Stories about the growth of esports over the last decade aren’t hard to find. At the first League of Legends World Championship Series Finals in 2011, the game’s publisher, Riot Games, wasn’t sure if anyone was going to tune in. When a couple hundred thousand fans did, they were elated. Last year, though, around 100 million tuned in to the event, which was held at an arena in Paris and featured a trophy case designed by Louis Vuitton.
One-to-one comparisons between linear and digital broadcasts are often misleading, and there has been skepticism around the accuracy of esports viewership numbers, but there’s no way around the fact that 100 million is a lot of people. Even if esports isn’t quite mainstream yet — “video games aren’t sports” is probably still the majority opinion in the United States — it’s getting harder by the quarter to dismiss professional gaming as a fringe online subculture.
To esports evangelists, the industry’s current trajectory was a foregone conclusion, but the particular dynamics that have shaped the last 10 years are the very dynamics that have made the esports industry, as we know it, possible in the first place.
The most obvious of these trends is the growing dominance of video games as a cultural industry. Between 2010 and 2020, annual game industry revenue grew from $78 billion to $137 billion — more than either Hollywood or the American music industry. In a cultural moment that’s supersaturated with content for consumers, digital games increasingly stand out as the commodity to beat. As Netflix put it in its Q4 2018 letter to shareholders, “We compete with (and lose to) Fortnite more than HBO.”
Put differently, at a moment when more Americans are consuming more video games than ever before, why wouldn’t esports start to make sense for millions more people?
In the early 2010s, game publishers updated and reintroduced classic franchises to a new generation of players, and turned popular community mods into polished first-party products. More importantly, though, they started imagining professional gaming not as a subculture for hardcore gamers, but as something that could drive interest toward new games or even revive older ones.
“Esports mainstays like StarCraft II, Counter-Strike: Global Offensive and League of Legends all came out around 2010 and were designed with competitive play in mind,” says Nicholas Taylor, a professor at North Carolina State University who researches esports. “For players, each game had multiple competitive modes and featured steep learning curves with a high skill ceilings. For audiences, they came packaged with sophisticated replay and analytics tools that helped tournaments create high quality broadcasts.”
The development of games that had viewers in mind as much as players quickly found a home on a new generation of user generated content platforms, especially Twitch, that made it easier than ever before for viewers to find gaming tournaments, and vice versa. (Twitch is owned by Amazon, whose CEO, Jeff Bezos, owns The Washington Post.)
“Before Twitch, streaming major esports events used services like Octoshape and Akamai to deliver,” says Rod “Slasher” Breslau, a longtime commentator on the esports industry. “Not only were they wonky experiences that sometimes forced you to download plugins just to watch streams, they were also incredibly expensive to utilize as bandwidth costs for live video were extremely pricey in the mid 2000s. But with livestreaming, the costs to produce the stream itself have flattened to zero.”
The rise of Twitch sits firmly within one of the more important trends of the 2010s: the growing role of the information technology sector as the infrastructure for life. This is most obvious with companies such as Airbnb and Uber, which aim to reshape existing industries while insisting they are merely technology companies, but it’s also true of culture too. Ever since Google acquired YouTube in 2006, technology firms have been increasingly in the business of hosting, making, monetizing and circulating cultural content.
What this means is that when we look at esports, we need to be mindful of how it is being served to audiences. Esports doesn’t just depend upon Twitch (read: Amazon) and YouTube (read: Google) to reach viewers. It also relies on those companies because nearly every game with a professional scene, from League of Legends to Overwatch, runs on privately held digital distribution platforms like Steam and Battle Net that act as a gatekeeper. This lets publishers exert a level of control over esports that major league sports can only dream of.
“Traditional sports has long been commercialized, but no one can prevent you from playing a game of pickup basketball,” explains TL Taylor, a professor of Comparative Media Studies at MIT who researches livestreaming and esports. “Current intellectual property frameworks around gaming upend issues of access and participation despite the fact that esports is only possible via a wide swath of stakeholders, of which game developers themselves are only one. What does the future of sport look like when our play spaces are built on commercial platforms and game companies see themselves as having total ownership of the space?” (Last week, for example, Electronic Arts announced that it was shutting down its Tetris mobile games. Say what you will about baseball, but the game itself can exist without the MLB).
