Jonathan Pan

Less sticks and balls, more keyboards and mice

Following in the footsteps of the Philadelphia 76ers, does NYCFC’s move signal wider interest to come from mainstream sports?

To date, most esports coverage has focused on two areas: fantasy genre games, such as Dota 2, and the professional segment of esports. While the latter will naturally monopolize attention (after all, it includes sold-out stadiums, six figure salaries for esports athletes, and broadcasts on ESPN), it represents only a small portion of the market. To put this in perspective, the most popular esports game, League of Legends, has roughly 870 professional players out of its 100 million monthly active users.

Were a traditional sport, such as golf, to focus only on professionals, the golf industry would be significantly less valuable, popular and notable than it is today. Accordingly, the virtual sports gaming business would do well to focus on the competitive segment of the pyramid – both in general and especially until they’re willing to change their sales model. While, there are many ways to define the competitive segment of esports. We define a competitive player as someone who has played a ranked match within the past month and engages with the game outside of the game itself (participating in amateur tournaments, creates and consumes user-generated content, and follows professional esports competitions).

Fortunately, focusing on the competitive gaming segment is exactly what game publishers are doing. EA launched its Competitive Gaming Division last December to focus on “making stars out of all of our players, looking at the base of the pyramid: 60-70 million young players who aspire to be part of eSports. The real action that we see, where we can help build community and build out the ecosystem, is at the base of that.”

In March, FIFA ran their annual Interactive World Cup (FIWC), which is the Guinness World Record holder for the largest video gaming tournament (2.3 million players tried to qualify). While EA has been running the FIWC since 2004, they are stepping up their game for next year’s competition. EA’s COO Peter Moore, who leads the Competitive Gaming Division, announced the $1.3 million prize pool Ultimate Team Championship Series at Gamescom. This tournament will culminate into the 2017 FIWC. Moore also crowned New Jersey native Frank “Stiff” Sardoni Jr. as the Madden 2016 Championship winner at E3, the annual video game conference in Los Angeles. Stiff won $20,000 and EA then announced a $1 million Madden tournament series next year.

Traditional Sports Athletes and Teams Are Critical To Engaging The Competitive Player Base

One of the key barriers to the development of the competitive gaming segment is perception. Many sports fans, and pundits like Colin Cowherd, have lashed out at ESPN’s (belated) broadcast and acceptance of esports. Furthermore, there’s a significant gap between those who love/watch physical sports and/or play virtual sports games, and those who also support esports. Given the nature of the genre, this problem is unique to virtual sports.

With time, however, we expect this gap to shrink thanks to further investments made by game publishers, physical sports athletes and teams. Last year, 2K Games took their first steps into esports with its inaugural NBA 2K Road to the Finals tournament, which was hosted by NBA 2K cover athlete Kobe Bryant and former Los Angeles Laker Rick Fox. In 2015, Fox even bought his own esports team, Gravity (now ‘Echo Fox’) and in August, Shaq became a minority investor in team NRG and often waxes on the similarities between esports and his experiences in the NBA. In addition, Utah Jazz small forward Gordon Hayward picked up an esports sponsorship from HyperX, a computer memory and peripherals company, earlier this year and Net’s point guard Jeremy Lin has served as an analyst for Dota’s The International and recently signed a global endorsement for a Dota 2 team.

These efforts are paying off. Detractors like Cowherd have started to reconsider their stance on esports and more sports teams and team owners have entered the space. After all, it’s hard to tell The Black Mamba and Shaq that he’s wrong about what sports are or aren’t.

In some instances, the legitimization of virtual sports has become so significant that traditional sport executives are beginning to worry. Premier League executive chairman Richard Scudamore considers esports and social media bigger threats to soccer than other sports because that’s where young people are spending their time. However, the esports threat can be viewed as an opportunity as well. Two Premier League clubs, West Ham and Manchester City, have signed esports players in an effort to engage with their fans.

Teams are integral to engaging the competitive player base because they provide a geographical, often local, dimension to esports. Currently, esports teams typically have regional fan bases and are recognized as a North American team, a European team, a Chinese team, etc. Furthermore, the teams that extend their existing brands into esports like FC Schalke 04, a Bundesliga team, are counting on their existing fandom in traditional sports to partially crossover into their esports initiatives.

Beyond engaging the competitive player base, sports teams will provide more stability to revenue sources outside of digital in-game sales for esports teams: media / sponsorships and merchandise. Sports teams have fully-staffed professional sales teams that are able to bring in new sponsorships and/or expand their relationships with current sponsors. More importantly, sports teams know how to make stars out of their players. Esports athletes, like sports athletes, are interesting people with interesting stories. Sports teams will invest in shoulder programming that will help make esports athletes more relatable to your parents. And when that happens, significant sponsorship and ad dollars will start to kick in. For reference, the NFL generated an estimated $1.2 billion in sponsorships across 32 categories. Team sponsorships vary by game and by team, but esports sponsorships currently range between five and seven figures. Since the formation of virtual sports leagues are still in nascent stages, the teams themselves are able to capture sponsorship revenue in the near-term.

Valve’s decision to ban skin gambling has huge implications for Counter-Strike: Global Offensive’s (CSGO) multibillion-dollar skin gambling market, CS:GO viewership, and esports as a whole.

Context

This decision was the climax of a series of events that started with a Bloomberg piece, “Virtual Weapons are Turning Teen Gamers Into Serious Gamblers,” published this April. While skin gambling was well-known in the gamer community, this article brought this murky world into the spotlight for the general public. For those unfamiliar with the concept, skin betting is the wagering in-game currency on a variety of events such as professional CS:GO matches. Players can later liquidate their skins on third party sites for cash.

The major catalyst for Valve’s decision to ban skin gambling stemmed from two class action lawsuits filed against them. The first lawsuit accused Valve of being complicit in the creation of an “illegal online gambling market.” The second lawsuit alleged that Valve willingly permitted and profited from teenagers participating in illegal, unregulated, and underage gambling via third-party sites.

Both lawsuits were filed shortly after revelations of previously undisclosed relationships between skin gambling websites and the gaming influencers who promoted the use of these sites. The first revelation came from Mohamad “mOE” Assad, a player-turned-General Manager of Echo Fox (an esports team owned by former NBA player Rick Fox), who tweeted about his dispute with the skin gambling site CS:GO Diamonds.

The next major revelation came from YouTubers Ethan “h3h3Productions” Klein and HonorTheCall, who accused two other popular YouTubers, Trevor “Tmartn” Martin and Thomas “ProSyndicate” Cassell, of deceiving their audience by playing and winning on the skin gambling site CSGO Lotto without disclosing their ownership of that site. A third YouTuber, Josh “JoshOG” Beaver, revealed his own equity interest in CSGO Lotto shortly after the news broke.

After this news broke, Martin and Cassell were also added as defendants to the second lawsuit. Martin is also a minority owner in Team EnVyUs, an esports team that recently received a “seven-figure” investment from SierraMaya360, a Charlotte-based venture capital firm. The co-owners of EnVyUs distanced themselves from Martin after learning about his involvement with CSGO Lotto.

The confluence of venture capital, team ownership, and skin gambling reflects the opportunities and pitfalls of the fast-growing and fast-moving esports industry.

Skin gambling: banned, for now

In most jurisdictions, it is illegal to offer both skin gambling and the liquidation of skins for real-world currencies. Therefore, the whole process has been broken down into three components: gambling, marketplace, and pricing API.

1) Skin gambling is being assaulted on two fronts: operations and streaming. On the operations front, Valve is beginning to issue cease and desist orders. A few popular skin gambling sites such as CSGO Double and CSGO Wild have decided to shut down in light of Valve’s announcement alone.

On the streaming front, Twitch announced that any streamers who continued to stream skin gambling content would be in violation of Valve’s terms of service, and by extension is also violating Twitch’s terms of service.

2) Skin marketplaces still operate within Valve’s terms of service and appear to be stable, for now. Skin liquidity also seems to be relatively stable. At the time of Valve’s announcement, a factory new AWP Dragon Lore (one of the most coveted and expensive skins) was selling for a range of $1,328 to $1,389. More than 24 hours later, the range dipped 15–19% to $1,130 to $1,150. The open question is if demand will match the increase in supply as some skins owners seek to liquidate their inventories on the marketplaces.

