Ahead of the game

Esports is currently experiencing a meteoric rise in worldwide popularity, resulting in record numbers across audience viewership platforms, player participation numbers, corporate advertising spend, merger and acquisition activity as well as through the staggering scale of revenue amassed in 2016 alone.

This remarkable growth means that demand is now fast outpacing supply, resulting in a talent gap from an executive search perspective that Esports organisations are now quickly looking to tighten. As the industry continues on its current trajectory of increased viewership and influence, organisations are increasingly on the lookout for leaders and executives with the commercial knowledge and unique basket of specific skills to reach younger, digitally-oriented consumers.

A booming industry

Esports is currently capturing the attention of worldwide audiences to the tune of some 1.3 billion people this year, marking an increase from 1.1 billion in 2016. Awareness of the industry is estimated to approach 1.8 billion by 2020 according to the UK Interactive Entertainment (UKIE) trade body. These audiences are not only participating with their eyes and ears but their wallets too, with Esports enthusiasts spending $231 million on tickets, merchandise and prize pool contributions last year, according to Superdata.

However, these impressive audience numbers are eclipsed by the staggering scale of media rights activity with 74% of Esports market earnings comprised purely of advertising and sponsorship spend (NewZoo). In financial terms, this currently stands at $95 million in 2017 and is expected to reach $340 million in 2020.

How does the industry work and make its money?

The Esports industry operates via a value chain that is comprised of publishers, teams, viewing channels, brands and leagues, all seamlessly working with the other to organise events, sponsor them, own teams, purchase players and facilitate the operation of the leagues within this model. Publishers are the driving force, operating the logistics around events and facilitating game leagues, with the players representing teams within those leagues. They also push their games as franchises, opening up professional gaming to new viewers.

Revenues primarily come from consumers, brands expending vast sums for media rights sales, advertising and sponsorship.

The events themselves are broadcast through multiple channels (the largest of which is Twitch, owned by Amazon). This interaction is illustrated in the image above.

An emerging talent gap

Whether from start-up studios or multinational publishers, we’re seeing a heightened demand for digital-savvy leaders to bring real commercial advantage to their business operations.

What is unique to this market is the skillset that organisations are looking for, with increasingly ambitious companies now on the hunt for strategic business leaders with broad international exposure.

So where are the identifiable talent gaps in this multi-billion market?

Attracting the right audience

Visa, Audi, Betway, and Snickers are examples of well-known brands that have sponsored Esports teams or tournaments in the past twelve months. With advertising and sponsorship accounting for 74% of the entire Esports industry’s revenue, marketing teams around the world are now on the search for talent that is at once versatile and digitally-savvy. It will be a vital skill to match talent that is not only experienced but which has a comprehensive understanding of youth marketing as well as the ability to keep track with how quickly the market is accelerating in terms of trends, audience segmentation and social media versatility.

The ability to identify and target specific segments of the Esports fan base is critical to a brand’s success and this directly impacts the selection of the marketing tactics used to achieve goals and in searching for the best talent to execute them. Whilst major household brands such as Red Bull and Coca-Cola, for example, have successfully entered the Esports space to engage with under-30s, they are yet to define comprehensive marketing approaches to an industry that requires a very specific basket of skills in this respect.

Creative experience

Strong event management and production skills are absolutely vital in this sector, with events taking on increasingly ambitious approaches in terms of size, scale and audience numbers, all of which are supplemented by strategic digital campaigns. The relevant talent in this regard is not just digital-savvy but can embrace robust marketing plans that manage event operations successfully and create innovative campaigns to promoting those events and leverage resources around them to increase market share and brand exposure.

Ticket and merchandise sales for Esports are estimated to grow from $53 million to $74 million in 2017, attributable to an increase in the number of tournaments being organised (Superdata). If the popularity of Esports in places like South Korea where over 40,000 regularly attend Esports events is replicated in the Western world, then organisations with stadium assets can cash-in. Given the capacity of stadiums in the US and Asian Pacific markets, the demand for talent with the ability to oversee and manage the intricacies of these events will be high. The challenge will be in clearly identifying the expectations of Esports fans and finding talent who can translate them into targeted strategies for event operations, commercialisation and experiential programmes.

With these companies on top of pioneering developments in stadium technology, whether involving mobile payments, point-of-service, in-stadium broadcasting, geolocation or advertising, there is a clear requirement for talent that can harness these strengths effectively and hit the ground running.

Acting on the numbers

Over 213 million people watched competitive gaming last year, and this number is estimated to increase to 303 million by 2019, according to a recent study by SuperData. Understanding audience segmentation and trends will be important for businesses as they look to engage the highest numbers possible. You can therefore expect demand for accomplished leaders in data analytics, customer modelling and algorithm-based systems. Commercial opportunities to tap into a highly-engaged global audience with significant levels of disposable income will become more available as the data is better understood but businesses will be looking to secure talent sooner rather than later to maximise the potential given the sheer size of the audience base.

This size creates opportunities and challenges alike for commercial and marketing executives within brands, rights holders and broadcasters as well as the major ‘actors’ in Esports - teams, games publishers, content providers/leagues and goods and service providers.

