Category: VIDG

Video Gaming - So What?

People root for their home team at sporting events. Teams are often aligned with specific cities as their home territory and compete against rival cities. Attendees bring their families to show them what it’s like to see high-level players compete in a high-stakes game. Part of the enjoyment comes from knowing that the team you’re rooting for has trained hard and improved their skills so they can bring home the trophy. And when your team wins, part of the joy for the audience is to be rewarded for your dedication as a fan.

In eSports there is no home or away game, no fan loyalty, only the desire for improved performance. The personal connection between the audience and the players/teams comes almost entirely from the desire to become better at the game. Viewers will connect with players by seeing their progress and aspiring to similar skill progress. While there is entertainment value to watching the game, viewers typically first enter the market out of a desire to play better themselves, either in order to win tournaments, or to improve by learning from the best.
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(July 27th 2016, statistics and graphic from the website: https://blog.battlefy.com/why-do-people-watch-esports-6ad7e8ec58b9)

According to NewZoo 70% of gamers watch a single eSport (game franchise), often the game that first attracted them to eSports. Players typically determine their main franchise based on their purchases, selecting their favorite from this limited personal library. It is because of this that many game publishers have gone to a free to play business model. It’s no coincidence that 8 of the top 10 eSports franchises are free to play. The more people that get their hands on your game, the more opportunities you have to find the potential eSports enthusiasts. Since 70% of gamers stick to one franchise, if you manage to develop an audience for your game, your video game development company now has a hold on your own eSport.

Newzoo_Esports_Viewers_Players_Franchises

May 11th 2017, statistics and graphic from the website: https://newzoo.com/insights/articles/esports-franchises-70-watch-only-one-game-and-42-dont-play/

As fans of a game increase in number, so too does their appetite for improved play and competition. By monitoring what people are watching on Twitch (Amazon’s video game streaming service) we can assess which games/companies are growing in real-time. The following games and companies are consistently among the most popular:

Activision Blizzard – Overwatch, Hearthstone, Starcraft, Call of Duty
EA – Fifa, Battlefield, Apex Legends
Nintendo – Super Smash Bros
Take two Interactive – NBA 2k, 2k franchises
Tencent- League of Legends, Fortnite, Rocket League, Clash Royale
Ubisoft – Rainbow Six Siege
Valve – Dota 2, Counter-Strike

These are the biggest games in eSports. While eSports teams play multiple games, the players within the teams are often dedicated to a single game. In this way, eSports teams can engage in each of the major eSports. The teams that are not able to attract the talent needed to perform at a high level in most of these games are effectively in the “minor leagues”. Their teams often don’t get to compete in as a many tournaments simply because they don’t have a roster deep enough to engage in every game, resulting in smaller viewership and generating less revenue. In the end these teams tend to compete more often with other smaller lesser teams with a smaller audience, much like you would see at a minor league: smaller crowd, a more shallow and uninteresting roster of players, and less advertising investment from large brands.

In 2018 eSports enthusiasts grew by 15% and reached 165 million, revenues grew 36% to $897 million. 38% of this business was in North America and 18% in China. According to NewZoo, the biggest revenue generator is sponsorship ($353 million in 2018), followed by advertising ($172 million), media rights ($160 million), game publishing fees ($116 million) and merchandise/tickets ($96 million). Sponsorships, advertising, and media rights all pertain to viewership. In this market viewership dictates financial success. Whether you are a team owner, broadcast platform, venue. If viewers are most interested in watching the best players compete in their favorite game, and if your team can’t afford the best players for those games, you may be outperformed on stage resulting in diminished viewership and a lesser financial performance for your esports team.

As a segment of the video game industry ($134.9 billion in 2018, 10.9% year over year) eSports has garnered a lot of attention for its robust growth ($897 million in 2018, 36% YoY). Esports’ growth has been out trending the overall video game industry, suggesting that it is still growing into its place within gaming: If 10% of gamers are potential eSports enthusiasts, and if the current ratio is far lower than the potential 10%, the market for eSports may continue to outpace the growth of the video game industry until that equilibrium is achieved.

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2018 Global Game Market Value 

https://www.gamesindustry.biz/articles/2018-12-17-gamesindustry-biz-presents-the-year-in-numbers-2018

As eSports has developed and grown, new market dynamics have arisen. Players have improved and become more strategic, now forming teams to win tournaments in multiple games, advertisers have jumped in to capitalize on the growing audiences, venues have been looking to adapt to bring in the crowds, game development studios have started to make competitive games. The big question many people are asking is: “Why is anybody watching this?”

Baseball today is played the same as 10 years ago, just stronger and faster. Baseball is limited by two things: the laws of physics and the actions that are permissible for players. Super Smash Brothers is played today entirely different from how it was played 1 year ago.

As players spend more time in the game, they discover new tactics, strategies, and counter-play. The key difference is that any action a player can perform in the game’s engine (the game's laws of physics) is permissible. A crafty player can find new aspects/mechanics in the game and apply them to create a new/previously unknown strategy or technique. In doing so the proliferation of this newfound understanding can change how the game is played on a competitive level. This is referred to as the meta. The game of how to play the game.

Many Esports enthusiasts engage in the hobby to be entertained and to improve. However, the driving force behind their interest in eSports is their desire to see the greats pioneer the meta of their favorite game. They keep watching to see when the next game changing tactic/technique/maneuver will be discovered and improved. This sense of discovery could be what fuels the market. This desire to see what is or can become possible, and go beyond the current understanding is one of the reasons people commit themselves to eSports, as fans, and as players. We believe the root of eSports’ impressive growth is the explosively exciting effect that is pushing the meta has on gamers.

It is for these reasons that we at Defiance ETF’s believe in the video game market and have brought VIDG to the market.

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