3) Pricing APIs exist because customers feel more “safe” that there is an independent party pricing items in an unregulated market. These services appear to comply with Valve’s terms of service and therefore shouldn’t be affected.

Ultimately, skin gambling may follow what has happened to “traditional gambling” in the U.S. We can look to PokerStars’s history as a proxy for the future of skin gambling.

PokerStars launched in 2001 along with many other online poker sites. It continued its U.S. operations in defiance of the passage of the Unlawful Internet Gambling Enforcement Act of 2006. Federal prosecutors finally forced it to shut down U.S. operations in 2011. Five years later, beginning in March of this year, PokerStars has been allowed to operate in New Jersey with significant regulation. This could be skin gambling’s future: implicit acceptance, then scandals, subsequent banning, and, finally, regulation.

The biggest threat to viewership is newer, popular games

One of the most heated debates that has raged in the CS:GO community is whether or not skin gambling leads to increased viewership. If yes, the logic goes that Valve’s ban will result in lower viewership, lower sponsorship, and decreased stability for the CS:GO ecosystem.

1) According to research done by EsportsBettingReports.com, there seems to be conflicting data on that question. On one hand, there seems to be a correlation, but not causation, between viewership and betting averages.

On the other hand, peak betting volume increased from 307,000 to 321,000 while peak concurrent viewership dropped from 1.6 million to 1 million between the last two CS:GO Majors, MLG Columbus and ESL One Cologne, respectively.

The conflict in the data leads to another hypothesis: the drop in viewership (peak concurrent viewers and total online hours) for the latest CS:GO Major is due to the meteoric rise of Blizzard’s new esports game, Overwatch.

2) Overwatch recently ended League of Legends’ 46-month reign as the most-played game in Korean internet cafes, a key indicator of global game popularity. Furthermore, Overwatch garnered 7 million players within the first two weeks, and 10 million players by the third week, of its launch. Overwatch’s success

Majors viewership won’t change much due to skin gambling. However, the smaller tournaments that were propped up by these skin gambling sites are likely going to disappear. CS:GO Lounge has had the ability to boost viewership by 5–10k concurrent viewers just by featuring a match on its front page, oftentimes between two unknown teams.

Is this the beginning of the end for decentralized esports?

Among developers, Valve has had the most open ecosystem, exemplified by:

• Allowing third-party organizers to run tournaments around their games, never asking for licensing fees (as far as our research shows)
• Helping fund Majors through sticker and items sales
• Having one of the most open APIs of any game developer

All of this reflects Valve’s laissez-faire philosophy and their lack of desire in taxing their nascent esports ecosystem.

Now that Valve has been forced to act on skin gambling, it is very possible that they are evaluating their open ecosystem approach. Should Valve decide on a more centralized approach (closed ecosystem) to their esports activities, as adopted by other gaming giants like Riot Games and Activision-Blizzard, tournament organizers such as ESL may face licensing fees or even possible extinction if Valve creates an exclusive league.

The centralization of Valve esports into actions such as creating exclusive leagues may create a virtuous cycle that increases stability in the Valve esports ecosystem:

1. Exclusive league: sponsorship dollars and prize pools will be consolidated and then divided among franchises (teams)
2. Franchises: increased financial stability through revenue sharing and less tournaments will enable teams to have more time to craft interesting strategies and to hone mechanical skills, ultimately leading to better matches
3. Increased competition: Better matches between better teams will increase viewership
4. Bigger audience: More eyeballs, combined with properly trained sales staff, will result in more revenue
5. Increased revenues: More money for the league means more money for the teams, increasing stability further

Skin gambling, esports leagues, and the decentralization of esports are flash points that we are closely monitoring at BRaVe Ventures.

TL;DR

We were given the opportunity to pursue our passions. We tried to do something big and different. We were equipped with everything we needed to win. But we still fell short, so the original team at Ember disbanded last month. Don’t feel sorry for us, we got paid to live our dreams. When you fail in sports and esports, the public wants to know what happened. There has been rampant speculation since we haven’t said much at all. It’s time to set the record straight.

Challenger Series

The bottom line is that ascending to the League Championship Series (LCS) through the Challenger Series has turned from a low probability event to a very low probability event. We felt good about the odds last November when there was still auto-relegation/auto-promotion and one best-of-five match. Things changed this January when Riot Games announced the revamped Promotion/Relegation system. The new system has no auto-relegation and Challenger teams would need to win at least two best-of-five matches to get into the LCS. While this new system is a much-needed step for ensuring stability in the LCS, it makes running a Challenger team much less appealing because:

1. LCS teams have more experience with pressure. LCS teams play eighteen games live onstage during the regular season and each game is immensely more intense than the ten offstage games in the CS regular season. It’s difficult to replicate the conditions of a do-or-die, best-of-five series.
2. Players know this fact too. Therefore, the best talent would much rather go to an LCS team if given the opportunity. Cinderella teams like Origen, a group of LCS-caliber players who decided to start their own team, are the exception rather than the rule.

And we see this logic being manifested in recent results. In Europe, Splyce, ROCCAT, and Giants re-qualified for their spots over the two Challenger teams in the EU LCS. In North America, Renegades and Team Impulse re-qualified for their spots. Apex was the only challenger team out of four that ascended into the LCS.

Ultimately, it wasn’t my decision to not go for it again but I agree with the logic of the business decision. As for the Ember brand and the Challenger spot, that still belongs to the parent company, Team Elemental, Inc. I don’t know what they will do with those assets as I’ve resigned as CEO of Team Elemental.

The Ember Academy is no more. Our docu-series is complete, here’s episode 1.

Default to Gratitude

It’s easy to get angry and upset in a situation like this. You can always find someone who has something negative to say about someone or something at a failed startup or organization. None of that matters because at the end of the day, we still have our health and the love and support of our friends and families. In times like these, I like to default to gratitude.

• I’m grateful for the amazing group of great players who took a chance and played for Ember: Nick Haddad, Greyson Gilmer, Ben deMunck, Colin Earnest, Juan Garcia, William Chen, and briefly Lucas Larsen.
• I’m grateful for our fans who believed, and I hope, still believe in our philosophies. In the grand scheme of things, we made a dent — a small dent but a dent nonetheless — in the world of esports with our open salaries and our emphasis on player health.
• I’m grateful for our investor who gave us a shot at building our dreams.
• I’m grateful for our staff who helped build an amazing brand in such a short period of time.
• I’m very grateful that our Head Coach, Weldon Green, stayed on to guide our players mentally and emotionally through this ordeal. This man has character (more on this later).
• Last but not least, I’m grateful for Bao Lam, my co-founder. As the General Manager, Bao bore the brunt of our loss publicly and privately. He made some good calls and admittedly, some not so good calls. But I empowered him to make those decisions — and I signed off on every major decision, good or bad — so I take full responsibility for everything that happened.

Lessons Learned

A lot of this may seem like common sense, and it very may well be. However, I still find it worthwhile to write down for the sake of benefiting others or reminding myself in the future.

1. Investor alignment: It all started off with a handshake. Getting into business with someone is very much like getting married. You probably shouldn’t do it after the first date. But I did it anyway. Our investor was very successful by every definition of the word. He is a successful entrepreneur, operator, and investor. He taught me how to be laser-focused on the right win conditions. In many ways, he was the right investor for me but I was the wrong entrepreneur for him. My ambitions were not aligned with his objectives. He wanted A, but I wanted B and C as well.
2. Board composition and meetings: The timeless “two board seat” dilemma that faces first-time entrepreneurs. I agreed to giving two board seats to my investor, which meant I only got one. Although it never came to a direct board vote, I effectively had no control of the company if we came to a disagreement. And when I had the chance to add an independent director, I didn’t push for it fast enough and the deal fell through. As far as board meetings go, I’m definitely an advocate of formal meetings and minutes. It sucks when you need to revisit an old decision and it was partially decided via email and/or a phone call and two sides don’t agree on details.
3. Hiring: Every founder talks about it, but we did a terrible job at it. The main reason was not having on-site interviews because we wanted to save costs. We thought having a paid trial period would work, and it did — until it didn’t. It’s just hard to get a sense of leadership remotely. Our players would respect some coaching staff and analysts online, but once they came here in person, respect would be lost due to interpersonal skills that you can’t assess through Google Hangouts. Secondly, everyone seems to hate everyone in esports. When we asked for recommendations or opinions on hires, we received mixed feedback on every single candidate.
4. “Game” versus “Business”: Before the company formed, Bao and I decided to split ownership for game versus business decisions. I thought the biggest issues that would happen with the team would be game-related, but it rarely was. Instead, it was often interpersonal issues — a bunch of teenagers and young adults trying to work together towards a common goal. Ironically, that’s exactly what I did as an Army officer — get a bunch of teenagers and young adults to work together towards a common goal. Delegating this was a catastrophic mistake. I should have been way more involved in resolving the interpersonal issues of the team.
5. Character over reputation: Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are — Abraham Lincoln. The first thought that many people have when there’s a train wreck is how do I look good coming out of this. Thankfully, not everyone thinks this way. And certainly not Weldon Green. When he boarded his flight from Finland to Los Angeles, things were rosy. We just lost to TDK, but we are rebuilding the team and staff. We were putting the final touches on the Ember Academy. After he landed, Bao was already forced out. And within a week, most of our players and all of our staff, including him, would be released. With the birth of his child imminent, and no job in hand, what does he do? He makes sure that all the players are in a good state mentally and have a plan of action going forward before addressing his own needs. I’m so inspired by what we did after things exploded. We stayed positive. We helped one another. We did the right thing. And no one can ever take that away from us.