As we have seen in other industries rich in customer data, the real success comes in securing the talent who can successfully interpret this data to; identify clear lines of focus for growing revenue, present opportunities for personalisation and gather insight to feed into product and service development

Commercial management

Businesses will look to protect the commercial assets and rights of teams and players and ensure they are valued fairly and activated in the right way to protect the integrity of the brand. This means a greater demand for commercial leaders who understand the particular dynamics of the gaming industry.

A careless activation strategy could have a dramatic impact on a player’s advocacy and popularity with fans if they are seen to have ‘sold out’ to a brand that doesn’t reflect them or their fans. There is an extreme sense of community in Esports and whilst fans might buy products from a brand that supports their favourite player any divergence from anything other than an authentic message will have commercial consequences.

Equally, the games publishers profit from a stable scene and well-branded teams, as popular teams ultimately draw more fans and create more drama. Publishers understand the value of franchised leagues and tournaments with regulated revenue splits and an established group of team owners.

However, as the Esports scene grows, more and more games publishers, players, sponsors, sports ‘clubs’ and even new leagues, are likely to emerge creating further opportunities for commercial exploitation. In this environment, commercially skilled executives will need to work hand-in-glove with external lawyers and in-house legal teams to ensure their rights are protected but also exploited.

Broadcasting

Broadcasting plays a huge role within traditional sports and we are now witnessing large TV and broadcasting corporations entering the Esports arena. Whilst the major broadcast channel for Esports distribution will for the foreseeable future remain digital, having traditional broadcasting for Esports could take things to a new and more professional level.

Despite this, access to Esports content is becoming easier thanks to the expanding portfolios and geographical remits of broadcasters such as Ginx TV, TBS and ESPN. Received wisdom suggests that broadcasting rights will start to account for a far higher percentage of the revenue in Esports than what we see currently.

With this comes the need for more comprehensive broadcasting capabilities with the mainstream broadcasters needing to think carefully about how their current platforms meet the needs of Esports consumers who have a go-to platform for consumption of Esports in the form of Twitch.

Lawyers and regulators

As broadcasting and commercial rights in Esports become increasingly valuable, the entire Esports community is struggling to stake out their intellectual property (IP) rights as a long-term basis for monetisation.

Whilst some commentators suggest that self-regulation is not required, given the growing commercial value of Esports and the increasing involvement of ‘corporates’ in the space, we would expect some sort of broad organisation to form, whether this is an external body or internal organisation is yet to be seen.

Media rights are likely to be a major driver of Esports growth. While traditional sports have long established a sustainable model for distribution of income, the Esports sector is different and at the moment, struggles to do so. Publishers want a piece of the pie and holding the IP, are in the position to lay claim to it. On the other side, in light of recent investments in Esports teams, there is increasing pressure for teams to find a way to monetise their success over and above prize money and merchandising.

This raises questions around rights ownership and who benefits. We would expect there to be consolidation in the Esports space over the coming 12 months and this process may well help to force the issue on IP ownership in some areas, however we expect lawyers, especially IP and rights lawyers, to be kept busy as well as lawyers dealing with integrity issues as Esports starts to hit the mainstream.

The potential exploitation of young Esports players, child-protection, skins-betting, reports of doping and match-fixing as well as moral questions around the live airing of competitions such as Counter-Strike (terrorists and counter-terrorists killing each other) are all areas that could be handled under the remit of a universal regulator. That being said, there are many constituent stakeholders involved in Esports, often with conflicting agendas. At the moment it seems unlikely that a one-size fits all regulator would be successful.

Staying ahead of the game

Businesses are busy keeping up with the formidable pace and growth of the industry, but to take advantage of this they need to act quickly. These businesses need to identify suitable talent from outside the sector, understand how they can add commercial advantage and leverage their strengths effectively going forward.

We see a high demand for digitally savvy leaders and strong marketing executives who have the ability to understand youth marketing and audience segmentation as well as acquisition marketing.

At the same time, there is an identifiable need for commercial executives with brand, rights holder and broadcasting experience, such as Mark Brittain at Gfinity, for example.

There is also increased demand for expert event managers and production officials comfortable with pioneering technology given the increasing scale of events and their logistical complexity; this is complemented by leaders with the experience to manage the rise in geolocation focused advertising.

With all of this activity comes a tight legal framework, with lawyers, regulators and talent agencies entering the space to police player exploitation and intellectual property rights.

Of course, all strategy is underpinned by big data and so businesses also need accomplished leaders and executives with a command over data analytics and customer modelling to focus business strategy going forward.

Odgers Berndtson is uniquely placed to deal with such challenges through its dedicated video gaming practice, headed up by Scott Dodkins, an industry veteran with over 20 years as an executive in this space. This dedicated practice is complemented by an Esports expert, Caroline Lacey, who has identified significant trends in the demand for individuals with broader international exposure as well as the need for more strategic business leaders.

This is certainly not an industry that is planning on standing still for the immediate future and businesses need to adapt their talent pool accordingly in order to take advantage of the vast opportunities at hand.