1/ To help shine some light on the magnitude of the Counter-Strike ecosystem's issues, TO losses in 2019-2020 per public filings:
- ESL ~$80mm (incl. all games)
- BLAST ~$25mm
Combine team losses, and the ecosystem (excl. Valve) is easily losing upwards of $50mm/year.
- ESL ~$80mm (incl. all games)
- BLAST ~$25mm
Combine team losses, and the ecosystem (excl. Valve) is easily losing upwards of $50mm/year.
2/ Worth noting that 2020 was actually the better year financially for ESL -- they were able to keep much of their sponsorships/revenue with significantly reduced costs, driven by layoffs and lack of offline events.
2019 was *worse* than 2020. Scary for return to "normal."
2019 was *worse* than 2020. Scary for return to "normal."
3/ Why are investors (note: not VC funds -- primarily family offices, strategics, etc.) funding this?
Assuming continuous growth (my pinned tweet's article explains some of the high-level rationale for industry as a whole), eventually this turns into a lucrative media business.
Assuming continuous growth (my pinned tweet's article explains some of the high-level rationale for industry as a whole), eventually this turns into a lucrative media business.
4/ So, what's the problem then, you might ask?
Active Counter-Strike player base has roughly doubled since mid-2019, but the viewer numbers are flat to down.
That is potentially catastrophic, especially seeing as @CSGO is doing more to promote tournaments in-game.
Active Counter-Strike player base has roughly doubled since mid-2019, but the viewer numbers are flat to down.
That is potentially catastrophic, especially seeing as @CSGO is doing more to promote tournaments in-game.
5/ How do you solve this?
There are two options:
- You either return viewership to growth by bringing back more ex-viewers/players, increasing conversion of players to viewers, or by increasing players, or
- You start monetizing the product more effectively
There are two options:
- You either return viewership to growth by bringing back more ex-viewers/players, increasing conversion of players to viewers, or by increasing players, or
- You start monetizing the product more effectively
6/ How can we improve viewership?
We need to make the game more accessible for viewers; that means scheduling games better (i.e., Liquid should not play at 4AM PT), reducing length of games and making it more predictable, improving spectator product, etc.
See yesterday's thread
We need to make the game more accessible for viewers; that means scheduling games better (i.e., Liquid should not play at 4AM PT), reducing length of games and making it more predictable, improving spectator product, etc.
See yesterday's thread
7/ What about monetization?
You'd need to make the viewers pay for the product.
This was thought to happen at the platform level (e.g., Twitch/YouTube), but unfortunately fans refused to watch on other platforms, so media rights deals have actually gone down(!) in recent years.
You'd need to make the viewers pay for the product.
This was thought to happen at the platform level (e.g., Twitch/YouTube), but unfortunately fans refused to watch on other platforms, so media rights deals have actually gone down(!) in recent years.
8/ Wait, what?
Twitch knows Counter-Strike events need it (bc fans won't watch elsewhere), so they refuse to pay meaningful cash for media rights.
This is what fans accomplished by flaming Facebook, Mixer, etc. for not being "Twitch."
Now it's down to direct fan monetization.
Twitch knows Counter-Strike events need it (bc fans won't watch elsewhere), so they refuse to pay meaningful cash for media rights.
This is what fans accomplished by flaming Facebook, Mixer, etc. for not being "Twitch."
Now it's down to direct fan monetization.
9/ What do you mean by direct fan monetization?
You'd really need to start hosting PPV events at this point given all the other streaming platforms are largely irrelevant, and there is no existing business model for charging fans any subscriptions (esp. after ESL ~killed ESEA)
You'd really need to start hosting PPV events at this point given all the other streaming platforms are largely irrelevant, and there is no existing business model for charging fans any subscriptions (esp. after ESL ~killed ESEA)
10/ Why now though?
Viewership hasn't grown in two years, but last year it was blamed on COVID and in early 2021 on lack of offline events. No excuse now.
