Earlier this month, there was rumor (Ashton, 2018a) that Schalke 04 (S04) might drop out of League of Legends European Championship Series (EU LCS) at the end of 2018 season. However, on May 30th, S04 Leader Sponsoring Volker Spaetgens told FOXSPORTS that S04 has not made the final decision yet. According to Volker, S04 has an optimistic view about playing in EU LCS and S04 is planning to expand into other eSports games in the upcoming years.
When asked about the 8 million EUR franchising fee starting from 2019 season (Ashton, 2018b), Volker said that EU LCS teams may not need to pay the 8 million EUR in a lump sum – the 8 million EUR would be split paid within a few years; if S04 is required to pay 8 million EUR in a lump sum before the deadline, it would be difficult to get enough money on time. If 8 million EUR is a big financial burden for professional football clubs like S04, then it is reasonable to assume that eSports clubs without solid financial support, like Unicorn of Love noted (Ashton, 2018b), would have a hard time to get financing on time.
eSports – attention economy
eSports industry and sports industry are both perfect examples of attention economy (Davenport & Beck, 2001, p. 3) – getting attention from fans, sponsors and other parties determines the destiny of a eSports/sports club. Chart 1 shows an analogical “storytelling structure” among filming industry, sport industry and eSports industry – for example, Daniel Craig tells a spying story, produced by Eon Productions, directed by “007” director team; Huni tells a LOL story as a member of SK Telecom T1 (eSports club) on the stage of LCK (eSports league) in 2017.
Chart 1. (author’s own illustration). The storytelling structure in eSports industry and sport industry
But the most significant difference between eSports and sport is the ownership of a eSports game or a sport – legally speaking, video game is a type of intellectual property owned by the developer while nobody owns football or basketball. As a result, game developers would take away most of the eSports cake and leave only a small part for eSports clubs. This is why many eSports clubs are actually losing money like H2K’s LOL department (Lippe & Tully, 2017).
Figure 2. (cloud9, 2018). Most logos on C9’s jersey are gaming gear brands
Likewise, even sponsors could get a lot of attention through sponsoring eSports clubs, only part of the attention they get could be converted into economy. So, why are some sponsors still decide to sponsor eSports clubs when eSports clubs are losing money? The sponsors of eSports clubs could be classified into the following types:
1 Gaming gear brands (Razer, AMD, HyperX, etc). Since eSports players must use gaming gears during the match, gaming gear brands would never give up such a chance to exhibit their products to eSports audiences with great potential to buy gaming gears.
2 Snacks and drinks brands (Monster, Snickers, etc). It is common to see audiences eating snacks and drink beverages when watching sports/esports matches. In addition, sponsoring a eSports team is relatively cheaper than sponsoring a traditional sports club. Thus, snacks and drinks brands could get access to the same amount of potential consumers at a lower price.
3 Capitalists. Currently, the eSports industry has not developed a perfect business model. However, considering the huge potential in eSports industry, many capitalists would like to be the first-movers and explore their own business models. For example, Vision Venture Partners, the mother company of Echo Fox, could use Echo Fox to expand its digital entertainment business.
4 Traditional sports clubs (S04, Cleveland Cavaliers, etc). The development speed of traditional sports is slowing down in recent years. Thus, video games could help traditional sports clubs to get access to millennials who grow up with games and some young eSports audience could be transmitted into the fans of sports clubs.