eSports update

In case you’ve been sleeping:

Tournament prize pools now rival those for some of the biggest events in traditional sports, and global audiences for some big gaming events have surpassed 100 million viewers, driven largely by esports’ exploding popularity in Asia.

The lion’s share of esports revenue comes from corporate sponsorships, according to industry analysis firm Newzoo, with ticket sales, merchandising and broadcasting rights bringing in additional revenue. Newzoo estimates that esports will generate $345 million in revenue in North America this year, in addition to more than half a billion dollars in revenue overseas.

You will note that total is much less than for major league football or baseball, which exceed $10 billion each.  Still, “more service for less gdp” is a common theme in the internet economy.  Consider this:

The 2017 League of Legends world championship, held in Beijing, drew a peak of over 106 million viewers, over 98 percent of whom watched from within China, according to industry analyst Esports Charts. That’s roughly on par with the audience for the 2018 Super Bowl.

In other words, the nation without the traditional “locked in” major sport franchises is choosing to jump to eSports.  And:

This year’s total DOTA 2 championship audience was roughly the same size as the total number tuning into the Kentucky Derby, and considerably larger than the peak Wimbledon, Daytona 500, U.S. Open or Tour de France audiences.

All of a sudden, more and more of the world is “stuff I never really heard of before.”

Here is more from Christopher Ingraham at Wonkblog.


Even a polymath ages Tyler, it’s nothing to be ashamed of.

What will be interesting is if this changes the market for video games in a large way, analogous to how international markets for films have changed the content/genre distribution of movies studios choose to pursue (eg China market critical for profitability).

If a large % of future video game revenue comes in the form of esports, which is now not even close to being true, one would expect the market to shift to easy to understand and learn, but hard to master video games with mass appeal.

I’d say this is well underway with Fortnite etc.

Fortnite, pfft. My hot 20-something Filipina gf plays that stupid game. It's like "Hunger Games" online, the "Battle Royale" version, and there are some professional gamers in every batch of people playing (you can tell by Googling their nym, and also they usually the last ones standing). I prefer the more cerebral royal game of chess.

Bonus trivia: a link has been found between better brain activity and playing video games, something about hand-eye coordination, but so far, sadly, no such nexus has been found for playing chess, though Rex Sinquefield the mutual funds maven and chess fan is funding one such study, trying to find a link. And chess is a sport! Bring it into the Olympics.

I've grown to love Ray's responses. True comic genius. Keep it coming!

More Jacksonvilles incoming?

I'm not an expert on the research, but overall it seems that the conclusion is there is no evidence that video games cause violent behavior.

Here is one large recent study:

This was my thinking as well. I recall seeing another similar finding regarding internet access/use in the aftermath of Sandy Hook coming to the same conclusion. I think that the body of research in this area is actually larger than people assume.

I think the real issue, as Axa hints at below, is that there was prize money involved in Jacksonville. Where money is there to is motive.

Men never shot each other after disappointment in poker/dice.

One assumes this is a droll statement concerning how common fatal disputes are between those who play various games of chance, at least outside of the confines of a casino setting.

Or not - a better comparison might be professional motor vehicle racing, however, as gambling does involve certain elements that are different from simple competition.

You assume right.

Video games are not perfect competition, there's always a chance component. Even the the pros have the feeling of "how the hell did I do that?" sometimes.

That depends on the game - same as with real sports. In most e-sports, chance or luck is a very small factor in determining who wins.

Just because the pros sometimes get a sense of 'how the hell did I do that" doesn't mean that act was attributable to luck in the sense of 'gambling'. It would be more comparable to a tennis player deciding to go for broke on a service return and hitting the perfect shot on right on the line.

I think the event was a Madden 19 tournament, so unless people are willing to say _football_ causes violence, probably not. Then again, facts have never seemed to get in the way of using a tragedy to support banning their favorite boogeyman.

I think we can all at least agree that we need to make it easier for people to purchase guns.

Thats a great and awesome post thanks for sharing with us.

I worked in an earlier era of this business (2008) and it is a weird world. A key challenge I perceived then as now is the opaque visible display of athleticism. The gap between a great tennis player and myself is quite easy to see. I can pick up a racket, but I can’t do much more. In contrast, I can play the same games as these pros and feel accomplished by virtue of a sliding scale of difficulty which games have relied on for decades. Certainly a youth league for Tennis offers a similar analogy to this, but games are designed to be winnable, creating some ambiguity about the difference between the average joe and the pros. The more one plays, the clearer the contrast becomes, but the level of understanding on the part of the general public to the nuance of this struck me then as the reason why it would not gain mass appeal.

What has happened in the intervening decade seems to be a continued disregard for any ‘mainstream’ audience but the continued development of a formerly niche viewership which can appreciate the nuance, strategy and skill on display.

