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The problem with prize circuits

in glhf

The problem with prize circuits is that they offer teams no opportunity to build equity in their organization. From a team-based gaming standpoint, the lack of longevity in teams can be traced directly back to the fact that their teams generally have no worth of their own.

The pro gaming bubble in the States, and around the world, from ‘01 to around 08’, was fueled largely by prize-based circuits. This was all fine and well in order to just kick start the whole thing; before these circuits there was more or less nothing. The CPL in the states and constructs like the ESWC, WCG, and ESL provided (and in some cases still provide) a large centralizing force within gaming, which was definitely necessary in proving that gaming on a high level could be the sort of gripping spectacle that we all now know it’s capable of being.

What I’m arguing is that, for team games, the reliance on the prize circuit needs to end, and needs to be replaced with something that offers teams less risk and more consistent reward.

Team vs Individual vs Individual/Team hybrid

First, I feel that we need to take up a brief examination of the fundamental business models of a few different sports. For sake of example, we’ll be looking at basketball, tennis, and auto racing.

Professional basketball in the States consists of a finite number of teams, each calling a specific city home. Teams play half their games at home, half away. The only time in which players from more than two distinct teams show up to compete at the same time is for an All-Star exhibition game. Profits for teams are derived largely from the ability to charge admission to see games played at their home venue, and sponsorships that come from that. Contests are between no more than two teams at a time, and teams are guaranteed to see each other more than once over the course of a season. Competitors are generally paid consistently, win or lose, according to their contract for the season, with the occasional bonus for players if their team does well or win titles. League championships come with no explicitly large prize pots; players generally find their monetary reward for good performance later on in the form of larger salaries. Players are paid by the teams, who are the core business unit of basketball (and all team sports for that matter), not by the league. The league has no private ownership, it represents teams doing business together, all with an equal stake. The body of teams stays generally consistent from season to season, even though rosters may change considerably.

Professional tennis looks most like what we see, at least when it comes to the economics of it, across the full spectrum of competitive gaming events. A tournament is organized at a specific venue and date, and some are purely invitational and others are open. Scores of competitors gather for a single tournament, and are typically on their own to get themselves to an event and provide themselves with sufficient room and board. Their payday is completely reliant on their performance; many players go home empty handed from tournaments, and thus the risk of showing up to compete is completely on them. Interest in the sport is derived from the development of major rivalries at the top levels of the sport. Distributing prizes based on performance keeps the top end of the sport stable, while the lower levels are generally less so; meaning that while a core group of familiar faces are almost guaranteed to show up at every major event, the list of competitors can change drastically from one tournament to the next, based on the ability of each player to take on the expenses and the risk to get out to a given event.

Auto racing is important to this discussion as it also has several key parallels to gaming circuits as they are today. While much of the focus in auto racing is on the individual drivers, the performance of the pit crews can often have just as much bearing on a race outcome as the drivers do. The economics of racing is a hybrid between team sports and individual sports, since a large team is absolutely required in order to be competitive, but a single competition has scores of teams showing up for it, and everyone is competing all at the same time. As opposed to our last examples where we have team vs team, or a series of player vs player matchups, racing is team vs team vs team….etc eighty more times. Since the very essence of racing is built on this ‘everyone in the pool’ principle, it actually makes sense for close to a hundred racing teams to travel to the same city at the same time for a single event, whereas the same principle applied to basketball would be a logistical nightmare as well as a huge waste of money for most teams. The money distributed to participants after races is typically based on a pretty convoluted system, but the majority of the cash that comes into racing teams is through selling real estate for decals on cars anyway, and only fluctuates slightly based on whatever bonuses you may or may not have earned based on performance from your sponsors.

Just to pull things together a bit more clearly, here’s the full comparison above in chart form:

a comparison

Thanks for the rundown, but what’s your point?

Different sports have different economic engines and constraints that result in a stable, profitable competitive ecosystem for each. If we were to take any of the economic models of one sport above and apply it to a different one, it simply would cease to make sense for the competitors. Yet, that’s what competitive gaming circuits have been doing to team games for the last decade: taking tennis’ model of tournament circuits and applying it to Counter-strike, when the model that should be mimicked instead is that of basketball. The result is a complete lack of stability within the team gaming scene, and an inability on the part of teams to create a sustainable business out of gaming.