The TDK Game Analysis

The rest of this autopsy focuses on the TDK game and it is roughly a twenty minute read. You should probably skip it unless you really like to analyze League of Legends games. This analysis was done by our Strategic Coach, Brendan McGee so the “I”s you read below belong to him. However, I’ve made some edits to both form and substance.

Summary: Ember’s failure in the semi-finals was the result of a series of bad decisions that occurred in the weeks before the match (lack of scrim diversity, playing the new jungler with only two weeks of team practice) plus the game day itself (draft, mentality). Before we get into the game-by-game recap, let’s answer two frequently asked questions.

Q: Why did we choose purple side for games one, three and five?

1. Scrim win rate: Since patch 6.4 hit and Santorin joined the team, we had an 84% win rate on purple side, and a 62% win rate on blue side.
2. General strategy: Purple side has many advantages, such as allowing you to trade two priority champions for one, and counter-picking mid-lane. Goldenglue is one of our best players and consistently dominated Alex Ich in scrims, so I wanted to have the counter-pick mid lane to let him shine. The vast majority of teams we scrimmed on patch 6.4 would first pick Corki on blue side. Corki is one of Alex Ich’s most played champions, he has played it twice in LCS, and it’s his third most played in solo queue. Corki is widely considered the best blind pick for mid-lane since it is so strong in lane and has very few weak matchups. However, Goldenglue’s Leblanc and Zed are world class and he wanted that matchup.

Q: Why didn’t you draft Goldenglue’s carry champions?

1. We planned to, but TDK conceded in their draft that Alex Ich is simply a much weaker laner and thus blind picked extremely safe, difficult to abuse champions (Lissandra and Nautilus). This caught me off-guard since Alex has played Lissandra once in LCS and it’s not even in his top eight most played in solo queue.
2. Goldenglue has performed excellently on many supportive champions in both NACS and scrims and in many cases prefers to play them himself. For example, our Zilean win rate in scrims is 88%.

Game 1 Analysis

We didn’t expect TDK’s bans. Teams rarely ban Corki on blue side, and Kog’maw is extremely low priority for most teams now, including us. However, the bans didn’t matter much since we did not plan on playing any of those champions anyway. We decided to stick to the plan and play our comfort champions.

• TDK First Pick [Poppy]: Poppy first pick is a strong tank, and certainly in Flaresz champion pool, but not a huge problem at this point since Nautilus is widely considered to be better (all players agreed on this) and this basically guarantees us our most practiced and strongest top pick.
• MBR First/Second Pick [Braum, Kindred]: Nautilus is not a priority here since they already picked their top. Braum has been a highly contested support pick in many regions as well as at IEM the previous weekend. At IEM, Braum was the third most picked/banned champion and has a 20% higher win rate than Alistar. It functions extremely well in lane swaps (which we intended to do as you’ll see later), is good vs tanks like Poppy (Braum just autos all melees during a team fight to stun them all). It also has great stats for us and internationally. Additionally, Braum is our most practiced support champion and has our highest support win rate.

• Kindred is probably the most controversial pick we had. Kindred is Santorin’s most played champion in solo queue and a personal favorite. Kindred is a strong early/mid game champion that can turn early skirmishes with her high damage and powerful ultimate. It is also a strong counter-pick to Elise, and Santorin prefers the Kindred vs. Elise match up. We banned Nidalee (Kez’s most played champion) and picked Kindred (his next most played), so we anticipated an Elise pick. We had been defeated by NRG the week prior and decided to focus on playing Kindred since they had shown such success versus us with it. Additionally, Kindred has strong early ganking pressure which we felt we needed since our plan was to pick Ezreal who needed time to scale. Thus we wanted to make up for Ezreal’s poor early game with a strong jungle match up that could pressure solo lanes.
• TDK Second/Third Pick [Elise, Janna]: The Elise pick was as expected. Janna was relatively unexpected since both Bischu and Trance (TDK’s support players) play a lot of Bard in both solo queue and scrims. However, Janna posed little threat to our planned composition since we intended to lane swap anyway and her strengths are primarily in lane.
• MBR Third/Fourth Pick [Ezreal, Nautilus]: We had planned to pick a lot of Ezreal in this series for at least two weeks. Ezreal had an incredible showing at IEM that weekend (most notable from SKT Bang) sporting a 60% win rate and felt incredibly strong. His arcane shift does not get blocked by Poppy’s W ability, he excels in lane swaps due to his attack speed steroid, and his two and three item power spikes during the mid-game are huge. Our team’s strength has always been mid-game team fighting and Ezreal fit right into this mold.
• Nautilus was our most played top pick and a champion we had planned heavily around either playing or countering. It was surprising to us that TDK did not first pick Nautilus, but regardless Solo felt incredibly confident in this match up.
• TDK Fourth/Fifth Pick [Lissandra, Caitlyn]: Again, Lissandra was a surprising blind pick from Alex Ich and something he hadn’t shown before. It made sense that TDK wanted to blind pick a mid-laner that was difficult to defeat with assassins such as Zed and Leblanc. Finally, Caitlyn meshed well with the Janna pick. TDK wanted to abuse Ezreal’s weak laning phase with Caitlyn/Janna, not only putting kill pressure on that lane but also persistently damaging the turret. This was a non-issue since we planned to lane swap anyway.
• MBR Fifth Pick [Karma]: Since Alex Ich picked Lissandra, we agreed it would be better to put Goldenglue on a supportive champion that could abuse the Lissandra pick with poke instead of all-in kill potential. We had seen Karma successful in scrims, not only on our team but other teams had played it successfully as well. We also had a very high damage jungler, and thus could afford slightly less damage from the mid-lane in exchange for some extremely powerful utility. The AoE shield/speed buff from Karma allows us to engage in our otherwise low-engage team composition and force fights, which you will see us utilizing to great effect in the actual game.

2) Post-draft thoughts

• Top: Farm lane, possible for ganks from both teams to swing match up early.
• Jungle: Kindred favored in duels as long as she dodges cocoon, high potential to stick onto Elise if caught out. Slightly less gank pressure than Elise.
• Mid: Karma favored pre-six (Karma poke much higher range than Lissandra Q), however susceptible to all-in from Lissandra at six.
• Bot: Highly favored for TDK. Caitlyn/Janna extremely oppressive lane due to Caitlyn range, faster push than Ezreal, and Janna shield.

3) Gameplay

Early Game: We execute our early game plan to perfection. We successfully lane swap, invade the enemy jungle level one to push them off their top side jungle and take the turret.

Late game: As the game goes on you can see we expertly bait Baron/Dragon over and over with perfect vision control. TDK are eventually forced to fall for the bait and we win team fights this way. Again, Goldenglue uses the karma pick to great effect, speeding up the whole team and allowing Nautilus to get hooks in these engages. LOD also uses his slow from Iceborn Gauntlet to catch members of TDK and set them up for hooks.

Misplays worth noting:

• [12:13] Goldenglue plays too far up vs Lissandra when the rest of our team is off the map. He gets three man ganked and dies.
• [14:30] Top turret is low, the enemy has double TP. This is a situation we had drilled many times in scrims. If the turret is low and there is TPand dive pressure, just back off or make sure the jungler is nearby to help and counter TP. However, Santorin is jungling on the bot-side of the map. This is a MASSIVE strategic mistake. I’m not sure if LOD/Stunt were calling for help before this dive, but if they weren’t then they should have been. This was an incredibly telegraphed play by TDK and should have been anticipated by Santorin.

