eSport value chain - Teams

2015-07-31 12:26

Det här är mitt andra inlägg angående eSport och mina kommande investeringar i det. Först måste man förstå värdekedjan och hur folk tjänar pengar på det. Först då kan jag själv tjäna pengar på det. Vi är på mycket god väg. Bloggar serien på engelska.

Hela inlägget med bilder och video finns givetvis som vanligt på min hemsida:

borstankar.se

Trevlig läsning:

So here we go. eSport value chain part two #2. So what are we going to talk about today? For you who missed the last post about publishers can read it here: http://borstankar.se/esport-value-chain-publisher/

So todays topic is teams.
Let's first reconnect to part one. We talked about Porters five forces that affecting the sector. It looks like this:

So we were talking about how publishers and published games could effect the market. We also scraped the surface of the power of crowdfunding. Today the Swedish government published a statement that the Swedish version of "SEC" are going to check if you can regulate the market. Just trivia. We also talked about singularity in the eSports market and some consequences of singularity.

Before we get started with todays post I would like to thank everyone that sent emails and commented on the last post. Means a lot to me, and you have some great ideas. I'm gonna try to fulfill all requests but please bare with me.

So todays post topic: TEAMS

Let's just take a few for example.

Fnatic
NewBee
Invictus Gaming
NaVi
Evil Geniuses

So now we are only talking about pro teams. With pro teams i mean teams were it's members are living on the income of gaming. Maybe Twitching or price money from tournaments. They are doing it on full time, just like a usual job. That's the teams we are talking about. And they are a part of the value chain. So the explaining starts.

A lot (around one third of all players in the US) actually consider the teams as the most important factor of choosing which stream to watch. Is that chocking? No, of course not. It shouldn't be. Because well it is like watching a normal game of hockey. If you are not a complete geek you will not watch everything. So let that be said. But apparently teams are having a big impact on the value chain. Why?

Well it is wide known that it is more fun to follow persons than following a "thing". So people get attached and fans are made. That drives the market as well as publishers do, but in a different way. The most popular teams are becoming brands. Just like Coca Cola and Microsoft, just in a different way. Also singel players are becoming brands. Just like any sport star. But if the eSport are just like any other sport we could predict were it will go? No, not really.

The eSport are (connecting back to post one) in constant evolvement. New publishers are bringing in new substitutes for the sector all the time.

So what we see today wont be there tomorrow? Well it is going to be there tomorrow as well. Look at the popular game Counter-strike. New updates of the game have been released and the gamers love it. The game 1.5 and 1.6 are actually still popular but new updates has substituted the old versions. The different may be small in a big perspective. But if you don't change and update you'll die. Reality of publishers. And reality of teams. Because it do not matters how good you are at a game if no one are playing it there is no chain of value. So you'll have to find a game that are popular by the public and were the publishers are acting continuous and releasing new updates to improve viewer satisfaction. So it we'll be there tomorrow but in a different way. Were the teams must adapt and train at the game that the audience likes.

For many teams this is a dilemma. You'll have to stick to the games were the value chain is big enough to raise you money so you can survive. To help the teams there are investors that invest in teams. And we are investors so let's mention some risk with that. Let's skip the part that the team may or may not be something. Let's talk investors perspective only looking at the team and publishers. So you'll have to find a team that have a head start. Are pretty good and have potential. We'll rule out the personal risk that maybe one or more persons in the team want to be a full time dentist and not gamer. Well one person does not make a team I know that. When you found your team they have to be good at a game were there you can take place in the value chain. And you must see a future in the game to be able to hold on to your place in the value chain. So good luck with that. I prefer stocks.

Let's connect teams to the value chain. They are taking money from tournaments, sponsors, investors, platforms (Twitch etc.) you can also call it from advertisers.
They are having a big pile of money to dive into. First there is price money and Twitch. If you can play there is were you'll make money before you are recognized as a eSport celeb. Then maybe sponsors comes along and gives you stuff to use. These things are of course the same for individuals. But teams get supporters and the team could theoretically exist longer.

By the way has anyone set the famous swede Heaton arguing with his girlfriend on stream?

Look here:

Well I am not much for guessing but that seems like a keyboard that his sponsor did not provide. Or it was something like it weren't released yet. Correct me if I am wrong.

After a while the most popular teams are becoming their own brands. And being sponsored at a more serious way. New product etc. You'll get the point.

If you take an individual the individual can pretty easily be substituted. The game gets unpopular or he or she might quit. Then the brand is dead. That is more unlikely to happen to a well established team. The members of the team can change but the team will be there, the team are bigger than it's players. Not today but if you'll give it a couple of years it will happen. I am sure. Why? Because like all the other sport some day the sponsors will pretty much own the most popular teams. It will become a part of their brand. Like many other companies today.

So teams are more unlikely to be substituted than individuals. But teams are likely to be substituted by other teams. Overall the teams have great power to steer the market but on the other hand they are vulnerable to a lot of other things. They are as well going to be placed in the middle. Witch most of the value chain competitors will be placed. Well because they are competing in the industry as well as publishers etc. But they are being affected by a whole bunch of other stuff. Sure there are chains connecting teams threats with publishers. And it will always come back to the viewer. It is pretty much a basic tutorial in the free market. Were the real power is at the viewers. Anyway back to topic.

Teams are threatened by a bunch of stuff. New games, sponsors may pull out, new teams, lack of skill etc. But also a lot of perks. Selling clothes and stuff to fans. Donations, sponsors (again), becoming a brand.

How can the teams protect themselves?

Well they have to build bridges. But I don't see that happening more than they are becoming brands. What would be best for the teams were if they could build walls. So that you must have a lot of capital to succeed. Well they are building small walls. You'll have to spent your 10 000 hours to be able to compete in the big leagues (Gladwell's rule of 10 000 hours). That are going to cost you pretty much money, patience and time. So it is not for everyone. But still, they do not have big "moats" as Buffet would say. Maybe that's why we love the sport so much? In american football, soccer (football in Sweden) etc. sure you can come from nothing but you'll still have to put up with the work. Same in financials. Put up the work and you are on your way.

So it is going to be interesting to see how the sponsors are going to try to dig moats, walls etc. The sector is worth a lot and the brands are going to wanna narrow the threat of newcomers. So is it gonna hit the teams? I don't know.
The teams as well should try to make moats to protect the teams. That may be good in teams perspective and maybe bad for the sport. Again I do not know.

To summary this in a financial perspective I would say that investing in a team when you don't have huge knowledge about the sector is an investment with very high risk. To get exposure to the teams you'll should look at the owner of the team and see if there is any way that the team can make an notable impact on that company. Try to find the supplier of fans shirts, hats etc. The teams will make viewers spend money to get "cool stuff". Maybe keyboard, gaming mouses etc. So I'll think the best tips are to try to find a sponsor that sponsor maybe one thing. One players mouse. The company should be small and not known by everyone. And of course it has to be on a great player. On the other hand you'll could also look for things like in the Heaton clip above. A well known player that breaks his sponsor contract to play with something else. Then try to think can I invest in that?

Well I know it is a long shot but anyway when it comes to the teams that is probably your best shot. What do you think? Don't hesitate to comment.

Next time are we going further in to the value chain. Then we are going to talk about leagues.

Until then don't forget to:

Keep on sending comment and emails!

Say what you think so it can be better next time!

Thank you for reading and good luck with your investments.

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