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The problem with prize circuits, part 3 - Consumers don't make money consuming.

in glhf

So why does the gaming scene expect to do just that?

This post’s title may be self-evident to most (in other words, duhhh) but it still needs repeating when it comes to professional gaming. Consuming a product is a zero-sum game: producer gains money, consumer loses money, product changes hands. So the idea that gaming teams can profit through consumption is generally a very silly idea indeed. But when you look at the way professional team gaming has operated to this point, it seems the folly in this is completely lost on the scene as a whole.

Gaming teams have bled money through every possible orifice to this point to prop up professional gaming as we know it; this in the form of entry fees, flights, fuel, equipment, apparel, accomodations, board, etc. Most teams see very little if any return on investment; and that holds true for both prize winners and perennial losers. The reason is that professional gaming teams are currently consumers, not producers. Our task is to change this.

Truth in slogans

This may be a hard thing to drive home to most gamers, I know, in an environment that measures success based on the fact you can buy a certain league’s logo on a hat from a store named Lidz. Think about it though…do you see people walking around wearing hats with the MLB logo on it? Or NBA? There might be a few floating around there, but most fans wear their favorite team’s apparel, not the league’s. The distinction is more important than most gamers realize.

What professional gaming teams consume is the competitive experience itself, and therein lies the problem. Think back at how every major league construct – long gone, still around, or back from the dead – oriented their business models. You’ll find that the targeted consumer was not potential spectators or fans; the target consumer were the players and teams themselves.

MLG is the dominant media property exclusively targeting the approximately 40 million consumers in North America who have a passion for playing video games as a competitive social activity… (Major League Gaming)

Beyond the game! (World Cyber Games)

Play hard. Go pro. (CPL)

Who is the obvious target here? It’s not the fan, it’s the competitor.

Where amazing happens. (National Basketball Association)

Sure, many young ball players dream of playing in the NBA and work to achieve that, but the NBA doesn’t base their entire marketing campaign around it. This slogan embodies the idea that you may not be able to dribble a ball, but you can still take part in everything the NBA brings to the table – as a fan.

Look at the Major League Gaming website today. Compare it to the site of Major League Baseball, or the National Basketball Association. The differences are glaring and should make the stark contrast between their business models abundantly clear.

The MLG site is geared towards driving more people to sign up and participate in events – in other words, to drive more consumption of their competitive product by attracting and keeping more competitors. The other sites are geared towards providing the onlooker another avenue to spectate what’s going on in the league – in other words, to drive more consumption of their competitive product by attracting and keeping more fans. The last thing that websites for major sports leagues do is try to attract random people to show up to events and tryout!

Trying to meet it halfway

Let’s pretend for a minute that Major League Baseball was a privately held company separate from the teams, but still grant our fictional MLB the same level of success it enjoys today, with the vast majority of teams still in great shape financially regardless of the size of their market or their level of success on the field. (The reality is that MLB is an association of baseball teams, but we need to suspend that reality for a moment to illustrate a point.)

The only way that this sort of success would still be possible, under this imaginary structure, is if teams were fully incorporated into the business model of the league as equal partners in the production of a competitive product to be consumed by spectators. (Read: teams as producers, not consumers.) The league would have to empower teams to be business units that were just as viable as the league itself for such an arrangement to work. Apply competitive gaming’s favorite business model to professional baseball, where the teams are mere patrons of the league just like the spectators are, and there’s no way the teams’ balance sheets carry hundreds of millions of dollars. It would be virtually impossible to maintain large market shares worth of fan attention if 50 different teams could participate in any given competition, and teams had no roots in a hometown.

If you’re still not with me, I’ll make it simpler: take ten seconds on the Major League Gaming website, and try to find anything targeted to spectators for the upcoming DC event on the front page of their website. Go.

Here’s the answer: a single plain-text link in 10px font that doesn’t go anywhere. Spectate for free! Great…any other bones you’d like to throw potential fans? Of course not, because that’s not the main goal, is it?

In my opinion, the MLG, just like the CPL, hasn’t demonstrated much interest in cultivating a robust fan base. No, I don’t want to hear about the ‘new’ MLG-TV initiative – you know damn well all the content they produce is geared towards current and potential competitiors anyway! They make money by attracting more competitors, and whether people show up to watch or not is an afterthought. They’re the producers, gamers are the consumers – why complicate it any further?

Doing the math

If you’re still unconvinced and are in need of some numbers regarding how insolvent most teams are, I took a crack at it, and these are my results. I think I was particularly generous in the ‘Airfare’ column in particular, since most teams wait until about a month before an event to schedule flights and accommodations simply to make sure that the event is happening and that they’ll be able to attend, and it probably works out to something much larger than $250 per round trip ticket for each team member.

The results are pretty startling, honestly. Without taking into account any additional money that may be flowing into that thin crust of three or five teams at the top of the pile, which are ‘signed to the league’ at MLG and are benefiting from lucrative sponsorships from Old Spice and the like, the Halo scene as a whole comes out of each 40+ team MLG event around $30,000 in the hole. From one event. This includes any prize money if paid in full on the spot, and bonuses from doing well at past events and showing up at a future event.

By my estimates, most teams blow close to three thousand dollars participating in one MLG event. By my estimates, more than three quarters of teams go home in the red. Stretch this out over multiple events and that ratio becomes much worse.

There’s only one way this sort of competitive system works out: the league stays solvent on a steady flow of money coming in from a steady flow of brand new teams, since old teams that don’t do well go bust, year after year. The only way teams stay solvent is if they place at every event.

This is no way to build a professional sport.

The first league to build a competitive ecosystem which encourages large numbers of solvent teams – I’m not talking four or five, I’m talking every team which is allowed to show up to their offline events – is the league that will take gaming into a proper professional era. In my next post in this series, I’ll examine some different ways we might arrive at such a situation.