Can web3 save eSports?
How a little piece of tech solves the industry's largest problems
I’m not shy on my feelings about eSports. To be fair to the industry, it’s not because eSports was a bad idea, but because gaming didn’t know what to do with it. Amid Microsoft’s predictable but adding-salt-to-the-wound gaming layoffs recently, the company put the final nail in the coffin of Blizzard’s eSports crew. It was an unfortunate dismissal of people who tried to show that competitive gaming has real benefit but who, under the burden of a major publisher and inside an ecosystem that didn’t value them, couldn’t take eSports to where it had to go. And it dovetailed with a year of eSports program shutdowns, eSports team firesales, and other eSports company shutterings.
Traditional gaming could not effectively use eSports. The incentives across the entities were never aligned, and technology made it nearly impossible for the fragmented participants to meaningfully collaborate. Here’s a non-comprehensive list of the number of groups involved in your average eSports event:
Game studio
Game publisher
eSports league
eSports team
eSports athletes
Event production company
Streaming platform
Live venue space
Ticketing agent
Merchandise retailer
Sponsor(s)
Audience
Consider the amount of data sharing, collateral creation, approvals, IP and distribution deals, development infrastructure, marketing strategy, attribution measurement, money transfers, audience engagement, digital ticketing, and physical item coordination that a simple eSports event typically involves. Forget the logistical nightmare of all of this for an industry that’s only a decade old and instead answer: how does anyone know if this is worth it?
There are the mere service providers who get their cut and walk away happy, e.g. the person operating the camera at the event doesn’t care how big Overwatch becomes because of his efforts. But what about the link between audience and sponsor, or audience and publisher? What about between athlete and fan, or studio and merch retailer? For years, eSports’ biggest struggles were that some of these entities were too out of the core value creation loop to benefit, and even those that could benefit had a hard time measuring the impact and acting further on it.
For example, many publishers saw eSports as something that would increase engagement in the title, particularly around major events. But publishers could only guess, using correlation, that X% viewership might have been related to Y% boost in playtime or MAU. There was no way to link the eyeballs on Twitch—and certainly not the attendees at an IRL arena—1:1 with player accounts or player spend. Esports teams and athletes likewise lacked a way to demonstrate how they could convert their audience into a) new players or b) more valuable players for game developers. And sponsors, who treated eSports activations as passively as any sporting event, had no tools to measure how the impressions of their in-event advertising corresponded to net new sales.
Ownership was also a problem in eSports. Teams and athletes often didn’t own their fans, who instead were owned by either the social or streaming platform, or the publisher. This made it difficult to capture value from the audience, and led many teams to become little more than fashion houses as they attempted to capitalize on and try to get closer to spectators. At the same time, ardent engagers with eSports teams or athletes couldn’t easily be leveraged by game publishers. Where were the super special League of Legends perks for uber fans of Cloud9?
There is one very obvious inefficiency that led to the breakdown of potential here: walled gardens. Each of the main actors in the above party-of-12 list is largely siloed from the rest, and that means the flow of dollars, users, and data is significantly hampered. For example, you can’t buy a Madison Square Garden ticket with your Blizzard account, you can’t take your new FaZe Clan hat into a game, and no sponsor can present unique offers to Overwatch’s top players. Game makers who are always looking for the highest spending and most engaged consumers can’t cater to a team’s spendiest merch buyers or longest-watching viewers, because they cannot know who they are.
To beat the dead horse once again, guess what solves that? The blockchain.
The universal database of always-on, always-accessible, always-transferrable information breaks down the barriers that prevent tighter collaboration amongst this hodge podge of players. True value creation or any semblance of a flywheel fails without this. Think of the poor eSports team: game publishers benefit hugely from the renewed engagement and increased spend teams can bring to games, but teams get zero cut of that upside. This changes considerably if eSports teams do something like, for example, becoming retailers of game items.
Imagine an eSports team setting up a storefront of Call of Duty weapons skins that sits directly next to the event’s livestream. For every audience member that buys one of those skins (perhaps because their favorite player just won an intense battle with a particular gold M4), the esports team gets a cut for the sale, the streaming platform gets a cut for hosting, and of course the publisher gets a new sale and maybe even a new player. In web2, this is so insurmountable a task of infrastructure coordination, partnership contracts, data sharing, etc. as to be virtually impossible.
The mere act of taking an in-game asset item from its walled garden and:
Presenting that for sale via another platform
Having that purchased item be reflected/usable in-game
And sharing the wealth across the value chain
is a non-starter in the games market we have today.
Not with web3. In fact, with web3 and permissionless infrastructure, this isn’t only possible but could potentially be done by absolutely anyone. Any team, any athlete, hell any player, could have a little storefront of game items. There’d be zero confusion for publishers about the ROI here as web3 offers more direct attribution than traditional cookies ever could. With blockchain data the asset will display as required on any platform, the sale is trackable from any location, and the revenue can be automatically split at the source, meaning the publisher is never required to handle annoying payouts, money transmitter licenses, etc.
Web3 abstracts so many technical and logistical hurdles that it’s almost staggering this isn’t happening at scale right now. All publishers want more money and more users. All eSports teams want to monetize their eyeballs. Web3 presents the first time that any of this can be interconnected.
Now let’s get even fancier. What about IRL arenas or sponsors? Buying an on-chain ticket or redeeming a POAP (a proof of attendance digital item) for a night of eSports at the Barclays Center lets Razer, the official peripherals sponsor of Fortnite (let’s pretend), present token-gated discounts to all attendees.
Barclays gets to sweeten incentives for ticket buyers without needing to worry about coordinating physical merch at the arena or data sharing with Razer
Razer gets 1:1 attribution of what their sponsorship dollars are worth in units sold
Attendees get extra benefits for something they were doing anyway.
And then Fortnite can offer double XP for a week for anyone who unlocks the digital twin item of their new Razer keyboard.
This all sounds fun.
With the right tech and rails, none of this requires significant development effort or time-wasting collaboration meetings. It also doesn’t need all entities to jump at the same time, a coordination tax that ruined the ROI for much of eSports. The nice thing about web3 technology is that a certain program could start with a finite use case and goal (say between team and publisher), and then other entities and partners can leverage those items later on (like a streaming platform). The data is always there. No one has to worry about the server holding all the user accounts for that one-off campaign being shut down. The chain handles it all in perpetuity.
And as we can see with the above examples, the other benefit of the chain is that the flow of users and dollars is omnidirectional.
You may ask: why don't traditional sports need this? First of all, traditional sports have leaned into web3 perhaps more than any other vertical out there, specifically for these reasons. FIFA, NBA, NFL, ATP Tennis, rugby, Formula 1. All of them have already launched into web3. That said, traditional sports actually leaves a lot of optimization on the table, particularly when it comes to connecting the dots with its vast network of licensed content and merch. It’s just that soccer and football and baseball were already massive, 100 year old+ enterprises by the time that more complex distribution, merchandising, and licensing frameworks came into play. So they’re still making tons of cash, but not as much as they could be.
What I’ve suggested here doesn’t require web3 games, at all. It doesn’t need secondary trading. It doesn’t need marketplaces. All of those things are great, but it’s important to note that web3 as a technology can serve the games industry in many ways. Esports, which has hung on by a thread for a long while, could perhaps finally find its footing with this otherwise maligned innovation in a way that brings value to games, players, platforms, and all the other folks working to make formal competitive gaming not just a reality, but something that raises all tides in gaming.