still owe prize money - unfortunately when other leagues get desperate, they stop paying prize money first. This is one of the reasons it is so important to me and everyone at MLG that we run the company with serious financial discipline so that we grow over time and don't make bad decisions that would make us flame out and hurt the entire community.
---
Criticism:
Thinking of MLG as a tournament organization is wrong, their model has and always will be one of an entertainment organization like WWE. This doesn't mean other organizations won't pop up or can't exist. There is the NFL and NBA- different strokes for different folks. Even in Korea there are three different stations dedicated to eSports with their own teams and events etc.
My beef with MLG is they produce relatively poor media content apart from VOD/Live Streams, few annual tournaments, inaccessible pro brackets for amateur players, and stagnant tournament payout. Instead of paying pros the huge salaries they do, they could attract a larger market share by promoting events with $500,000-$1,000,000 prize pools, more regional events, or paying for more players to go 'pro' at 5 figures instead of 6. Moreover, with all their TV personalities etc, why don't they pump out more media? It seems like a no brainier that they would do this as it would increase their worth as an advertising medium since users would spend more time on their site.
MLG is not perfect, their model has flaws, but I don't see another organization coming close to them in market capitalization for a long time unless there is serious cash being floated around by a new organization.
E-sports has always been touted nearly every year as being so close to having a break out year. The prizes have waxed and waned. There was the $1,000,000 CPL World Tour with $500,000 being awarded at the finals which were broadcast prime time on MTV with $150,000 going to first place, Jonathan Wendel.
In the mid 90's I thought with the rise of Thresh that competitive gaming would explode. It didn't. I figured the rise of Fatal1ty, cheap computers, and broadband would lead to the E-Sports revolution. Nope. Then I thought the allure of competitive CS in the early 00's would be E-Sports time- wrong again. CPL? WSVG? ESWC? WCG? WEG? CGS? Kode5? DigiLan? Nope. Nope. Nope.
Some might say that competitive gaming suffers from a deficit of financial support, I say it's a deficit of opportunity, organization, and hope.
I remember on the old coL forums I brought up a topic that Jason commented in about the future of E-Sports. I contended that consoles were too big of a market to look over and many of the forum were provincial and claimed consoles will never be as big as PC E-Sports.
/Facepalm.
I'm not going to write this post and contend that MLG is the future. I don't really know if it is. It seemed as though CPL was made after the World Tour and sponsors such as Pizza Hut, Intel, and Razer. Nope.
Perhaps the CGS would work.
Nope, it disenfranchized many communities, wrecked a lot of working team organizations, and set E-Sports back.
CPL
Nope, great sponsors but ultimately showed the sponsor model for organizations is not sustainable.
WSVG
Same story.
ESWC
Same story.
What is the sponsorship model?
The business model of many esports teams and tournaments is one in which advertising and sponsorship of the event pay for the costs- which are immense and often unforseen. Cost of equipment, venue, staff, promotion, and prizes can make a tournament that may only pay out $20,000 cost its organizers $60,000 or more.
But even for the industry juggernaut MLG, all is not well.
http://img694.imageshack.us/img694/2757/halo3blows.jpg
I'll stick with the original topic, as I have followed MLG's web traffic for awhile.
Defense against criticism:
Just analyzing the overall page views is misleading, look at their search volume and unique users- those are the money drivers for web advertisers. Searching of MLG is up significantly, overall users is slightly lower.
I wouldn't credit H3 as the reason for the decrease in traffic volume. I think a lot of it has to do with perceptions about the economy and people moving on to new games. Additionally, MLG got a huge user boost from buying out eSports heavy hitters like GotFrag and MMOChamp. Yet after being purchased both of these sites have stopped producing the amount of new content that would add to their advertising earnings.
In terms of advertising web dollars, GotFrag is a much more valuable site than MLG, but the MLG brand is worth a lot more than GotFrag. You can't just look at MLG.com and determine how the company is performing, you need to look at their ancillary sites as well.
Moreover, even if their daily users are down, it doesn't affect their advertising significantly as MLG's sales pitch has always been to companies to sponsor their title events. Because the Championship drew in 700k unique users to their site last year, sponsors are willing to fork out the cash. Of the roughly 50 Million in revenue MLG brought in last year, about 41 million of it was from direct sponsor advertising on the web and at events.