Like other ‘nerdy’ pursuits, eSports still seem to wrestle with a hunger for mainstream acceptance (e.g. lobbying for inclusion in the Olympics), but are clearly at their best when speaking to their core, which is growing by the year.

Interesting thoughts. I wonder how different this is from mainstream sports, though, really?

Even an untrained eye can spot a tennis ball served faster, a baseball hit farther, etc. However, most popular sports still require quite a bit of knowledge to be truly appreciated. Think of the comments a Brit might make about American football, or an American about cricket. Even though both of these sports have quite a bit in common with well-known local sports, these foreign observers will generally have no idea what is going on and not appreciate the game.

I find it hard to believe that people who don’t play e-sports will ever care about watching e-sports which is quite different than big time sports on tv like football and soccer.

Of course, lots of people play e-sports for fun, but as you mention it’s still a niche market and is limited to that demo I think.

"I find it hard to believe that people who don’t play e-sports will ever care about watching e-sports which is quite different than big time sports on tv like football and soccer."

I think you have an exaggerated belief in how much people care about sports they've never played. I'd much rather watch one of the various e-sports than soccer. Or even than baseball (and I've played it).

Two big problems with the esports market. First, the games are oriented towards playability over watchability. This will impact the market for viewers who don't play the games. Second, reaction time is a dominant factor in most of these games and is incredibly youth oriented. The result is that high performers will not have staying power. I think this will be a negative for the US market. But maybe they don't care about that in China, idk.

Over a year ago, as an experiment I watched the finale of some battle-royale type game being played on the CW. I didn't know the game, and it was only interesting because it was a brand new experience. I wouldn't do it again.

I would probably watch if it was a game I had played a fair bit and knew the common pitfalls/traps. I've played all of basketball and soccer and baseball and football and ballroom dance and hockey so when I watch those competitions I can appreciate the displays of skill and athleticism involved.

Sure, but you aren't the target audience. Millenials play these games and there are loads of them. E-sports will someday be the primary form of 'sports' entertainment, without question.

Do they watch for games they've never played? If I played Fortnite I believe I would enjoy watching a Fortnite competition, which was my thesis.

I once spent a half-hour watching an analysis of a 5-minute Super Mario Bros human-played speed-run.

Good commentary can make up for a lot of that. John Madden drawing arrows and explaining the action over replays did a lot for football, I've even found golf interesting when the commentary explains what's actually going on and I've never set foot on the links. Esports offer the perfect technology for this kind of commentary as replays can be seen from every angle and there are not just the actions of the players but also environmental factors that can be explained.

But, one issue with viewability is whether or not these games have pauses in the action that gives commentators time to do their thing. Football is notorious for having more non-playing time than playing time in a game, but that's gives the commentators plenty of time to really get detailed about what's going on. Even basketball and hockey have plenty of pauses to allow replays to highlight amazing play.

Most esports are harder to break up that way. They have a rhythm but a lot of them tend to have a build up, then lots of action all happening at once (and sometimes on different areas of the map simultaneously or sequentially,) then the match is decided. They lend themselves to after action reports more than in-line commentary, or edited broadcasts rather than live. Once you get past the "games are just time wasters for kids" attitude, this is the main hurdle I think esports will need to overcome.

I think that is true, and there are may skillful commentators in eSports. Their language is (in my observation) very fast paced and as jargon-y as Madden to the uninitiated.

Great point on replays. More and more games are building in dedicated esports functionality, which can make more traditional broadcast experiences possible.

I'm not sure. In the olden days, sports broadcasters used to use massive and unverifiable Chinese viewing statistics to claim huge figures for e.g. the World Cup final. Now, we have a global tournament playing an American game, which claims to have had a peak English viewing audience of 832,382 viewers, and 104 million Chinese viewers. Maybe.

The Top players by nationality are: Korea, China, Taiwan, US.

So, a large viewership in China seems likely. That being said, those numbers from China are probably exaggerated.


That's top players by money earned.

Previously I already established that in esport performance verbal IQ dominate whereas quant IQ is weaker or not significant, e.g. for DOTA2,

log ExpDota2/PopM=+0.13*GreVerbal-20.54; #n=70; Rsq=0.163; p=0.0005366 *** (VVSig)

log ExpDota2/PopM=+0.076*GreQuant-12.27; #n=70; Rsq=0.0318; p=0.1398 (NotSig)

In general female has higher verbal IQ than male and the higher quant IQ from male is irrelevant for DOTA2. Thus innately female has an advantage over male in esport. However, in high competition environment the level of grit against the competitive pressure is very important. The OECD PISA large sample of student well being data already showed that most people cannot handle competitive pressure. However the relevant readily available PISA data does not breakdown on gender and the raw data are too large to handle on limited computing resources. The next best is to look at gender performance under competitive pressure in a single country.

