Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
Shaun Byrne is a young entrepreneur in a nascent industry – competitive video gaming, also known as e-sports. A few years ago, Mr. Byrne and some friends began hosting gaming events as a hobby. They started a small e-sports club at the University of Windsor, where he recently earned his MBA.
“We started by accident turning a profit on our events,” Mr. Byrne recalls. “We realized there was potential for a business to sprout out of what we had done, and we decided to try and expand it provincewide in Ontario.”
Mr. Byrne is now co-founder and chief executive officer of Windsor-based eSport Gaming Events, which he and his partners, Sten Dragoti, William Girard and Shane Perron, run as a part-time venture. eSport Gaming has held about 30 events in Southwestern Ontario.
These gatherings fall into two categories. The first: tournaments in which PC and console gamers compete for cash and hardware prizes provided by sponsors. eSport Gaming’s LAN (local area network) tourneys might attract 250 players and upward of 50 spectators onsite, plus several hundred more watching via popular online streaming platform Twitch.
The second category: satellite viewings of tournaments held elsewhere. In late July, eSport Gaming drew more than 300 spectators to a Toronto movie theatre to watch top players of the hit game Defense of the Ancients (DoTA) 2 battle it out in Seattle for a $10.5-million (U.S.) prize pool.
Those winnings signal that e-sports – which promises sponsors and advertisers access to the coveted 18- to 24-year-old male demographic – is going mainstream. To build a sustainable business, eSport Gaming wants to better monetize its offerings and create a series of events with a big game developer such as Microsoft Corp., Mr. Byrne says.
A typical 200-player LAN tournament will bring in revenue of about $5,000, whereas a 300-spectator viewing event will yield closer to $10,000, he notes. Nearly all of the money comes from ticket sales to players and audience members.
Mostly because of a lack of funding, eSport Gaming hasn’t fully capitalized on merchandising, online streaming, advertising and sponsorships, Mr. Byrne says.
Another challenge in the rapidly changing world of e-sports: Players are a fickle bunch. Today’s biggest title, League of Legends, has been going strong since its 2009 launch, Mr. Byrne points out. “But we’ll also see games that have a very big boom for a short period of time.”
Despite their efforts, Mr. Byrne and his partners have gotten nowhere with major game developers. “We’ll think we have a lead, someone to speak to,” he explains. “It’ll turn out to be a dead end.”
Mr. Byrne doesn’t see Microsoft holding e-sports tournaments in a market such as Windsor or Kitchener-Waterloo. “But they could definitely partner up with someone like us and we could go in there and do it for them,” he says. “Trying to get them to realize that the potential is there will be key to growing our business.”
The Challenge: How can eSport Gaming build a sustainable business in a fast-moving, fickle industry?
THE EXPERTS WEIGH IN
Warren Currell, president of the interactive-entertainment business development and consulting firm Sherpa Games Inc., Toronto
I know they want to work with Microsoft or whoever, but to do that, you have to get a lot more visibility and have a lot more impact on the marketplace. So it’s a cart-before-the-horse type thing: You need to be a lot bigger to get anybody to take notice.
Maybe they want to start putting up some big money for tournament prizes and getting a lot of people. Maybe they’ve got to think bigger, like doing it at a hockey rink and setting up massive amounts of tables. They could do destination events where you’re staying at a hotel overnight – like it’s two-day event and you get money from hotel room bookings. But again, that’s got to be bigger.
The games they choose are really important, too. League of Legends and DotA 2, it seems like they’re the standards these days. You’ve just got to stay on top of that. Maybe on the side they could have little tiny different games, and again, those could be promoted by the publishers at the events. Sometimes those companies have big marketing budgets.
There’s the marketing side of Microsoft and the PR side. The PR side, they kind of throw away money, and the marketing side, they’re spending money to make money. If you’re trying to go after the marketing side, you’ve got to show that these events will drive revenue. You’ve got to have the empirical data.