VALORANT also poses a threat to compete for the same funding, and is *already* taking investment away from Counter-Strike.
Viewership hasn't grown in two years, but last year it was blamed on COVID and in early 2021 on lack of offline events. No excuse now.
VALORANT also poses a threat to compete for the same funding, and is *already* taking investment away from Counter-Strike.
11/ Why does a small reduction matter?
There is no "small reduction" in an ecosystem losing $50mm/year and not showing growth; no sensible investor will continue funding those losses if they can't see a reasonable path to success.
Ergo, small reduction becomes significant.
There is no "small reduction" in an ecosystem losing $50mm/year and not showing growth; no sensible investor will continue funding those losses if they can't see a reasonable path to success.
Ergo, small reduction becomes significant.
12/ What does significant mean?
Take down salaries and prize money by 50% and see how many players stay in CS:GO instead of starting to stream or going to other games.
Lose top players and you lose more interest, putting viewership in a downward spiral.
You may not recover.
Take down salaries and prize money by 50% and see how many players stay in CS:GO instead of starting to stream or going to other games.
Lose top players and you lose more interest, putting viewership in a downward spiral.
You may not recover.
13/ Why aren't we hearing of this from the companies in question?
Their raison d'etre is operating tournaments (CS:GO is largest driver of ESL/BLAST business) or teams (many orgs).
If their investors heard them voice this much concern, it might become a self-fulfilling prophecy
Their raison d'etre is operating tournaments (CS:GO is largest driver of ESL/BLAST business) or teams (many orgs).
If their investors heard them voice this much concern, it might become a self-fulfilling prophecy
14/ Why doesn't @CSGO step in?
Read about their company culture and you'll understand. Also, CS:GO remains incredibly profitable (estimates vary) and esports is its most important user acquisition channel after Steam.
Read about their company culture and you'll understand. Also, CS:GO remains incredibly profitable (estimates vary) and esports is its most important user acquisition channel after Steam.
15/ Can anything else be done?
If you could combine all of CS:GO esports under one TO (e.g., Riot model), you could probably easily turn the whole ecosystem profitable through increased market power, restriction of supply, and cost synergies.
But that won't happen, either.
If you could combine all of CS:GO esports under one TO (e.g., Riot model), you could probably easily turn the whole ecosystem profitable through increased market power, restriction of supply, and cost synergies.
But that won't happen, either.
16/ Who cares? #IEM is great.
I care because I've spent the last 20 years of my life either playing or watching Counter-Strike, and the game has had an outsized impact on my life that I'd like for millions of others to experience too.
For that, we need it to become sustainable.
I care because I've spent the last 20 years of my life either playing or watching Counter-Strike, and the game has had an outsized impact on my life that I'd like for millions of others to experience too.
For that, we need it to become sustainable.
Addendum 1: There's virtually no path to PPV solving the whole ecosystem's issues, which is why the only way to resolve it is to fix the product and start growing viewership again. Hence yesterday's thread (see below)
https://twitter.com/tomi/status/1413618226383052803
Addendum 2: For each losing year, the future expectations must grow enough to offset the incremental losses to warrant continuing investment.
If you buy an asset for $1 but need to lose $9 over five years before it gets to breakeven, your cost basis is now $10, not $1.
If you buy an asset for $1 but need to lose $9 over five years before it gets to breakeven, your cost basis is now $10, not $1.
Addendum 2 (cont'd): If you assumed you were going to only lose $4 before breakeven, your cost basis has now effectively doubled (from $1+$4 = $5 to $1 + $9 = $10).
That means, in effect, that returns also must double -- that's a step function change, not a marginal improvement.
That means, in effect, that returns also must double -- that's a step function change, not a marginal improvement.
Addendum 3: Should have noted that "ESL (all games)", as defined here, is really how their parent company MTG reports "Esports" - ESL Gaming is the sub that owns ESL, DreamHack, ESEA, their non-branded white-label services, etc., hence the "all games", incl. under separate brands
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