HUMAN beings will compete with each other at almost anything, from American football to poetry-reading. Video games are no different, and organised tournaments have been around for years. In 1997 a semi-professional American gamer called Dennis Fong made waves when his skills at Quake, an early three-dimensional shooting game, won him a Ferrari 328. Since then, competitive gaming—“e-sports”, to its fans—has continued to grow, most famously in South Korea, where Starcraft, a futuristic strategy game, was played in front of big audiences and broadcast on two television channels.
The last few years have seen an explosion of interest, driven by games explicitly designed to be played competitively, and by the ability to stream video cheaply over the Internet, which allows matches to broadcast to viewers around the world. Expert players of games such as Starcraft 2 and League of Legends, a sword-and-sorcery team game, can earn hundreds of thousands of dollars in prize money, on top of salaries paid by professional teams and cash from sponsors. The Economist spoke to Sundance DiGiovanni, the boss of Major League Gaming, the biggest e-sports firm in America, to discuss whether video games can really be sports, why viewership is growing so quickly and how the ability to broadcast over the internet is opening up new opportunities for media firms.
People seem to struggle with the idea of competitive gaming when they first hear about it. They say things like ”it can’t be a sport, surely, because there’s nothing physical to it, all you do is sit on a chair and move a mouse, or fiddle with a game controller!”
Haha, well, I’m not here to argue about the true definition of sport. My argument is: is it entertaining, when presented as sport, and do enough people recognise it as one? You can argue that golf isn't a sport, or that chess is. That’s not for me to say. My question is, is what I’m producing capable of drawing an audience? And all the numbers seem to point to yes, so I guess we’re doing something right.
I imagine a lot of the reactions are similar to what people said the first time they heard about people racing cars around a track for money, or playing billiards, or darts or whatever.
Another question that I suspect people will be wondering about: to what extent is there skill involved in all this?
Well that’s an understandable question, especially for someone who hasn’t tried it. I used to play baseball in high school and college, and people would say, “hey, that looks easy”. And then you'd go to a batting machine and you’d try to hit an 80mph ball, which isn’t fast by Major League Baseball’s standards. But you find out that, for you and me, it’s pretty difficult!
But yes, there needs to be a big potential skill gap in a given game for us to feature it. And we also have the commentary that’s common to all broadcast sports. Part of our commentators’ jobs is to help our less expert viewers understand just how difficult it is to play games like Starcraft 2 or League of Legends at the very highest level—how the strategies and the mind-games work, what are a particular player’s strengths and weaknesses, that sort of thing.
2012 was a good year for you—4.7m unique viewers for your biggest event, in Anaheim in June. 440,000 people watching at once, almost double last year's record, and that's on top of 20,000 spectators in person. But what were things like at the start? Can you remember the early tournaments you held?
Oh, those are some painful memories! Our very first one, ten years ago now, was in a small internet cafe in the East Village of Manhattan. It was about the size of a conference room, maybe a bit larger. It was run horribly, it was a mess! There were maybe 120 people in total.
For the next one we rented a ballroom at a hotel in Philadelphia. I remember duct-taping our tiny banners to the bottoms of the tiny projector screens, all of which we’d rented. Our main stage got unplugged at one point because someone tripped over a power cord. I’m shocked we got through that first year without getting more wrong.
After that we went to Dallas, Atlanta, Boston, all over the country. Back then it wasn’t guaranteed that anyone would show up at all. And keep in mind that these things were happening in a vacuum, because there was no way for us to broadcast anything. We were recording our games and then trying to put these tiny, postage-stamp size videos (which was all most people’s connections could handle, of course) onto the internet. And of course none of it was live. People could follow what was happening on our forums, but it was a real grassroots exercise.
And how did you pay for it all? You have venture-capital backing these days, but I presume that wasn’t the case back then.
Well in the beginning it was savings accounts getting drained to next to nothing. But because we learned quickly, we started to get recognised as these guys who had made a successful business out of competitive gaming. Soon we got a couple of sponsors in, and then we really tried aggressively to raise money. And eventually we did, in 2005 and 2006 we got $10m of VC money, and then another $25m right afterwards. The story was starting to gel.
