CLG’s approach to the business competition that exists in eSports

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In eSports, everyone is already familiar with the competition that exists between teams in game, but to many, that battle is secondary. Winning is fantastic and a great influence in determining an organizations’ ability to garner sponsorships, but it’s certainly not a one to one relationship. There is another competition taking place constantly behind the scenes every day; the never ending battle for marketing dollars. At least, that’s how many in and outside of the business of eSports might see and choose to participate in it. I think George and I have a very different approach to the business side of eSports than the typical operation in the scene. For this iBUYPOWER blog, I’d like to provide some insight into our philosophies on the “unseen competition” of eSports and how that affects how we operate CLG, the business.

To begin this discussion, we must first set a clear understanding of how organizations like CLG generate revenue and make their businesses profitable. Unlike traditional sports, eSports teams are not yet established enough to tap into the same number of revenue streams. In traditional sports, a team like the Yankees generates most of its revenues from broadcasting rights, licensing (primarily through merchandise), and of course, event attendance. Most eSports teams make almost no revenue from these areas, though more established teams like CLG, EG, TSM, Fnatic, etc. can generate a decent amount of revenue from licensing as well. Even so, almost every organization in eSports generates 90% of its revenue or more from sponsorship deals. This key understanding is actually what I think holds many organizations and players back in regards to properly addressing how to increase their market value. eSports organizations should not, in this current climate, be attempting to model their businesses after traditional sports organizations. eSports organizations are media companies. After becoming established, the ultimate financial success of your organization is not even largely determined by your team’s ability to win games, but the ability (or at least the perception of, because ROI tracking in eSports is quite difficult in many instances) for your players and brand to move your sponsor’s product.

Presently, the number of companies and marketing dollars involved in eSports is rather limited and restricted mostly to endemic companies. Since eSports is also a relatively new and underdeveloped market/industry, endemic companies are of scale. That is to say, companies who generate a large portion of revenues from eSports don’t have million dollar marketing budgets. Larger non-endemic companies are also not currently either paying enough attention to eSports to even care, or simply can’t find an ad buy large enough to meet their marketing minimums. To expand on this further, even if a company like Coke wanted to get involved with eSports earlier than signing onto LCS, they probably couldn’t justify it until Riot came along with an ad buy large enough to fit their marketing plans. All companies with marketing budgets look to break up their projects in chunks that make sense. If you’re the marketing director at Coke and you’ve got a hundred million dollar marketing budget, you’re probably not paying attention to any ad buys under a couple million dollars. Who wants to divide their time and track results between 20-40 projects when you could consolidate your efforts into 10-20?

Understanding this, we can now reasonably discern the massive importance of sponsors in the eSports economic ecosphere. It is also with this understanding where I can begin to provide some insight into George and I’s personal philosophies on how CLG should be interacting with other parties in this economic environment.

I firmly believe in the future of eSports and that it will one day rival traditional sports in scale with regards to viewership and economies. As such, I think that organizations with market influence as prevalent as CLG have a tremendous responsibility not simply to ourselves, but to the entire community and the future of our industry to do what is best for the future of eSports. While that statement in itself may seem rather selfless, I can assure you it is definitely not; there is great selfishness in that statement as well. Sure, CLG can do everything it can right now to squeeze every dollar from our fanbase and marketing budgets and watch the industry bleed out as other follow suit, but we’d much rather play the long game. Now is not the time to “cash out” as it were. I would much rather be a whale in the ocean than the biggest trout in a lake. This key philosophical belief is what initially got George and I engaged with each other on the business side and why I continue to love working for CLG. George has always acted as a visionary and sought to push the industry forward. Pioneering livestreaming, taking CLG to Korea, teams running community tournament, and the CLG documentary are all things that George approved or had the vision to do in the LoL scene first. The argument can certainly be made that some of these ideas may have been executed poorly, but that doesn’t detract from the vision it took to see the potential in these areas.

So how does this line of thinking affect how we actively operate the business? Primarily, we are more interested in looking to help others grow and push the industry further rather than idly see them make poor decisions while withholding our own resources. When someone like Steve, Jack, or even Regi (GASP) asks me for a sponsor contact, I’m happy to share it with them, and have on numerous occasions. That being said, I am very cognizant of which organizations I think are doing a great job representing the industry and helping us push forward and those which are holding us back. Just because I would give Alex Garfield (not that he could benefit from my rolodex) an intro to a sponsor doesn’t mean I would show other the same courtesy. The scene is very small and it’s critically important that sponsors are seeing return on their investments. My job becomes much more difficult if I go to a potential sponsor and they say “Well, we’ve already worked with XXX eSports team before and it was a bad experience.” This becomes even more critical with the current climate we are facing. Larger non-endemic companies are starting to invest their marketing dollars in eSports, and it’s critically important in my mind that they see results, continue to reinvest, and in turn encourage their competitors to do the same. It doesn’t stop with introductions to dollars though. I work to check in with the colleagues of mine in the scene that I respect to share ideas and discuss business in general with. If I’m finding success or struggling in one area, I’m happy to key them in on what is and isn’t working. If there’s a team I think has great potential but we can’t make work for whatever reason, I’ve suggested teams to other owners that they have in turn picked up. I, in turn, take ideas from them or aspects of what they’re doing and see if it makes sense for us.

CLG does not fear competition, and we don’t think anyone else should either. I love it when I see EG do a kickass announcement or Fnatic does a sick promotion. When others succeed, it applies pressure to others to step up their game. Monopolies don’t make markets stronger, competition does. Stagnation doesn’t push the industry forward, innovation does. CLG will always work to do not only what is best for us, but what is best for the industry. Not just because it’s better for eSports in the long run, but because there are generations of fans we want to be around for and hear chant the CLG name at competitions and events for decades to come.

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by Kelby May, on March 4, 2014