Q&A: Arnaud Verlhac, Esports BAR

Innovation, Investment, Monetisation, Audiences and more will be discussed at this month’s digital edition, Esports BAR+ Americas, September 22-25

Here, the director of Esports BAR, Arnaud Verlhac, talks about the irrepressible growth of the esports market, how it has coped with the COVID-19 pandemic, and what can be done to capitalise on this phenomenon.

A little over a year ago, the Fortnite World Cup took place in front of a sold-out Flushing Meadows Park, but this mainstream visibility has been stunted by the current coronavirus pandemic. How has esports coped?

The impact of COVID-19 on business will have repercussions for years to come. Social distancing, border closure and self-isolation have damaged the entertainment, sports and leisure industries in particularly acute ways.

Strict lockdown restrictions, and the need to keep adults and children alike busy and engaged, created an unprecedented scarcity of choice and availability of new entertainment. Esports has been the most substantial beneficiary of this shift in attention. Mobile gaming or app-based streaming made gaming and esports the most immediately-available distraction. Lots of people discovered esports during the pandemic, but also lots of brands, companies and media.

Pre-COVID, it was already the case that gaming’s share of time and wallet was increasing, particularly among young people – but the pandemic hyper-accelerated that trend.

According to Nielsen, four out of five global consumers played video games or watched video game content during the height of the COVID-19 pandemic lockdowns.

In general the industry saw a 46% daily active user increase in PC gaming and 17% increase in mobile gaming. This led to a growth in microtransactions, with In-App Purchase (IAP) revenue for mobile games increasing by 24% since the pandemic was declared.

The esports ecosystem as a whole will benefit from raised awareness and interest in gaming, particularly as a result of its implicit legitimisation by traditional media. The new fans brought into esports and streaming can now be converted into enthusiastic and committed consumers of gaming content and fast movers into the esports space can take advantage of a rapidly rising industry at the beginning of a big popularity spike.

Esports has shown resilience to COVID-19 and its adaptability and relative success within entertainment shows it can adapt to overcome serious existential challenges.

How has the esports audience evolved over the past several years, and how much of its mainstream appeal is down to the growth of platforms like Twitch?

Esports represents competitive gaming at the professional level and in an organised format (tournament and leagues). Competitive gaming has cemented itself in popular culture – global investors, brands, media and consumers are all paying attention.

Total viewership is expected to grow at a 9% CAGR between 2019 and 2023. That has put the audience on pace to nearly double over a six year period. Looking ahead, most projections put the esports ecosystem on track to surpass US$1 billion in revenue for the first year this year. Money flows into esports through media rights, live ticket sales, merchandise sales and in-game purchase, but still most revenue (around 70%) comes from sponsorship and advertising.

Before Twitch came along, competitive gaming was a nerdy, underground pursuit. The streaming platform turned it into an economic juggernaut, made a handful of elite gamers into multimillionaire superstars and gave the entire competitive gaming industry a level of credibility that it never previously enjoyed.

Now we see high schools setting up grassroots esports leagues in order to help students develop learning skills, and universities offering scholarships to League of Legends players.

In what ways is esports challenging the definition of sports programming?

Esports is an expanding sector with an exponential growth rate that already has official competitions, professional teams and specific sponsors. Distribution platforms which acquire sports rights are looking at the Esports Audience and considering Esports more than ever as a new stream of revenue.

A burgeoning media market is forming and could disrupt the way fans of all sports pay for, watch, and consume entertainment, which might have a direct impact on sport programming soon.

What can be done to develop a business model that engages with enthusiasts without alienating potential newcomers dipping their toe into the world of esports?

This is a very specific question and an interesting one, but so many things could be done.  Esports BAR is a business facilitator, a relationship broker, a networking creator; we don’t give advice or share what we believe because it’s not relevant. Many people in this industry have different ideas; our objective is to gather them together, so they can discuss amongst themselves, and do business; we don’t participate in these brainstorming sessions ourselves – it’s not our place.

Unlike with traditional sports where football, for example, will always be a draw, esports is a lot more volatile and dependent on trends. How can broadcasters keep on top of what is popular and invest their resources wisely?

Core esports games and audiences are not as volatile as you might think. Counter-Strike or League of Legends, for instance, are as reliable as football in terms of audiences. I would even say that these games are attracting more viewers each year, where football loses more audience each year.

But it’s true that some new games are surfing on trends to increase their popularity. Others, like Fortnite, are marketing geniuses: they use each trend to grow their audience. To invest their resources wisely, broadcasters should stick to the top games, keep up to date to the latest trends, and be flexible.