Esports ecosystem ain't broken, it's misunderstood.

Another rare occasion sharing my thoughts on Linkedin with a bunch of hot takes to keep you engaged in too many words. Bet? Here we go:

Esports isn't sports.

Competitive Gaming mimics traditional sports in its core, but its business model does not at all. I believe anyone that bothers to inhale my thoughts will be smart enough to connect a few dots: Ticketing is a very obvious example where revenue streams work completely different. Besides the obvious, there are many cultural nuances and being a professional sim-racer for SK Gaming 16 years ago, leaving my fingerprint in the industry with Fernando Alonso's and Red Bull Racing's Esports Teams and leading top tier esports teams in Europe as well as North America provides me with a unique generalistic view on our industry.

Let me entertain you.

Robbie already said, you're tired of your teachers and your school's a drag, you're not going to end up like your mum and dad. The equation is easy though:

Commercialization is the current key to esports' success and esports commercializes entertainment instead of sports. Winning doesn't necessarily matter, if a VALORANT team is fielding TenZ, shroud and tarik. Winning a LEC split in League of Legends generates less revenue than Perkz, Caps and Jankos streaming endless of hours during the same season. And most certainly no one cares about him winning if the greatest Call of Duty player alive transitions to professional sim-racing with FaZe Clan . Is the ecosystem broken if winning "doesn't matter"? Yes and no. The equation is easy though:

1. Commercialization is driven by reach and engagment
2. Esports players are influencers; esports commercializes influencers
3. Competitive success amplifies the influencing power
4. Competitive success alone does not maximize your influencing power
5. In our industry, entertainment is the driver for community building

Traditional sports has other values it benefits stronger from: tradition, geo-affiliation, generational growth, youth development and supporting local communities to name a few. Loyal fans because your favorite team represents your city or you had this special connection with friends and family through sports - especially with a parent introducing you to sports very early on in life? Very different to how the gaming communities were and are built.

To clarify before pro players will hate me: Winning matters! It amplifies success, but success will have to be monetized through entertainment in the current state of esports. Streaming, Vlogging, Social Media, Discord... My best advise to any esports pro: Build your own community and stay loyal to them. Take a look at League of Legends player Marcin "Jankos" Jankowski, VALORANT player Oscar "mixwell" Colocho or the Counter-Strike legend Gabriel "FalleN" Toledo.

Millions in player salaries, kinda stupid, isn't it?

Unlike the above, this is an extremely loaded and complex topic but let me tackle a few elements real quick. The growth of player salaries in esports has been insane, but so has been the development from nerdy backroom events, over footprints at exhibitions to filling entire multifunctional arenas all over the world.

That being said, most recent years were all hype and a rat race many embraced, oftentimes through investments that were built on overly-optimistic assumptions or simply with high risk - and a lot of them worked out, some of them even changed the industry. Ultimately, it's coming back to how investments can be monetized to create a positive return. Player salaries are therefore a reflection of the assumed value the organization can generate and this is where it gets funky real quick.

Y'all blame the owners for overspending, easy huh?

I'll be very blunt for a second. If you ask for high salary but refuse to create content or enable partnerships - fuck you. If you promise to stream and engage with social media but instead end up playing WoW more often than not - fuck you even more. If you believe you should have high salaries and take all commercial rights away from the organization in the believe you can commercialize yourself better individually - stop playing professionally and become an influencer.

That's what should be said more often because assumptions around commercialization is the main justification for high salaries. In the end it's one ecosystem where many different stakeholders have to function and collaborate together and there are many absurd takes I have seen in practice and on social media.

And as said above, it's a complex topic. Lionshare of prize money ending up in player's hands, orgs unmet desire to monetize their IP in-game or simply non-commercial ways that benefits organizations for being competitively successful are a few examples of factors that will influence the equation, however, in it's current state, esports functions through commercialization and that's why many think the ecosystem is broken.

There are only a few stars but many wannabes

The model of commercialization works though, but it is limited and alternatives are rare. There are only so many esports athletes that

a) are good enough to play the game at the very highest level

b) are professional enough to work collectively together

c) are brilliant entertainers, build their fanbase and engage with the audience

In other words, the most valuable assets are rare and only a few organizations have understood how to enable and work with them to monetize their potential to a point where the player can be top earner in the market and the organization is generating a healthy return to support world championship winning operations - the winning formula.