Great plays worth noting:

• [4:00] Our first strategic outplay. I had seen this cheese done in LCK a few weeks back by Longzhu Gaming. We adopted it and used it successfully on every team we scrimmed in the two weeks prior and felt confident TDK would fall for it like all the rest. Of course they do and we secure an early lead for our bot lane against Ohq, significantly reducing the pressure from that lane.
• [21:20] We win a team fight, but Solo recognizes our ability to dominate even further and hook Ohq under turret for an extra kill securing us mid turret. Additionally you can see how the Karma pick enables this with its incredible team-wide mobility.

Game 2 Analysis

The draft goes identical to game one in the first rotations. We all agree that our previous composition worked well and the onus is on TDK to adapt.

• TDK First Pick [Poppy]
• MBR First/Second Pick [Braum, Kindred]
• TDK Second/Third Pick [Gragas, Ezreal]: TDK takes away Ezreal and picks Gragas instead of Elise. Here TDK is indeed adapting, they recognize the weakness of the Elise pick versus our composition, as well as the strength of the Ezreal pick once it gets items. We’re not too worried about the Gragas pick at this point because Gragas’s early game is weak and abusable by Kindred. However, his ultimate does counter Kindred’s ultimate but we’re confident in our ability to outplay.
• MBR Third/Fourth Pick [Lucian, Nautilus]: Lucian is considered a strong laner and for a long time has been the answer to Ezreal in the laning phase. At this point we are super confident in our early game pressure if we can get standard lanes. The reason behind the Nautilus pick is the same as game one.
• TDK Fourth/Fifth Pick [Trundle, Lissandra]: Trundle support is a smart pick from TDK here since we are running a one-tank team composition and Trundle’s ultimate will make Nautilus much less tanky in team fights. We think Lissandra was picked for the same reasons as game one. It also provides good follow up to their strong Poppy/Gragas engage.
• MBR Fifth Pick [Zilean]: Again we decide on a supportive mid-laner. Zilean was by far our strongest pick for the last month. It was so strong that many teams (LCS teams included) banned it versus us in scrims, and TDK banned it versus us when we played them in NACS. Zilean + Kindred ultimates provide us with longevity it team fights, making us very difficult to kill. TDK’s composition was extremely dependent on getting good engages and one-shotting a carry and Kindred/Zilean ultimates help neutralize that threat. Additionally, Zilean’s speed boost increases Nautilus’s ability to create team fights by speeding him up when he’s looking for hooks. Thus, in the event that we get a lead, Nautilus would have help forcing fights around objectives or in the jungle.

2) Post-draft thoughts

Overall the team felt confident in this draft and had momentum carrying over from their victory game one. However, as I reviewed the draft once the players left and went into game, I began to see where the holes were. We had very little way to pressure our early leads. No lane was really gankable for Kindred barring complete misplay from the enemy. Top was a farm fest, so was bot. Lucian should be able to pressure Ezreal in lane and gain a slight cs lead, but the kill pressure was extremely low due to pillar and Ezreal’s mobility. Lastly, of course mid lane was difficult to gank. Our composition heavily relied on the enemy forcing fights onto our team and then our team utilizing their abilities to survive the all-in and turn the fight in our favor using Kindred/Zilean ults and a double bomb stun/Nautilus counter engage. Even Braum’s ultimate was useful in slowing the enemy’s engage and once their engage failed slowing their retreat and making double bombs easier to land. However, this of course assumes the enemy plays into our hand that way.

3) Gameplay

• [1:30] We should not have allowed TDK to lane swap. It is important when we pick an early game laning bully such as Lucian that we get the standard lanes we need. I’m not sure why the team makes no effort to spot the lane swap and respond accordingly.
• [1:50] Both teams invade respective red buffs, a predictable play that we can abuse later but choose not to.
• [6:40] You can see even with Zilean, Goldenglue is putting a lot of poke pressure on Lissandra and maintaining mid priority.
• [7:00] Santorin does a good job recognizing Poppy is overextended and lands a solid gank.
• [11:00] We correctly set up vision for dragon and bait TDK into engaging on us. You can see how the Zilean and Kindred ultimates turn this fight in our favor despite TDK’s super hard engage composition. Santorin’s ultimate is good and we correctly fight front-to-back, killing the enemy tanks since Lucian is much stronger than Ezreal at this moment. Solo’s flash hook secures a final kill and we win the fight convincingly. We correctly move straight to dragon. It is important we stack dragons as an additional win condition. It also adds 5 stacks to Santorin’s devourer enchant, greatly accelerating the effectiveness of his build.
• [12:25] Here begins a catastrophic series of misplays that completely nullify our lead and get TDK all the tempo in the game.
• [12:30] LOD gets caught farming a greedy wave despite Trundle walking over a ward. We talked a bit the previous week about coordinating our recalls. We had just won a big team fight and LOD should have recalled with everyone else to spend the gold and get back on the map with full mana ready to catapult our lead into a mid turret and rift herald.
• [14:15] Solo gets ganked pushing out the top wave. I don’t think he was particularly overextended and this was simply TDK using all of their available summoners to try to make a play. We respond with a teleport from Zilean but Lissandra also teleports and they get a kill 3v2. I don’t think if Zilean had ult’d Nautilus instead of using bombs that he would have lived, although it certainly would have taken longer to kill him. The rest of our team uses this opportunity to get damage on mid, but ultimately we end up taking a deficit here due to a good play from TDK.
• [14:40] Here Santorin is the third person to get caught out in as many minutes. I do not have access to the voice comms during these games but it’s difficult for me to understand what he is doing in this position. We just saw 2 members from TDK topside after killing Solo just seconds before so it seemed like we should have avoided the top side jungle at all costs.
• These three catches bring our lead down to 1k and seriously dampen our tempo. It is crucial with this team composition that we snowball a lead off our early jungle/mid/bot pressure but instead we throw it away in careless misplays. Now the tempo is in TDK’s hands.
• [17:45] Here we again correctly push out mid and rotate onto dragon, securing vision and taking the scuttle crab. However, we start dragon immediately and completely forfeit our favorable strategic position. We should have stood on our pink wards and continuously killed vision until TDK ran out of wards and was forced to come into the river. We can then land poke and possibly even engage if we land a good double bomb/Nautilus hook. However, instead we start dragon and then tank five hits in a straight up standoff.
• We now have no tactical advantage and a series of misplays cause us to lose the team fight hard. First, we tank the dragon too long. Second, we tunnel too hard on getting the actual dragon and all three of our carries step onto a fully charged Gragas barrel to secure dragon. Gragas immediately ults, separating our team completely and leaving LOD and Goldenglue chunked to 40% hit points at the very start of the fight. Stunt ults in the wrong direction, and shields nothing so Braum basically has no function in this fight. TDK are able to do all of their damage to our front line while our back line is left running away from an untouched Poppy who was able to TP flank. The biggest mistake here is all three carries getting hit by the Gragas barrel/ultimate.
• We’re now down 2k gold (a 3k swing) and have lost all tempo to a scaling composition. The game is very hard to win at this point and the ball is in TDK’s court.
• [23:20] We set up a death bush near mid-lane correctly predicting TDK will want to come drops wards around dragon to get another TP flank. However, both Goldenglue and Stunt get restless way too early, step out of the bush, and alert TDK to their presence. Then they stay in the bush anyway. You can see Trance walking up to ward the river and then getting furiously pinged back by his teammates because we accidentally revealed ourselves. This was a pick that got countered by our own lack of patience. With Trundle dead the team fight may have gone in our favor.
• [24:00] Solo recognizes his ability to kill Lissandra and goes for it. A clutch play no doubt and buys us some time.
• [26:00] LOD gets picked off again for no reason. The big wave coming top was pushing to us quickly and he could have just waited at the turret for it. He knew our red side jungle was dangerous. Now we’re down 4k gold and cannot defend mid.
• [27:00] Good Zilean play from Goldenglue wins us a fight and we regain a small amount of tempo.
• TDK engage under turret without Lissandra and a few good double bombs turn the fight in our favor. Flaresz goes way too deep under turret and Trance tries to help. We kill both and go for Baron.
• This Baron call is another massive mistake. It’s certainly a desperation play, but I don’t think it is one we needed to do. The jungler is still alive and healthy, Lissandra is alive and untouched and still has her ultimate. Lastly, Ezreal is alive and healthy and able to stand out of range damaging us while doing Baron. We lose Braum for nothing. We should have used the won team fight to establish Baron vision and catch/prepare side waves.
• [31:30] Again, we correctly push out mid and take control of dragon vision. However, we let TDK into the river without defending the choke. We start Dragon but are unprepared to fight for it and get slaughtered by TDK due to another good Gragas ult.
• We secure dragon at the expense of a significant amount of health on our front line. The call was to retreat but Solo and LOD seem to not be on the same page. The team gets split up on the retreat and Solo/LOD are easily picked off by the re-engage from TDK.
• TDK gets Baron and the game is essentially lost.

