Lecture Notes: The Rise and Fall of Esports

Introduction

• Esports witnessed rapid growth and decline in the 2010s
• Once seen as the future of sports, challenging traditional sports leagues
• Promised new opportunities for players and marketers
• Big investments from venture capitalists, game publishers, and even traditional sports team owners

Initial Growth (2010s)

• Esports expanded beyond niche markets in South Korea
• Twitch's rise and cable's decline favored Esports
• Attracted millennial and Gen Z audiences who avoided traditional media
• Esports teams and leagues hoped to monetize through tickets, merchandise, and media rights

Peak of Esports

• Institutions like colleges offered scholarships, prize pools increased
• Mainstream brands (Fortune 500) sponsored teams and events
• Billionaire investors from traditional sports got involved
• Esports was hailed as the next big thing in media

Decline of Esports by 2024

• Many teams shut down due to financial issues
• Decline in viewership and questions about audience value to advertisers
• Publishers reduced support or shut down leagues
• Prominent teams like TSM and Cloud9 went silent amidst financial struggles

Economic Challenges

• No team or league turned a profit despite high investments
• Fraud and mismanagement within the industry
• Esports ecosystem relied heavily on publishers, teams, leagues, and advertisers

The Role of Publishers

• Publishers like Riot and Activision played key roles
• Variance in publisher support affected the ecosystem's sustainability
• League of Legends and Counter-Strike were major titles

Business Models and Failures

• Esports tried to emulate traditional sports leagues but lacked sustainable revenue
• High entry fees for leagues like Overwatch and Call of Duty
• Failure of closed leagues to deliver promised financial returns

Case Study: FaZe Clan

• Prominent team with significant competitive and cultural presence
• IPOed but failed to sustain a profitable business
• Over-reliance on sponsorships and merchandise

Other Market Players

• Counter Logic Gaming (CLG) acquired by Madison Square Garden, later dissolved
• Enthusiast Gaming’s attempt at media first, then Esports failed
• Game Square's acquisition strategies and challenges

Regional Differences

• North America: well-funded but underperforming teams
• European teams like Heroic and Astralis faced similar financial issues despite competitive success

Conclusion

• Esports faced systemic issues, unsustainable business models
• Lack of profitability despite high viewership and cultural impact
• The future of Esports remains uncertain amidst ongoing challenges

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Additional Insight

• Activision's Role: Over-promised financial returns; later pivoted focus to successful live services
• Venue Challenges: Esports-specific venues struggled financially

Closing Thoughts

• Esports built on the premise of critical viewership mass and advertiser value
• Challenges in monetizing young, impressionable audiences
• Esports' future may lie more in passion-driven competition than commercial endeavors