Daily Management Review

Hopes On 'Esports' Video Game Gladiators Pinned By European Telecoms Firms


Hopes On 'Esports' Video Game Gladiators Pinned By European Telecoms Firms
Telecoms firms see Esports as a way to lure younger clients and brand themselves as digital companies rather than merely providers of phone services, with championships watched by crowds of fans similar to traditional events like the NBA basketball finals or soccer World Cup.
By creating teams, TV channels or leagues, telecom companies like Vodafone, along with European rivals Telefonica and Orange, are investing in building up the industry.
Compared with the combined $450 billion income of the film, television series and sports industries in which those firms already compete for the best distribution rights, Esports remain financially tiny with global revenues of $500 million in 2016.
To bring in significant revenue from young people accustomed to consuming online products largely for free, the telecom firms still need to build an appropriate business model as a video game player earns in a month what a top soccer player might make in an hour.
But generating revenues of $1 billion. Industry experts see a potential for a $10-20 billion market eventually, the number of Esports fans is forecast to grow more than 50 percent by 2019 to 500 million people globally, according to data compiled by JP Morgan.
Consultancy Deloitte said that even for American Football's premier event, numbers are expected to challenge audiences already.
"This year, an Esports event could get more audience than the Super Bowl and in a near future land more revenue for image rights," Deloitte said in a report published last month.
With offering easy access to millions of players in Latin America and more of the fast fiber optic connections which video gamers and spectators demand than Britain, Germany and France combined, Spain is a leading market in Europe.
With 60,000 daily viewers, the world's third-biggest after the United States and South Korea is the Liga de Videojuegos Profesionales (LVP), or League of Professional Video Gamers.
It is sponsored by Orange and Spanish sports rights firm Mediapro, which also owns the La Liga football rights, bought it last year.
Telefonica has created its own team, Movistar Riders, which competes with Vodafone's G2, in which Ochoa plays and has launched in January on its premium TV platform Movistar+, a 24 hour channel broadcasting the best competitions.
It is the first time since he joined the industry 15 years ago that he sees telecoms companies rushing into a new market this way, says Ignacio Martinez, who oversees Vodafone's Esports strategy in Spain, even though none of the three companies has disclosed how much they have spent so far in Esports.
Support from fitness coaches, psychologists, physiotherapists, project managers and technical directors, like any professional football or basket ball team, is received by his two squads which play Counter Strike and League of Legends, a game where players fight each other, Martinez says.
"It's a natural place to be for a telco because without a good fiber or mobile connection, you cannot play or watch. We're targeting a rising audience of digital natives who are extremely active on social media and influence their parents on which telecoms services they should buy," Martinez said.
The return on an investment seen in the ball park of the tens of millions of euros is potentially huge - and quick.
Compared with $44.1 on average for U.S. professional sports leagues such as NFL or NBA, an Esports viewer generates $3.3 in revenue, according to the data from JP Morgan.
And monetization levels that took 50 years to achieve in traditional sports could be achieved in just 10 years at the current growth rate by Esports.