4) Conclusion: We lose the game due to careless catches in the mid-game losing us the hard-earned tempo from winning the first team fight. The tempo loss leads to TDK being strong enough to contest us at Dragon and our simple team fighting misplays lose us the fight and shoot TDK into the lead. Overall, the team looked much less confident this game and regressed back to the type of misplays we had worked hard to reduce.

Tally of game effecting misplays: LOD: 3 (2 extremely bad catches), Stunt: 1 (Bad Braum ultimate in teamfight), Santorin: 2 (1 extremely bad catch), Solo: Non-optimal team fighting (potentially his call to just start the dragons, but no way to tell at this point), Goldenglue: Almost none of his Zilean ults are actually effective this game. Additionally, a desperate baron call throws an opportunity TDK handed us to collect free farm, prep waves, and recover a lot of vision.

Break between Game 2 and Game 3

During game two, it became clear to me that the Poppy pick was a big part of what was contributing to TDK’s pressure and success. I discussed with Ken and Michael (the other analysts) the possibility of changing our bans to include Poppy and leave Kalista/Nidalee open. TDK would likely choose one of these OP’s (almost certainly the Nidalee since it is Kez’s favorite jungler and Santorin has had a lot of success in the past with Nidalee) and we would get Kalista.

Kalista is a huge strength for us and gives us play making ability in the botlane and much needed hard engage to get fights onto Ohq. However, as soon as I bring this up with the players they reject the idea of changing bans. Instead, they want to take Lissandra away from Alex Ich. If we could get Alex off Lissandra then he would likely default back to Orianna, allowing us to get Goldenglue his Leblanc/Zed game.

I reluctantly agree to this plan for the draft. And to this moment regret not asserting myself more. We had never come up against a roadblock like this with such pressure. For the 1.5 weeks I had been put in charge of drafting we had always made it a democratic process where I suggest picks and players choose from the options what they feel more comfortable on. Occasionally in scrims I take full control to force them to play things new and outside their comfort zone, but in this pressure situation it was difficult for me to have the foresight to contest the players on what they all agreed was the problem. This was a catastrophic lack of planning.

We should have had contingency plans for changing bans during the series and gotten practice versus characters like Nidalee and Kalista. However, every time I tried to make them play versus Nidalee they universally rejected the idea and said that champion should never be left open (even though many international teams have done so frequently, including at IEM). The players should not have had the ability to reject anything I wanted to do. I should have had the authority and rapport to enforce a training regimen. 50% of this is my fault, I should have taken control. 50% is the result of the power vacuum left by the firing of the last coach. The last coach never really had any authority and his plans were often vetoed by the players. From the birth of the team they had been conditioned to think that they had final say in draft. For me to wrestle that authority back from them would have taken the foresight to understand that this could lead to problems in the future. Nobody saw that, we’d never had a problem with it. It was a ‘why fix what ain’t broke’ situation.

Game 3 Analysis

• TDK First Pick [Poppy]: Of course.
• MBR First/Second Pick [Ezreal, Braum]: We decide to take Ezreal and Braum here. We take Ezreal away from Ohq because it is one of his favorite champions and we don’t want him to have it again. Ezreal’s scaling is way too strong and we want our team to have the scaling marksman so that in the event that the game goes long again we have a fail-safe.
• Why not Nautilus? TDK had shown no priority for Nautilus up until this game. Also, they had already picked their top laner so I felt no urgency to get Nautilus. I was certain we would get it in the second rotation like the previous two games. We also didn’t want to pick mid obviously to save the counter-pick. So the only other option other than picking support was jungle. We wanted to abandon the Kindred jungle pick first rotation to see if Kez would go for it. We were confident in playing Gragas into that match up and thought TDK might see an opportunity to take Kindred away from us. Here is the only place I think that I could have potentially saved this draft and that was by picking Gragas instead of Braum, but again there seemed to be no reason to prioritize it.
• TDK Second/Third Pick [Gragas, Nautilus]: This is a surprise to everyone and we naturally assume it is Nautilus support at this point. I had never seen Nautilus mid before in any region. Nautilus support is widely considered to be bad on this patch and easily dealt with by Braum.
• MBR Third/Fourth Pick [Lissandra, Rek’sai]: Here we take Lissandra away from Alex Ich (or so we think). Lissandra has a good win rate for us in both the top and mid lane. It also punishes Poppy early and gives us a way to make plays. At this point we are still assuming Alex will pick Orianna, Karma, or some kind of support mage. Santorin had no idea what he wanted to play here. With Contractz we would have immediately picked Elise and put a lot of pressure on the map, something we’ve done many times before. However, Santorin does not like playing Elise at all, didn’t want to play Kindred into Gragas again, and thus defaulted onto Rek’sai. It’s already clear to me the draft is in a bad place.
• TDK Fourth/Fifth Pick [Vayne, Alistar]: Now it’s clear that it must be Nautilus mid. TDK have drafted four tanks and a Vayne. Vayne has been seen zero times in all regions on both patch 6.2 and 6.3, and no region had played on patch 6.4 yet. Ohq had two Vayne games in solo queue. However, TDK had legitimately outsmarted us and we had a composition very poorly prepared to deal with them.
• MBR Fifth Pick [Morgana]: We had about 30 seconds to discuss what we wanted to do here. Solo wanted to put Lissandra mid and pick Trundle for top. Trundle does well vs tanks and can out duel Poppy in the late game. However, in the past we’ve cheesed Nautilus top picks with Morgana. Morgana can continually push Nautilus into turret and chunk him, allowing us to get slow chip damage on the mid turret and potentially get it for free after a favorable gank. Also, against four melees Morgana is actually very strong if we have a lead in the game since it is very easy for her to get many targets stunned in her ultimate. However, it was painfully obvious to everyone that Vayne would probably never die if we didn’t get a strong lead in the early game.

2) Pre-Game Mentality

As far as I could tell, the team’s mentality going into game three was pretty low. This was not the easy domination we were all expecting. Everyone knew we played poorly in game two and now we were heading into game three with a really strange draft that did not feel good at all. At this point I suggest that we lane swap. And instead of invading the enemy’s blue buff, let’s predict their invasion of our red.

However, the players objected to the plan, saying they wanted to play standard. Here I should have been even more adamant, and I should have had a more detailed image to present to them. The enemy did exactly what I said they would do and we could have opened game three with a cheesy one or two kill lead into our preferred lane swap scenario. This might have been enough to carry us through to an early game lead strong enough to beat the four tank composition.