The female players constantly whinged about routinely deal with online harassment as if the male players do not harass the other male players as well. Ability to handle verbal abuse is part of the competition strategy, that also occurred in gentlemanly game like chess. Competition is not for snowflakes.

There are competition without verbal abuse, like in academic examination/competition situations, where the researchers had tried to produce neutral environment,

"Competitive Pressure Widens the Gender Gap in Performance: Evidence from a Two-Stage Competition in Mathematics"

Although female participants have higher Math grades at school the gender gap reverses in the two stages of the math contest. More importantly, using the set of participants who take part in both stages, we find that the gender gap in performance increases from stage 1 to stage 2 of the competition. The increase in female underperformance is attributed to higher competitive pressure and alternative explanations based on discrimination and differences in reaction to increasing difficulty are ruled out.

Again, in general female students have better maths scores in school (mostly from homework assignments and exams?) However, putting the female in school maths competition environment the trends reversed.

5 Conclusion

Field data from a two-stage elimination math competition offers a unique opportunity to test for and measure gender differences in performance as competitive pressure increases. The gender compositions in stage 1, 2, and among winning participants show a clear case of a glass-ceiling effect, as the female presence is reduced to 13% among the winners even though 56% of contestants in stage 1 are female. We find that female underperformance increases from stage 1 to stage 2. We attribute this to changes in competitive pressure and rule out alternative explanations based on discrimination and gender differential reactions to difficulty. The increase in female underperformance is explained not only by female participants being more risk averse or less confident (as shown by the fact that the number of answers omitted increases as competitive pressure increases): even when we control for the number of answers omitted the number of right answers given by female contestants decreases.

Our setting, which shares many of the features found in hierarchical organizations, offers a good test-bed for detecting gender differences as competitive pressure increases. We therefore identify an important source for the diminishing female presence as one moves up in multi-stage elimination contest-like hierarchical organizations in the labor market.

See how for male:female the mean ScoreAtSchool started at 7.10:7.17, stage1 41.72:38.44, stage2 52.08:44.81, winners 0.07/0.02. Or in terms of number of students, AtSchool 8092:6021, stage1 11638:9038, stage2 1851:941, winners 127:19.

Overall results:

item OverallObs. OverallMean MaleObs. MaleMean FemaleObs. FemaleMean p-value

MathAtSchool 14117 7.13 8092 (57%) 7.10 6021 (43%) 7.17 0.03

Stage1 20751 40.27 11638 (56%) 41.72 9038 (44%) 38.44 0.00

Stage2 2792 49.63 1851 (66%) 52.08 941 (34%) 44.81 0.00

Winners 146 0.05 127 (87%) 0.07 19 (13%) 0.02 0.00

The age group is indicated by level. The discrepancy increased with age. At level4 there was 0% female winners. It is unlikely that there were verbal abuse at any stage.

Or the results on corporate performance in another country.

"Executive gender, competitive pressures, and corporate performance"

Men have a measurable advantage in twitch skills over women, so games that rely on that will be male-dominated.

Also, women are unlikely to gamble their earning potential on playing video games when they could just get a normal job. I expect the average income from people who attempt to earn money from e-sports is negative.

"I expect the average income from people who attempt to earn money from e-sports is negative."

Even if you restrict it to those who actually have earned money, the average is probably negative. And the median is probably very negative.

On the other, it's probably much the same for chess players.

I'm amazed at the popularity of reality tv, which even produced a president. I understand that fantasy sports is real big, ESPN even has shows dedicated to fantasy NFL. I also understand that much of the popularity of these illusory games is the gambling that goes with it, especially the difficult to regulate online gambling. Meanwhile, the popularity of real sports has been flat or in decline for years. Indeed, absent television revenues, would any of the real sports survive? Baseball, the most popular game when I was growing up, is considered too slow by today's generation. What keeps MLB going are a combination of television revenues and public largesse, the latter including billions of public funds used to build and equip stadiums as well as tax breaks for the owners. While we think of baseball (or football or soccer or whatever) as local, with the community where the team is located both supporting and benefiting from the local team, studies have shown that the bulk of the economic benefits don't go to the community where the team is located but to the community where the owners and players reside (because that's where the bulk of the income generated is spent). A big problem with real sports is that it's played by real people, people who often aren't very likeable, who do outrageous things with impunity. Boxing was very popular when I was growing up. Boxing! There was even a weekly fight on television (the "fight of the week") which we would watch on our black and white television. Today, football is considered by a growing number of people as barbaric, played mostly by young men with low IQs and large muscles, in "careers" that last only a few years due to the injuries suffered, including widespread brain injuries. These unfortunate features of real sports for the most part aren't applicable to esports or fantasy sports because it's an illusion. But because it's an illusion, the "competitors" don't have the real skills of real players that produce consistent wins. Thus, the frustration.

