Harry Alford

@harryalford3

eSports: Untapped Monetization For Traditional Sports Startups

Mary Meeker recently presented her 2018 Internet Trends Report. Among the many trends included in her 300-page deck was a nod to video game Fortnite Battle Royale, the most watched game on Twitch. Twitch’s continued growth in streaming hours and the total mobile video viewing for gaming are opening the door for new emerging content types and monetization. Fortnite isn’t just garnering the attention of new gamers, but unanticipated startups have also started to take notice.

Developed and published by Epic Games, Fortnite made $296M in the month of April, breaking the record for most additional content revenue in a single month by a console game according to Super Data. The overall industry saw digital spending grow 23% in April as consumers spent $9B on digital games across console, mobile and PC platforms in April.

Fortnite’s ascension to being one of the most popular games in the world can be attributed to it’s free-to-play model where users can purchase virtual goods via micropayments.

Startups have been applying technology applications and creative experiences used in traditional sports and carrying them over to eSports (see eSports One). They are providing a brand new platform for advertisers and corporate partners to monetize streams. Some startups are expanding or pivoting entirely to eSports. One example of a company doing just that is LA-based, REELY.

REELY developed a computer vision tool set for identifying highlights in traditional sports. They use AI and Machine Learning to recognize, rank and distribute sports highlights for notable college teams and even professional leagues like Major League Lacrosse. Through REELY, teams can now look at scores, moves, players, basic analytics and automate highlight reels. View a baseball highlight from one of their customers, The University of Kansas, below:

After receiving significant demand, REELY’s developed an eSports prototype for the game Fortnite, in partnership with GamerzArena. REELY’s CFO & Co-Founder, Frank Bryan, states, “The robust computer vision toolset we’ve built for traditional sports is a perfect fit to empower the content automation capabilities of influencers and content marketers in the eSports and gaming space.” The response has been overwhelming, and they’re evaluating product opportunities for automating short-form content creation for streamers, advertisers and competition organizers.

The average time spent watching eSports continues to grow in contrast to traditional sports decline in viewership. Deep Space Ventures Managing Partner, Stephen Hays, believes the games are transitioning into a Gaming-as-a-Service (GaaS). The games might start free, but eventually the content will be paid. Hays states:

Just look at the number of people who are willing to pay, to cheer for their favorite Overwatch team in Twitch chat, by buying single-use emojis (purchased via “bits”). The willingness to spend money in this market is much larger than most people think, and it is just the beginning.” — Stephen Hays, Esports Media Consumption-The Future is Paid Content

REELY is entering eSports at a time when the demographic is young, highly concentrated and has a willingness to spend. Typical market strategy for startups focused on traditional sports is to saturate one sport and then move into the next. But the same startups can very well capture more value by expanding their access horizontally to more users and more time with those users in the eSports space.

Media outlets and Professional sports franchises are implementing this on a larger level with distribution rights, acquiring teams and incorporating eSports into their strategy, but it won’t be long until we start seeing more upstarts make the lateral move into gaming on the startup side.

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