Given their position at the top of the esports food chain, publishers like Activision Blizzard and Riot Games have been able to rake in enormous franchising fees, reportedly charging anywhere from $10 to $60 million to would-be team owners for a slot in first-party organizations like Overwatch League, League Championship Series and the Call of Duty League. This has the secondary benefit of shifting most of the risk for these ventures away from themselves: Should any of these leagues fail, the teams, not the publishers, will be left holding most of the tab. The combined legal and technical power of publishers allows them to push out would-be tournament organizers at every level of play, set the terms on which stakeholders can access today’s most popular games, and collect and control data from casual to collegiate to professional play. In that, the esports industry has quite a bit in common with today’s titans of tech — agree to their terms, or get left behind.
Finally, no story about the 2010s would be complete without talking about money. Like much of the technology sector, esports has been running on venture capital for most of the last decade, which is the socially acceptable way of saying that it runs on losses. In an investigation for Kotaku, Cecilia D’Anastasio laid out the secret of many organizations in the esports world: almost no one (with the very notable exception of publishers) is making any money.
To make matters worse, the valuation of many companies in esports, especially teams, appear to be grossly overinflated and, like much of the Internet, the metrics used to measure viewership are dubious at best.
The systemic unprofitability of the esports industry is another window into a bigger story about the 2010s, one that traces how the investing landscape was altered in the wake of the 2008 financial crisis. At a moment when funding a sustained economic stimulus through taxation was a political non-starter, the Obama administration turned to monetary policy to steer the country out of the crisis. By dramatically reducing interest rates, the Federal Reserve reduced the returns on a wide range of financial assets (e.g. bonds), which in turn encouraged investors to put their money into ventures with a potentially higher return — like early stage technology investments, or esports teams.
In essence, these policies were designed to create a temporary wealth effect that would compel the rich to do something useful with their money. In a general sense, it worked: The total value of all venture capital investments more than doubled between 2008 and 2014, from $30 to $60 billion, and has grown every year since. At the same time, this capital glut sunk enormous amounts of money into investments seemingly without a viable business model. Most people know the consequences of this situation, one in which anyone with a PowerPoint and a pitch could score a funding round, vis-a-vis the spectacular collapse of WeWork or the ongoing crises over the gig economy’s tortured path to profitability. But it is precisely these dynamics — low interest rates and high levels of cash to invest — that keep esports going despite the fact that very few companies appear set to turn a profit any time soon.
So where does that leave esports as it enters the ’20s?
Long-standing game franchises (e.g. League of Legends, Counter-Strike and Street Fighter) chug on. Newer ones (Fortnite, Rainbow Six: Siege, Rocket League) look to take root in the hearts and minds of players. Team owners and tournament organizers, meanwhile, watch the clock, waiting for lucrative media contracts to materialize before the keg of cheap capital eventually sputters out. A recent agreement struck between Activision Blizzard and Google awarded exclusive broadcast rights to YouTube for the Overwatch League, Call of Duty League and Hearthstone esports. The terms of that deal, however, have not been disclosed.
(“It all comes down to media rights,” as Josh Chapman, co-founder of Konvoy Ventures, an investment firm specializing in esports, told The Washington Post late last year. “Whether it’s profitable is entirely contingent on … how much of that media rights revenue is shared”).
If the 2010′s was esports’ adolescence, it was because we got a glimpse of what professional gaming could someday become. And there’s no doubt, in 2020, that esports will continue growing. With every passing year, the idea of professional video game competition, now integrated into many high schools across the country, will be increasingly unremarkable to more and more people.
But how the esports industry grew, in what directions, for what reasons, and to whose benefit, is also a story of the 2010s — a story about technology, power, and play that has been told in many ways. The question now becomes whether the coming chapter, the one that follows the growth spurt, will chronicle esports’ continued ascension or begin its awkward phase.
Will Partin is a freelance writer and doctoral candidate at the University of North Carolina, where he researches the role of technology in cultural industries. You can follow him on Twitter @william_partin.