3) Gameplay

• [1:50] Sure enough TDK lane swap and invade our red buff. Had we gone ahead with the plan we could have punished this.
• [3:30] We play the lane swap fine, but we don’t have the damage to kill Nautilus mid with Santorin’s early gank.
• [6:00] As stated before this game hinges on us getting an early lead. Any game vs. tanks is like an arms race, and if we were able to secure leads for our solo laners then we’d be able to outpace their tanks’ magic resist with our own damage and penetration. You can’t blame our players for not trying, they recognize that Nautilus has no teleport and once Goldenglue hits level six he recalls and calls for a dive top lane to kill the Vayne.
• However, before the TP’s come down we see Gragas in the area on a ward. I think we could have backed off here and salvaged this situation, but we go in anyway. All the TPs come down and we get slammed by Alistar and Gragas. In the end we trade two for one and start a slow slide to defeat. Nobody really played the fight poorly except perhaps Stunt, who misses the initial Braum Q and thus doesn’t get turret aggro. Instead, Goldenglue gets turret aggro and tanks 3 shots making him low enough to die in the chase.
• [9:30] Here Santorin recklessly ults into the enemy red buff despite both bot and mid being pushed in. Gragas is waiting for him there and the resulting chase gets Goldenglue killed because both solo lanes rotate faster for TDK. Small misplays like this all contribute to the game sliding out of our control.
• [11:00] Santorin ganks Poppy but she is too tanky and turns the gank for a kill with Gragas’ help. Solo doesn’t flash and probably could have lived if he did.
• [13:40] We make a good TP play on the topside of the map. Crucial we make some kind of play to punish the Vayne or else the game is over. The play is setup by LOD/Stunt playing the 2v2 well and chunking out Vayne. However, Stunt ults the wrong direction and then runs up instead of down to his team. If he ran down then we could have fought the rotating Nautilus/Gragas after Vayne was dead, but instead we end up trading one for two. Still a positive trade and something we needed desperately.
• [15:00] and [16:00] Solo gets caught out twice in a row dying both times, giving TDK even more momentum and helping them finish their crucial tanky items before he can finish any real damage items. I’m not sure how much of a mistake the first catch was, but when Alex catches Solo the second time he is definitely overextended. These mistakes cannot be overstated and are a hallmark of our team’s weakness. We die in sidelanes incredibly frequently, and almost never get those types of picks ourselves. This is largely due to a lack of knowledge on how to manage side-waves properly.
• [19:00] A good team fight setup by Poppy getting caught overextended. Solo and Goldenglue truly shine in this teamfight. Solo’s use of flash plus ult while targeted by Nautilus ult basically nullifies the Nautilus damage and locks up the TDK frontline to be killed by LOD.
• I cannot express how much I want to highlight this play by Solo. This is LCK-level presence of mind in team fights. This is the kind of team fighting you can’t really teach. It is the main reason I don’t think Solo should be removed from the team.
• Then, Goldenglue flashes forward for the three man ult and lands a q onto Ohq, which secures a kill on the Vayne. Our success in this team fight reinvigorates the team and we then utilize a huge wave top at [21:00] to outpush Vayne by herself in the bot lane, trading one turret for two. However, despite this we are still down 4k gold due to the many misplays earlier in the game.
• At this point our team excels at picks. We should look to control vision around certain objectives and bush camp. Tanks are easy to kill when locked up in CC and by themselves. Instead we continue prioritizing side-lane farm and not being grouped at the moments we should be.
• [23:30] Santorin gets caught in a weird position leaving the team and this starts a teamfight. We get a dream wombo-combo but it’s too late in the game for it to matter. The enemy has a huge amount of magic resist and Goldenglue gets Gragas ult’d out of the fight. If the Morgana ult had clicked on all four of the frontline, we might have won the fight, but we had basically lost the arms race at this point and couldn’t kill the tanks or the Vayne. Still, Solo and Goldenglue played admirably in this fight. The Lissandra engage from Solo would have been game winning in other circumstances.
• At this point the game is basically over and the players know it. At [25:40] LOD gets caught again and at [28:00] we lose a pretty one-sided teamfight and baron and that’s essentially the game.

4) Conclusion:

• This game felt extremely difficult from the outset due to the draft. I got legitimately outsmarted by TDK and didn’t have the correct answer to Nautilus mid.
• I failed to force the team to do my level one plan and we miss a crucial opportunity to adapt and punish TDK’s habitual level one. This is standard best of five material but I failed to get the players to do it.
• Getting caught out in side lanes was still a huge problem this game, the tally is: LOD: 1, Santorin: 2, Goldenglue: 0, Solo: 2, Stunt: 0

Break between Game 3 and Game 4

Having watched this game and clearly seen the issues with the draft, this time I prepare a mock draft scenario for the players to look at (below). I want to take Poppy and Ezreal off the table, then secure Kalista and Alistar in the first rotation. As stated before, this gives us huge playmaking potential on bot lane, and Ohq would basically be forced back onto Vayne or Caitlyn, who are both extremely vulnerable to Kalista/Alistar.

TDK could do a number of things here and what’s shown is only one possible scenario. Whether they take Nautilus or not, send it mid or top, or pick Graves, it doesn’t matter. What matters is we have an extremely strong hard-engage composition, one that we have practiced many times which allows us to throw all of our considerable weight onto Ohq in team fights. Once the Vayne dies, we have a similarly tanky lineup that can continue to fight, the key difference being that we have an extremely tanky ADC as well. Versus a tanky lineup like TDK’s, Kalista does very well because she builds BotRK 1st item, then lots of tanky and lifesteal heavy items after that. She can easily survive the relatively weak burst of a Nautilus and then quickly lifesteal the damage back up while dealing %hp damage to their front line. However, again the players reject the idea, and to this day I really don’t know why. The only explanation I have is that it was lack of scrims and training where champions like Kalista and Nidalee were left open. They were just too scared to play versus Nidalee.

Game 4 Analysis

1) Draft

• TDK First Pick [Poppy]
• MBR First/Second Pick [Ezreal, Gragas]: In the end, nothing changes and the players are convinced Gragas was the problem last game, not Nautilus. Also, Ohq cannot be allowed to have Ezreal. At this point the players are essentially drafting for themselves since they rejected my ban proposal. Nautilus/Gragas would have probably been better here to prevent the Nautilus cheese again, and Ohq would have probably gone Vayne anyway.
• TDK Second/Third Pick [Nautilus, Elise]: It’s safe to say the players are anticipating the Nautilus mid again and we’re already thinking of how to counter it better than Morgana. Elise for Kez didn’t have a great showing game one anyway so we’re not too worried about that. Although Elise does have more pressure in the early game than Gragas, Gragas however out scales.
• MBR Third/Fourth Pick [Trundle, Braum]: Trundle is an excellent anti-tank pick since he can strip tank stats with his ultimate and become even tankier himself. Also, if he has a lead he can actually duel Poppy in the late game. We decide to stick with the Braum pick since it is effective versus tanks and still a strong laning/team fighting support champion.
• TDK Fourth/Fifth Pick [Vayne, Alistar]: TDK predictably take Vayne and Alistar. We really have no answer to this at this point, and the draft has gone completely off the rails. Everyone on the team is in a poor mentality and rushing through choices without really consulting me. At this point we need a strong scaling mage in the mid-lane that can one shot Vayne and still deal strong magic damage to the tanks.
• MBR Fifth Pick [Orianna]: The idea is that melee champions have a very broadcasted group up and run at you death-ball style. Orianna prefers this situation since anytime the enemy is coming towards you it is very easy to land an Orianna ult. Plus, Orianna deals very high magic damage when she gets four to five items, enough to deal with tanks as long as we are not too far behind.
• Overall, I think we all felt that the draft was sub-par and we had lost the series. The players went into the game, again rejected the idea of cheesing our own red buff, and played exactly how you would expect with that mentality. I take responsibility for the game three and four drafts. I had the conceptual ideas of how to adapt, but I lacked the leadership to override the players and force my agenda. Having been made strategic coach only a week before, I had already built rapport with the players due to my previous work. However, I didn’t have time to truly build my confidence in the actual drafting procedure to deal with extremely tense, high pressure situations such as this. I had done it once before and it worked. During a scrim set with TSM I started reading off bans. When the players asked why we were banning that, I responded “just trust me, I have a plan.” They trusted me, ended up liking the draft and we beat TSM in that set. If I had only pulled rank that way during this series, things might have turned out differently.
• Another failure on my part is when Goldenglue asked me what summoner spell he should go on Orianna. He said he wanted to go ignite so they could try to kill the Nautilus early and prevent him from getting too tanky. I told him he should go teleport, and one other player (I believe it was Solo) agreed with me. However, Goldenglue said he wanted to take ignite anyway since he really felt we needed more damage in the early game.