On an earlier post in the forum someone mentioned that MLG is an organization built around running tournaments and that they put every dollar they earned back into the organization. This is not true at all. Sundance and Mike financed the company on credit and then secured venture capital which to my knowledge has reached $47 million at this point.
Directly Mike's mouth in April 2008:
Quote: Q.: How does MLG make money?
I get this one a lot and I see it misunderstood everywhere.
MLG makes most of its money from advertising. Our Sponsors are advertisers that commit a year or more of advertising across everything we do - events, the website, TV, player or team endorsement deals and anything else. Sponsors typically come on at the beginning of a new season and stay with us for several years (like GameStop). This year we've added some great ones like Dr. Pepper, Stride Gum, Old Spice, Panasonic and HP. In exchange for their big commitment, we agree not to allow any of their competitors to advertise within MLG. These are the best relationships because these companies really dig in and get to understand our community and support MLG's growth (so please continue to support them!).
Some advertisers are shorter term and only buy advertising on MLG's websites. Lately as our websites have started to get very large and we have started to hire a full team of online sales specialists, there are more and more online-only advertisers (such as the Army and Navy).
The rest - a pretty small portion - comes from licensing (selling the rights to our brand or media - like the Astro Headsets or ESPN distribution of MLG content) and selling things directly to the community (everything including event registrations, online tournament fees, t-shirts and whatever else we can think of). That's it.
Q.: Does MLG make money or lose a ton on Pro Circuit events?
Pro Circuit events are not profitable on their own - and they're not really meant to be. Registration fees don't even come close to covering the prize money we pay out, let alone the millions of dollars in production staffing (there are now over 100 people working at MLG Pro Circuit Events), etc. However, without live competitions, there is no league. So we have to create as much media as possible out of the Pro Circuit and use them to make sure the top MLG Pros get as much exposure as possible.
Q.: Why doesn't prize money go up a lot every year? Who pays the prize money?
Prize money is just like any other expense at MLG. As much as we want to keep increasing prize money, we can't always do that, just like we can't keep buying Sundance gold-lined, purple velour track suits every month. More than anything else, we are focused on running MLG like the successful business it is to ensure that we will be around for many years. Unfortunately that means we have to make tough decisions about where and what and how much to spend on different things and prize money is one of those.
Q.: I heard MLG got investors, how does that work and when does that money have to be paid back?
In 2006, MLG took investment money from two venture capital firms - once in January and once in October. We received a total investment of $35 million. This money was an investment in the company, not a loan, so it doesn't have to be paid back. The firms bought a piece of the company in exchange for the investment, so they will only make money when at some point in the future MLG is sold to a bigger company or goes public.
The basic idea for a company like MLG is that you need to invest a lot of money up front to build something very big before you can start making money. We're just starting to get to that tipping point. The good news is we have put together a great team of people and the company is run extremely well. A lot of other companies have tried to compete with MLG over the years, but none have had the capital, the history, the strong community or the team we have here, so they're all pretty much gone at this point, or on their way out.
Many of these companies still owe prize money - unfortunately when other leagues get desperate, they stop paying prize money first. This is one of the reasons it is so important to me and everyone at MLG that we run the company with serious financial discipline so that we grow over time and don't make bad decisions that would make us flame out and hurt the entire community.
---
Criticism:
Thinking of MLG as a tournament organization is wrong, their model has and always will be one of an entertainment organization like WWE. This doesn't mean other organizations won't pop up or can't exist. There is the NFL and NBA- different strokes for different folks. Even in Korea there are three different stations dedicated to eSports with their own teams and events etc.
My beef with MLG is they produce relatively poor media content apart from VOD/Live Streams, few annual tournaments, inaccessible pro brackets for amateur players, and stagnant tournament payout. Instead of paying pros the huge salaries they do, they could attract a larger market share by promoting events with $500,000-$1,000,000 prize pools, more regional events, or paying for more players to go 'pro' at 5 figures instead of 6. Moreover, with all their TV personalities etc, why don't they pump out more media? It seems like a no brainier that they would do this as it would increase their worth as an advertising medium since users would spend more time on their site.
MLG is not perfect, their model has flaws, but I don't see another organization coming close to them in market capitalization for a long time unless there is serious cash being floated around by a new organization.
E-sports has always been touted nearly every year as being so close to having a break out year. The prizes have waxed and waned. There was the $1,000,000 CPL World Tour with $500,000 being awarded at the finals which were broadcast prime time on MTV with $150,000 going to first place, Jonathan Wendel.