And of course that sort of success brought attention to us. So folks like DirecTV and News Corporation saw an opportunity in this—competitive gaming as a way to market to a young male audience. So from being the only ones doing this in the US, we suddenly wound up having to go up against News Corporation, though their first attempt didn’t last that long.
You’ve said before that one development that really changed things was when streaming video over the internet became popular a few years ago.
Yes. Right around the time that Justin.tv [a big video-streaming site that anyone can use] got going [in 2007], people were starting to play around with homebrew video-streaming software, including us. Our first streaming initiative was a $20 season pass that let you watch video live from our events, and I think around 2,000 people signed up. At that point we knew we were on to something.
And I believe one of the big advantages of video-streaming is that it makes it worth your while to serve even small numbers of viewers in lots of different countries, in a way that you couldn’t if you had to negotiate deals with hundreds of local TV stations.
Absolutely. Those 4.7m unique views that we got in Anaheim were spread over 175 countries, some with only a few dozen people watching. But we can do that, and it’s worth our while to do it, and that’s what’s changed.
So it’s another example of the internet’s ability to completely change how product distribution works?
Yes. And streaming gives us other advantages, too. You can track your viewership in real time, for one thing. We can see it in our streams: when Flash [the nom de guerre of Lee Young Ho, a famous Korean Starcraft 2 player] gets eliminated, 10,000 people go away! And unlike TV, we don’t have to worry about pre-selling ads. We can do real-time bidding. And we can almost instantly turn all our coverage into video-on-demand, in case someone misses the live broadcast and wants to catch up later. I think a lot of more traditional sports could benefit from looking at this sort of model, particularly the ones that struggle to get TV airtime.
So who’s watching?
Our typical viewer is 18-34 and male, which of course is the sweet spot for a lot of brands. I should point out that over 40% of our viewers have a household income over $100,000, so technically we’re a luxury brand.
Our viewers tend to have a high level of engagement with their hobby, too—in other words, a lot of their leisure time is taken up with gaming in one way or another. It’s what marketers like to call a “sticky” activity. I’m either playing, or I’m watching someone else playing, or I’m reading about it.
I read something in Rolling Stone magazine that always stuck with me: that the greatest marketing decision the Grateful Dead ever made was to allow people to record their concerts and share them, which helped to create a fanatically loyal community. That level of engagement is a powerful thing. So from my point of view, I want as many people to see our product as possible. Even if they’re doing that by pirating our stream! After all, they might see what we’re doing and decide to buy later.
You aren’t the only people in this area, of course. You’ve got competition from the IGN Pro League, for instance, who are ultimately spending News Corporation’s money. And you’ve got the South Koreans, and European players such as Dreamhack and the Intel Extreme Masters, and dozens of smaller tournaments run online.
Well, I think for now, the competitive gaming business is still in a big growth phase. The way to build the audience is through partnership with the other players, and that’s something we’re doing. There will be more direct competition eventually, but the marketplace will sort that out. And in any case, I think the sports model often lends itself well to dominant regional players, so maybe that’s where we’ll end up, perhaps with a situation like you see in tennis, where there’s a handful of really big tournaments in different parts of the world each year.
And how about the future? Presumably the very fast growth we've seen in the past few years will start to slow down at some point?
At some point, sure. But I don’t think we’ll see that for a while. I mean, to an extent we’re beginning to rival some traditional sports in some of our viewer numbers. But I think competitive gaming could be much larger—just think of the installed base of games consoles and PCs, which is in the hundreds of millions. The last thing I want anyone to do is look at where we are today and say “we’ve done it, we’ve arrived.” Not that I think they will, though. That’s where competition is healthy and helpful. It stops you from getting lazy.
I also think that the e-sports phenonemon is beginning to affect the wider video-games business. Like everyone else, game developers are having to evolve with their audience. Nowadays a lot of the action is in cheap mobile-phone games, or games that are free to play but make their money by charging for optional extras, and traditional developers are having to decide: “how do we create compelling experiences without charging $60 a time?” And then you have people like Riot [the developers of League of Legends], and they’ve proved that having a competitive scene around a free game is a great way to keep people engaged, to have millions of them playing it every day.