>I'm amazed at the popularity of reality tv, which even produced a president.

The last two, actually.

And the next one is going to completely blow your mind.

"A big problem with real sports is that it's played by real people, "

Rayward, E-Sports are played by actual humans. The players are even prominently featured on the televised broadcasts.

Also, just an FYI, Indy Cars have humans inside.

I don't care for Indy racing, but F-1 is fantastic. I actually watch it on tv, sometimes in the early hours of the morning because most races are in Europe or in the Middle or Far East. The little guys that drive (they have to be little because the cockpit is tiny) have to be the bravest souls on Earth, as those cars run at very high speeds on very dangerous tracks, where simply passing another car is a death defying act of courage. Truly amazing. And the technology that goes into the cars is something that anyone interested in tech has to appreciate. Yet, it's a sport with hardly any following the the U.S. Indeed, I'd guess that in the U.S. there are many more fans of esports and fantasy sports than F-1. Oh, and I'm a fan of Ferrari and drivers Sebastian Vettel and Kimi Räikkönen.

There's tech in the cars? I guess so, that's why they have advertisements all over them.

Actually, tech has acknowledged they can't build a reliable car, only the software that one hopes doesn't crash like Windows.

"Actually, tech has acknowledged they can't build a reliable car, "

Say what? rayward, Consumer Reports has increased it's rating of the Tesla S to above average as of 2017.

“I'm amazed at the popularity of reality tv, which even produced a president.”

I thought it was fascism, or 12 Russian trolls?

Starcraft tournaments have been a thing for at least 15 years, and DotA at least 10 years. It used to be you would watch the matches by downloading special replay files, then it switched to YouTube, more recently Twitch. The only reason it feels all of a sudden is probably because of recent monetization. But that's a generic shortcoming of economics and finance, ignoring culture until it carries a price tag

Why do you want finance to 'pay attention' to culture that has no financial aspect?

This has an effect on many games. Example; The RNG (random number generator, or RN Jesus) that modifies warships aim, to simulate WWII accuracy, in is a major hindrance for tournament play. I expect this feature to be jettisoned in an attempt to lure eSports dollars.

FWIW, my five-year-old enjoys watching YouTube videos where other people play with toys. We're spectators in a virtual world.

"All of a sudden, more and more of the world is “stuff I never really heard of before.”"

Tyler's Abe Simpson moment?

All these games are heavily promoted, and to some extent subsidized, by the developer of the games.

Imagine that you "owned' football and made a 2 cents every time a game was played. That is the situation that these game studios are in.
It is unknown how large the esports scene would be if companies actually had to make money of the profesional league itself.

League of Legends, the largest esport, is basically the marketing arm of the developer, Riot Games. It keeps you engaged: you learn the newest strategies, talk to your friends about specific matches, cheer for your favorite team. But ultimately the goal is after you watch a match you go and buy content for the game.

I think what you said is true, but I don't see why that matters. If I want to go bowling or play golf, I generally have to pay somebody.

Maybe I was unclear. Yes you have to pay somebody to go bowling or golf, but that person changes from location to location. Anytime to play Dota you are doing so with Valve's permission. Nobody owns golf. Valve owns Dota.

A key piece to remember here is that the most profitable games are SaaS. League of Legends, Dota2, & Fornite are all free to download. They make their money via micro-transactions, primarily for cosmetic items. These companies have a strong incentive to keep players around. So they make regular updates to the game and provided other ways to keep engagement high. Like esports.

Contrast this to the "old" style of game development where your only revenue comes from the purchase price. With a few exceptions (SSBM) these games lack an esports scene as the developer has no reason to sponsor it.

Imagine what the NFL would do differently if they were trying to maximize the number of people playing football instead of the number of people watching football.

Interesting points, I think a bit is missing in your example. Skill do translate over from game to game, top gamers have moved over to Fortnite for the boost in income. So the esport isn’t quite as locked as a traditional sport where top players cannot easily (in a few months) move to another sport.

It may be better to compare a class of egames like FPS to a traditional sport.

The life span of these games isn’t like traditional sports either. So it makes sense that the economic model would be quite different.

"So they make regular updates to the game and provided other ways to keep engagement high. Like esports."

Good point. I will point out that the professional sports tend to make changes to keep the game interesting to viewers. Though, the games are old enough that the changes tend to be minor.

You can't trust eSports viewership counts from China. A majority of their streams are actually popularity scores which are mistaken for individual viewers (closer to "number of interactions" than "number of watchers"), and beyond that they have a serious issue with botting propping up numbers to make it look good to sponsors. Most major western eSports markets will even break out the Chinese figure from the broader viewership totals.

I am not an expert on research. You make a very clear concept.

I can't believe how eSports have grown so much and turned into a very lucrative sport. This year the Overwatch League had a lot of exposure and coverage from the media.

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