The system quicky falls apart if you overpay for overestimated, underperforming or uncollaborative assets or fail to commercialize the assets accordingly which is common in times where marketing budgets are cut. What's worse though?

Entitlement is esports' biggest opponent

Over the years and with precedents set on the market, there is a certain entitlement for players to demand unhealthy salary levels, especially when backed up by agents whos main source of income is through player salaries. Unfortunately, there are organizations that keep paying those salaries, either in the wrong believe to commercialize as explained above or some still in the believe that winning will enable enough revenue automatically and this is where most fall down. Spending high, maybe finishing high but absolutely not earning high.

Why? See above.

And yes, to all the players, there is absolutely a tricky balance between being a top performer inside of the game and an entertainer outside of the game. For me, it starts with mindset though. My focus as a manager has always been to enable the success either way and there are many different ways to do. It has been my obligation to enable the success but I am expecting collaboration in return - esports organizations and players are one team and those that want to be successful have to work hard. And let me tell you, forcing you to stream 40 hours a month on Twitch isn't enabling success, way more has to go into it, from both sides. You don't even have to be a streamer to build a community - it helps though. More importantly, you have to care.

If you feel oh so entitled that only playing the game and not doing anything else should pay you thousands and thousands, go and ask Quake or Starcraft players how well that works once commercialization fell flat. Esports ain't the NFL, it's still in early stages, it's still growing, it's still falling down and standing up again, it's still in need of growing our communities and engaging with them accordingly and as a professional gamer you automatically fall into a role model persona that can not only change the industry for the better but actually generate more value, and winning doesn't necessarily matter.

Lets ride the rollercoaster, baby.

All of the above is written through the lense of an esports organization that is targeting monetization through esports competition. There can only be one winner in an esports competition though and there can only be so many esports organizations with the biggest stars on their teams - what about the rest?

First of all, current economic climate requires everyone to understand their value proposition. It will lead to a correction in compensation based on my explanation above. Salaries will have to reflect generation of value in a more defined way. Bad for those that only care about playing the game, but good for those that actively seek to generate value.

It will remain a challenge for players to balance their competitive success with generation of value, but as long as competitive performance is not the key driver of financial success, it will be the hard reality for everyone in our industry. Embrace the challenge though because the few organizations that will master the above, will establish themselves as the powerhouses of the near future - see you in a few years NaVi, Team Liquid and G2 Esports.

Others may be forced to close doors or jump into more unique selling points: SK Gaming has been strong commercializating with and for strategic partners / investors rather than top tier esports. Eintracht Spandau is willingly taking over and focussing on the local German market instead. Pittsburgh Knights is becoming a more sophisticated tournament operator, running VALORANT Challengers. Veloce Esports is acting as a media/talent agency. Last but not least, Evil Geniuses is utilizing the power of data to find raw talents that can be taught "how to live evil" while catering to a unique, smart, diverse and women-heavy audience as part of growing our communities.

I don't like winning. I hate losing.

Change is inevitable. It's already here and it's challening. If you read all the way to this point, you are probably caught desperately in the current esports dilemma and I feel you. Let me state the following to paint a possible picture of the future:

• More esports teams will cease to exist or pivot into other priorities making more space for those that are mastering the commercialization of esports athletes.
• Compensation of esports athletes will become a more detailed reflection of where the value comes from and that will correct some of the current salaries on the market.
• Talking about salary caps is currently a waste of time due to its legal dilemma and regional disbalance on a global scale.
• The industry becomes smarter, not only organizations but everyone. Pay attention to how teams contribute to the success of VALORANT.
• "Fortnite Kids" will be the dominating generation of hardcore esports in the next 10 years and giving it another significant push in audience.
• The upcoming 4th generation of esports pros will be more open to streaming and content creation, prepared to enable the success mentioned above.
• Don't cannibalize out of desperation. Don't force pay-per-view. Focus on community building and OTT instead. Reach and engagement remains the core to our business. Accept that media rights aren't comparable to traditional sports. Innovate differently.
• Most importantly, TOs / Publishers will hopefully create sustainability and security by establishing revenue streams that do not rely on commercialization of the esports players. Reward organizations for competitive performance, unlock org-level monetization, most logically through in-game items.
• A final hot take: I hate prize money. Majority of prize money leaves our ecosystem and 18 y/o-players buy Lamborghinis and Porsches with money that could have been reinvested into the growth of our ecosystem. Especially in times where professional esports players have salaries way above average household incomes - for playing stupid video games.