2) Gameplay

• The early game (first ~10 minutes) was extremely passive and consisted of the standard double lane swap. We traded both side lane turrets and entered the early-mid game with a tempo advantage. This tempo advantage was because TDK spent so much time trying to kill Orianna that they fell behind in the turret pushing game. They also decided to spend time stealing blue buff instead of having everyone push our bot tier two turret.
• [8:15] Because of our tempo advantage we are able to push an extra turret on the top side of the map and trade two turrets for three, garnering a small gold lead for ourselves. This was a good call from the team. The only downside is that Orianna dies in the mid lane from a Poppy roam.
• However, at this point it becomes obvious that our team’s mentality has hit rock bottom. We are making zero plays on the map, conceding all map objectives without even trying to fight, and slowly losing the game by attrition.
• [15:45] Here we make the first real play of the game. Santorin moves bot to gank an overextended Poppy who is low on hp and mana. Solo recognizes the chance to kill her with his ultimate and calls Santorin down. However, Nautilus immediately starts to TP in and Elise can be seen rotating to help. Orianna has no teleport and is unable to respond. If Orianna had TP then we might have been able to match teleports, kill the Poppy quickly and clean up the rest of the fight. Instead we lose Gragas and our top’s summoners.
• [18:00] and [19:30] and [21:00] Solo gets caught out three times pushing out the bot lane. Because of our extremely passive play style we have no control of either quadrants of our jungle, and TDK is able to rotate on both of our side lanes to catch anyone who ventures out while keeping Orianna pushed into turret. However, these catches are avoidable.
• [23:45] We catastrophically lose a baron team fight and TDK take Baron and the series is essentially over.

3) Conclusion: Not enforcing my new ban strategy left us with a difficult choice to make in the first rotation. We probably should have gone Nautilus and Gragas, but that would not have made a huge difference. Ohq would get Ezreal, which carries just as hard in the late game vs our team as a Vayne.

Not enforcing teleport choice on Orianna lead to us being unable to set up a single play on the side lanes after the lane swap phase was over. We were left trying to scoop up farm when it came to us, giving up all rift heralds and dragons and the majority of our jungle camps.

Player mentality was at an all time low during this set. You could tell because of the number of times Solo died in a side lane. It appeared we had just conceded the series at this point and were playing it out out of courtesy.

Conclusion

Thanks again to our fans who supported us. I hope you will continue to support our players as they move onto new teams. #MBRWIN

By Jonathan Pan and Sayako Seto

Activision’s acquisition of King has made it the most dominant interactive entertainment company. It is now a force to be reckoned with across all platforms: PC (anchored by five — soon to be six — Blizzard franchises), console (Call of Duty was the #1 console game in 2014, globally), and mobile (King brings 340 million monthly active users).

A lot has been written about about the deal. Our favorite articles are from The Atlantic, The New York Times, and Bloomberg. These articles tend to focus on what the deal means for Activision. We will explore what the deal means for everyone else, especially in the mobile gaming space.

This acquisition is a reflection of the fact that we have reached “peak casual” in mobile gaming. Excluding Supercell, major Western mobile game companies have collectively dropped more than $8 billion in value over the past four years. The convergence of low growth and increasing user acquisition costs from a crowded market makes 2016 ripe for market consolidation.

King is just the start.

Furthermore, the rise of midcore (Hearthstone), hardcore (Vainglory), and esports will shape the next generation of mobile games. Combined, these trends will result in wealthier shareholders, happier game makers, and more importantly, delighted players.

But before we talk about tomorrow, let’s take a look at how we got here today.

The journey to peak casual: Pincus, Nadella, and … Kardashian

We first heard about social (casual) gaming at a talk given by Mark Pincus, the CEO of Zynga, in 2008. Nobody in the audience seemed to understand just how big social gaming and its transition onto mobile would be. Zynga completed their Series A and B rounds that year and its explosive growth would spawn a whole host of other companies clamoring into that space.

Fast forward seven years and now there are multiple social/mobile gaming companies with market caps or valuations ranging from hundreds of millions of dollars to billions of dollars.

A few years ago, it would be inconceivable to think that the CEO of Microsoft would pay any attention to mobile gaming or that celebrity games could be financially viable. These are realities today. Satya Nadella has included mobile gaming as part of his transformation strategy because “the single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming.” Kim Kardashian’s mobile game made $43 million in a quarter.

“The smartphone is the new sun.”

Mobile is huge; mobile gaming is huge. We get it.

Then why are some mobile gaming companies losing so much value?

Because the low-hanging fruit of obvious game concepts have all been picked. Because it was too easy to raise money in this space and now the market is saturated. Because mobile gaming companies couldn’t figure out how to solve the timeless problem in entertainment — how to consistently create hits.

Then who is continuing to fund mobile gaming companies?

• Alibaba, China’s biggest e-commerce company, invested $120 million in San Francisco-based Kabam
• Tencent, a Chinese internet conglomerate, purchased a 14.6% stake of Glu Mobile for $126 million and a 20% stake of Pocket Gems for $60 million, two American game studios.
• SoftBank, a Japanese telecommunications conglomerate, increased it’s share of Supercell to 73.2%
• Netmarble, the top Korean mobile game publisher, invested $130 million in Los Angeles-based SGN (also 26% owned by Tencent)
• Sega, a Japanese game developer, acquired Demiurge Studios, headquartered in Cambridge, MA, and took a stake in Ignited Artists in San Francisco.

Here are a few reasons for the east-to-west migration in capital.

First, Asian companies want to sell their content in the West. Second, it wants to sell Western content into their own markets. And third, a variety of national economic reasons ranging from currency devaluation, repatriation of foreign-held cash, and low interest environments.

The third point is a major reason why Activision made the deal. The Atlantic piece we mentioned earlier describes the economic benefits of the deal: using $3.6 billion in offshore cash means a tax savings of $1 billion (if they had repatriated the cash) and the remaining $2.3 billion is financed by low-interest, long-term loans.

Since the market is pummeling publicly-traded mobile gaming companies valuations, it makes sense for cash-rich companies headquartered in a different country (tech, gaming, or otherwise) to acquire Zynga or Glu at a discount. While market consolidation happens, mobile game companies need to stand out to look attractive to potential buyers.

Three companies that are currently standing out in the market provide cues for everyone else: Glu (lower user acquisition costs), Supercell (disciplined growth), and TinyCo (licensed IP).

Navigating the crowded landscape: How three companies are standing out

1. Glu was valued at $327 million when it went public in 2007. This April, Tencent purchased a 14.6% stake for $126 million. It’s current market cap is around $570 million. Although not a breakout success, Glu has proven to be a sustainable and growing business. Glu has dealt with rising acquisition costs in an interesting way, build games with celebrities and let them market it: Kim Kardashian West on Twitter.

Trying to mimic its success with Kardashian, Glu has inked deals with Nicki Minaj, Katy Perry, and just released Sniper X starring Jason Statham.

2. Supercell on the other hand, has been a breakout success, a company that VC’s dream about. Supercell has gone from raising a $12 million Series A round in 2011 (~$50 million valuation) to raising $1.2 billion from SoftBank at a $5.5 billion dollar valuation this year.

Besides making awesome games, Supercell has been very disciplined with hiring. Most companies with such explosive growth can’t help but hire if not overhire. Supercell generated $1.7 billion in revenue with 152 employees in 2014. As a comparison, King generated $2.26 billion in revenue with 1,200 employees the same year. That’s roughly $11.2 million in revenue per employee vs. $1.8 million in revenue per employee.

Perhaps Supercell is taking a page from Valve, which is estimated to only have 330 employees, but creates awesome games on par with companies twice or thrice its size. Smaller development teams have proven to be quite successful in the past few years. One of the best examples being Hearthstone, a game built by a core team of fifteen.

3. TinyCo is the only mobile game company we found through our research that focuses exclusively on licensed IP. Last year, it published Family Guy: The Quest for Stuff. This week, it announced that Marvel Avengers Academy, a game were teenage versions of Marvel superheroes navigate the trials of superhero school, will launch in the first quarter of 2016.

Licensing IP is a smart move because the mobile game market will begin to look a lot like the films market. M.G. Siegler writes, “nearly every movie is a sequel or the hopeful launch of a new franchise or a spin-off from another franchise.” And the data backs him up. Based on Sriram Krishnan’s research, 53 of the 80 top grossing movies from 2007–2014 are part of a franchise and 46 of the 80 are sequels.

While Activision has the strongest portfolio of original video game IP, Disney has the strongest portfolio of IP that can be licensed for video games (Pixar, Marvel, Star Wars, Disney). Activision’s huge cross-platform user base is appealing to an IP-rich company like Disney.

Disney may have the aspiration to do this all themselves. After all, they already have a strong IP portfolio and a revitalized mobile and console gaming department (Disney Interactive). They just need a strong PC gaming arm. Geographically and culturally, the best bet would be a partnership with or acquisition of Riot Games. You heard it here first folks :)

We, for two, welcome our Magic Kingdom overlords.

