If You Build It, They Will Come

I’m sure you’ve heard of the eSports stadiums in the far east - in places like Chengdu which holds mostly Warcraft III events and South Korea holding Starcraft events - and in eastern Europe - Kiev Cybersports Arena, which was the home of Arbalet Best of 4 and more recently the IEM European Championship. These arenas could host so many events its not even funny and appear to be drawing good attendance during the events.

Why can’t we have one in the west? The idea that people won’t go to eSports events seems to be a myth, and I've seen hundreds, if not thousands of people just sit down and watch  from the few events I've gone to. People love to watch people compete, no matter what it is. If the content is good, as can be seen by Arbalet Best of Four and IEM European Championship,  people will come. Furthermore - despite poor attendance by WCG Grand Finals in Asian by comparison - the crowd at the WCG grand finals in 2010 was quite good.  If you look at the attendance at MLG Dallas for SC2 and the draw for all the events at NYC you can definitely tell people will show up if the competition is good enough.

(from HLTV.org)

The revenue and the capital seems to be the main problem. If we take the example of Asian and Eastern European we could provide a good source of revenue by doing what they do in the mean time - function as an Internet cafe and simply have a stage attached to it. Both the eSports arena in Chengdu and Kiev have a store, a LAN center, and then a stage which they use for the events they host. This allows the proprietors of the arena to stay afloat between tournaments/bigger events which may only come along every so often.

Basically you only need to get a LAN center which is large enough that you can have a LAN center in one room - which will serve as the major place for most of your business - and have a theater setup off to the side.

Hopefully the example of the east Asian/eastern Europe PC cafe/eSports arena will catch on in the western world because - to be perfectly honest - we have few good venues in north america or western Europe. Almost every event there are technical problems that could be sorted out by having a dedicated venue instead of jerry-rigging an event onto a convention center/hotel ballroom. These range from lack of proper proper power sources - causing power outages - lack of proper bandwidth for games like Counter-Strike, Starcraft 2 or World of Warcraft and the stream setup, to the simple problems with having to make a makeshift theater setup in an extremely short amount of time only to tear it down after the event is over. Furthermore the cost to transporting the goods -PC's, consoles, streaming equipment, projectors, bleachers and other paraphernalia - only add another cost to an already high one of simply running the event and renting out a facility. 

(from IEM)

Now people might say that because of the size of these facilities - the cyber sports arena(pictured above) is to small to host an MLG event let alone the finals of QuakeCon or the sheer amount of people which watch the DreamHack finals each year. And you may be correct. But I've been to an MLG event, their main stage has about the same amount of fixed seats - albeit less comfortable ones - as the Cybersports arena. Furthermore the arenas in South Korea - the MBCgame one for example - generally come in to sizes, one for the bracket matches which would be big enough to host a smaller event like a IEM global challenge before heading to a larger facility, like a conventional hall or a real sports arena, which would host the finals. Add to this that almost all the "big events" are split into areas, usually half of them are simply empty space, sponsor booths(most of which are small at best and have excess room between them for no reason) or LAN party setups(in the case of gamegune or dream hack), which would not be taking place in an arena in the first place.

Also, from my experience, the Kiev sports arena would be plenty comfortable for most of the events I've gone to. Some times, when these events are attached to larger gaming or tech conventions, it might be a bit packed, but generally you could breath well at the few major events I've gone to. From the walkthrough provided by ESL (CLICK HERE) it appears that all the events i've gone to could fit inside it easily. MLG San Diego and Anaheim could've been done in it - without an open bracket of course - IEM LA could've been done in it and the WCG grand finals of 2010 could've been done in it, unless there was a massive amounts of people for the first two days of the competition which disappear in the finals day. Simply put, without the convention hall you could've fit all 3 of the major international events into this arena. Now it does appear that they need more seating, but that's simply a a footnote in an overall proof of concept.


Now my unprofessional business model diagram which is a major oversimplification of all the necessary areas to generate profit:

Gaming Organizations: How they work

I’ve been reading gaming blogs/websites, for example ESFIworld.com, MLGpro.com and HLTV.org as well as other, and seeing comments on their recent articles with comments showing lack of comprehension in the field of gaming organization, so I decided to write a rough draft of how they work.

Step 1: Organizations sponsor teams/players

Organizations, like SK-gaming, Fnatic and Evil Geniuses, sponsor players and teams to represent their brand and compensate them with salaries, products and travel expenses. This is a new way deal, the organizations give these players a lot of money to support their brand and their sponsors. They hope by sending the teams to events that they will having a better chance to sell their brand to major multinational corporations like Intel, nVidia, Dr.Pepper, etc. which will provide the monetary support that they need to continue to support the players to go to more events which will then again attract more sponsors.

Advertising

The sponsors, seeing this as a valuable place to get advertising in on the 18-35 market, hope that they will being gaining a youth oriented brand identity as well as getting a word in to a market which is heavily advertised to, by attaching their name to a organization. This is why almost all organizations have various sponsors all over their shirts - ranging from energy drinks to high end computer components. Generally though they are gaming related, such as gaming peripherals like Steel-Series and Razer which hold the larger share of the advertising market.

Step 2: Events

At events the players will be representing their sponsors. The better they play, the better they make the organizations and sponsors look. It also makes monetary sense - they want their players to make the most of the large amount of money they spent on getting them to the event, grow the brand image of their organization and increase the amount of camera time they show their sponsor’s logos.

Step 3: ??????

This is an undefined place. Changes from org to org but usually it involves a method of generating revenue whether that be through the sale of shirts with their sponsors logo as well as their own on them or they send their players all over the place to work at conventions for their sponsors, or hold sponsors with the name of the organization and sponsor on it’s name.

They also do something which many would see as a bad thing. They take a percentage of the prize money from the players winnings. It’s a necessary part of the business. When they are putting out hundreds, if not thousands, of dollars to transport the teams around the world, the least the players can do is pay back a small percentage to the guys who are paying their paychecks.

Step 4: Profit!

If all goes well the organizations now has a stable line of revenue and is a valuable advertising partner to a major corporation. However few organizations ever reach this level.  Evil Geniuses, SK-gaming, etc have reach this level, but even they have a hard time producing a constant level of revenue.

Most never get to this level, as getting enough money from sponsors, ads and sales are exceptionally hard. Most run at a constant red and never make it to profitability.