What’s the problem with this really? Team games seemed to get along just fine previously…

Prize circuits cannot be setup to provide a team sport the stability it needs for it to function properly over the long term.

While there’s potential for the league to be a very stable entity with predictable cashflow, the exact opposite is the case for teams, who must live from tournament to tournament on a steady diet of prize money. There’s very little risk for the league to hold a prize event, and that risk approaches zero the more teams commit to showing up.

However, if only the top 3 or 5 out of 20+ teams get paid at each and every prize event, there’s inherent risk involved for any team to show up to any event; the odds that a team will walk away in the red is great, while this same risk doesn’t exist for the league. The result is a very volatile scene, with teams forming and dissolving at a constant pace, which sees teams either bubble to the top into a positive cashflow or fizzle out before getting there. Very few teams find that mix of talent, dedication, and willingness to take it on the chin financially for a time which is necessary for success in this environment, and while all that is to be commended and is certainly rewarded in this sort of system, there’s no incentive for mid-level or even mid+ teams to stick together if their climb up the ladder has stagnated.

This is the crux of the issue with the prize-fed scene. There is no middle ground. You either make it, and get there quick, or you typically don’t and drop off the face of the scene. Even when prize pots are small stuff, we’re talking less than $10,000 per year for the best team in the game, you still see this sort of attrition in the mid levels of play. You see teams breaking up after climbing up to the top of the competitive ladder simply because they can’t cut it with the top three teams in the game, and so they get none of the cash that keeps that top handful of teams afloat. While I’m sure a good portion of players on teams that meet this sort of demise end up staying in the game and finding other teams to play on, all too often the result is that the player walks away from the game. Before long, you have stagnant scenes where most of the best players in the game have moved onto other games or have stopped competing, because there’s no incentive for a healthy mid level scene to exist.

There’s an important realization that the scene hasn’t made yet: prize circuits exist for their own profits and not to build wealth in the teams. The prizes are merely the incentive to get teams to sign up and assume the financial risk (travel, accomodations, board) required to make their event successful and their model profitable, and as long as new teams continue forming at the bottom end of the scene to subsidize the whole machine, the prize circuits aren’t bothered with this detail. Simply put, their model allows them to profit while dumping a lot of risk and expense on the teams that compete.

Look at professional gaming last decade. Who profited? It sure as hell wasn’t gaming teams. Maybe, just maybe, a small minority of teams managed to come out the other side in the black. Most did not. Making money as a gaming team is an extremely rare exception, and reliance on prize circuits is to blame. So why is there a continued demand for these sorts of leagues?

Look at any professional team sport. There isn’t a single healthy team sport where even 10% of teams change in the top division of play from one season to the next, and with some exceptions most teams would be able to describe themselves as profitable. This is where we want to be, and you sure as hell don’t get there by propping up prize circuits!

So if we abandon the notion of prize circuits, what then could possibly take it’s place?

The root cause of all this wild volatility in team games is really that the teams themselves are worth nothing. Prize-based circuits accept all comers in most cases since it’s most advantageous to their bottom line. Since it essentially costs nothing to start a new gaming team, there’s no entry barrier, and very little in the way of sanctioning or splitting competition up into tiers, it’s hard to argue that gaming teams are capable of holding any equity, any inherent worth at all. Of course there are going to be exceptions to this; teams that are constantly posting podium finishes in tournaments, and have the best players in the game locked into long term contracts will have some value, sure. But if less than a handful of teams enjoy this sort of status in a scene that’s several hundred teams deep, you have a business model that doesn’t work for the vast majority of those involved, and thus simply isn’t sustainable.

To fix it, a new way of constructing competitions needs to be established that allows teams – at all rungs of competitive play – the ability to build equity in their team. Not just the top three, but the top ten teams need to enjoy a healthy revenue stream; the next twenty below them need to find that their hard work to get to that level is at least paying the bills. And those getting in at the ground floor need to see that the pinnacle of the game isn’t the only place to reach solvency. What this looks like exactly is the topic of my next post, but I’ll leave you with this: the above can only happen when ownership of a league is shared amongst the teams that comprise it.