The aftermath of peak casual: More midcore, more hardcore, more esports

A great cocktail party conversation starter (yes, these types of cocktail parties exist) is whether or not team mobile-based esports will be a thing. Our position is yes. The success of any team-based esports game (mobile or not) largely depends on three criteria: hardcoreness, complexity, and having a large audience.

Playing a hardcore game is like reading an entire book series like Harry Potter or Game of Thrones. If you start on book three, you would be lost. If you want to be a legit Game of Thrones fan, you have to commit to reading the entire series from start to finish. The same level of commitment exists in games like League of Legends or Dota 2. The learning curve increases every month for new players because there are ever-evolving skill trees, masteries, strategies, champions, etc. These games also require high actions per minute (APM) that are enabled by a mouse and keyboard. It is the hardcore and complex nature of these games that helped them gain an estimated 100+ million monthly active users combined.

Vainglory meets all of our criteria for a successful, team-based esports game. It is without a doubt, the most successful hardcore mobile game to date. There are 18 heroes to master — a far cry from the 100+ champions/heroes in League of Legends and Dota 2 — but the most we’ve seen in a mobile game. As a sign of its complexity, the average game sessions last 75 minutes long; 110 minutes in Japan. The game launched on iOS in November 2014 (and on Android in July 2015) and has since gained 1.5 million monthly active users.

Vainglory is setting the boundaries for team-based mobile esports and hardcore mobile gaming. In 2015, the estimated global installed PC base is slightly under 900 million and growing around 2%. Smartphone subscriptions are estimated at 2.1 billion, growing around 20%. Vainglory has the potential to be three times larger than the biggest PC esports game — League of Legends — in a few years.

On the other hand, playing a midcore game is analogous to reading a great book. You can pick it up and read it for fifteen minutes or hours. It’s up to the individual. The best example of a midcore game is Hearthstone. When Hearthstone comes out with a new expansion, it’s like players have to read a new book that is loosely related to the first one, but you can read it without reading the first book first. Also, there is a low to medium level of APM required. Blizzard makes an estimated $240 million per year from Hearthstone. Activision-Blizzard has a whole portfolio of IP that the King division can partner or build games on.

The success of Hearthstone and the potential of Vainglory is a strong argument for why the aftermath of peak casual is more midcore, more hardcore, and more esports.

The King acquisition wraps up a banner year for Activision: Hearthstone was released for iOS and Android, Activision hires a former CEO of ESPN and president of MLG to start an esports division, Overwatch opens closed beta, and today, on the first day of Blizzcon, Activision announces a film and TV studio — Activision Blizzard Studios.

Activision is starting to look a lot like Disney, with game IP at the center of its expanding universe.

By Jonathan Pan and John Kim

Our favorite story about Michael Jordan happens in the Portland airport. As Jordan and his teammates were waiting for their luggage, he slapped a hundred dollar bill on the conveyor belt. “I bet you my bags come out first.” Nine teammates jumped on those odds and lost because Jordan had bribed a baggage handler. Jordan “cackled with delight as he collected everyone’s money.” What drove him to win a few hundred bucks that he didn’t need?

“There was a chance at an easy score, and he took it. Yes, the most cutthroat athlete of his generation loves to gamble, and even more than that, he loves to win.” — Bill Simmons

Understanding Jordan’s love for competition is critical to our investment thesis for Esports:

• Humans need to compete
• Esports is a new mechanism to satisfy that need
• Esports games have much shorter lifespans than traditional sports
• Therefore, invest in companies that amplify competition (creating stars, betting/fantasy, and offline rewards) rather than a specific eSport

For those new to esports, take a look at the esports market ecosystem map to understand all the players. Part one of this series aims to dampen the fervor from the often one-sided press coverage of esports. Part two of this series examines the sustainability of the current esports ecosystem.

The Need to Compete

Sigmund Freud, the father of psychoanalysis, believed that competition is a part of being human. We’ve been shaped by Darwinian forces for hundreds of millions of years in pursuit of survival. This manifests itself in the fact that we compete in almost every facet of our lives — academics, work, relationships, and play. Sports have long served as the dominant way to satisfy our need for competition. It has a simple, yet brilliant framework:

1. Offer a fair platform with objectives, rules, and space
2. Let the players compete to determine the winner

Each match offers a new opportunity to satisfy our competitive hunger. That desire is so powerful that the global sports market is projected to reach $70.7 billion in revenues in the U.S. by 2018, according to a research report by PwC.

With that kind of money involved, it’s no wonder that competing at the highest levels in sports is largely limited to those who possess the necessary physical gifts. Most people, like us, have to settle for the role of humble spectator or fantasy player to get our competitive fix.

With esports, anyone with a computing platform can compete at the highest level. And if the $70.7 billion sports market is any indication, entrepreneurs and investors are excited about the potential of esports. Where should they focus their attention on? We believe that the biggest opportunities in the next 5–10 years in esports center around amplifying competition:

• Manufactured Stardom
• Betting
• Offline Rewards

Manufactured Stardom

Jordan was one of the greatest basketball players to have ever played the game. Six-time NBA Champion. Five-time League MVP. Fourteen-time All-Star. Ten-time NBA Scoring Champion. The list goes on. None of this happened overnight. Jordan played varsity in high school. Then, he played for North Carolina and was twice selected to the NCAA All-American First Team. Jordan was rare talent that was molded by decades of coaching, support staff, sponsors, and a sports ecosystem that benefited from his success and vice versa. There is low supply and high demand of exceptional talent in the sports ecosystem.

In esports, it is the opposite. Anyone with a computing platform and enough time can compete at the highest level. That creates a high supply of exceptional talent. There is low demand because teams are incentivized to build their team brand over individual player brands due to the short average career span of esports players and the uncertainty of the survival of specific esports games.

We believe that an esports megastar should be created because he (or she) would significantly advance esports as a whole, much like what Tiger Woods did for golf. How do you manufacture a star and who will do it?

Esports stars need to be content creators (influencers) and athletes. According to Gary Vaynerchuk, influencers need to have talent, put in a ton of work, and then be the fastest in acquiring followers. Esports stars have to do all of that, plus win. This is almost an impossible task because of the time requirements of being a professional player — team practices, individual training, and maintaining a social media presence. There needs to be a support team that maximizes what little time the stars have to create content and market that for them.

The two types of companies most likely to do this are multi-channel networks (MCNs) and talent agencies. MCNs provide distribution technologies, back-office support and ad-exchange services. Talent agencies are in the business of turning people into stars. Our bet is on Creative Artists Agency (CAA).

More Than Just a Barbershop

The two largest talent agencies in the world today are CAA and William Morris Endeavor (WME). These two have sizable sports agencies as well. CAA built its internally while WME acquired IMG, the largest sports agency. Both are now majority owned by private equity firms. Silver Lake owns 51% of WME and TPG Capital owns 53% of CAA.

Why are private equity firms interested in talent agencies? Private equity tycoon Teddy Forstmann famously said this about the talent agency business — “You are in the barbershop business. The only way you grow your revenues is you get another barber to work for you, and he cuts 10 haircuts today.” That may have been true in the past. We believe talent agencies are are critical to the future of sports and digital entertainment. Agencies serve as the broker for information and opportunities. And in a world where there is more talent and more content than ever before, having a broker screen and put together deals/shows makes perfect sense.

Specifically, we envision the creation of a new joint venture — CAA Esports. This JV would be a partnership between CAA, game publishers, and major brands. One of the major issues with esports sponsorships is the lack of a credible advertising agency that can activate esports properties. CAA Marketing won the Grand Prix for “The Scarecrow.” Problem solved.

CAA has also made acquisitions to form CAA Premium Experience, a full-service event management and marketing practice. One of the acquired companies worked on the Pacquiao vs. Mayweather fight as well as the World Cup. This level of experience on high quality events could be a boon for game publishers, who had to create internal events production teams due to the lack of a viable outsourced option. These teams are expensive to maintain and not part of the core competency of game publishers. It’s a win-win for every party involved:

• CAA: Enter the esports agency market in a meaningful way and increase market share (WME/IMG acquired an esports agency in January 2015, signed three teams, but has yet to announce a sponsorship deal)
• Game publishers: Outsource costly events production teams while ensuring high-quality live experiences for fans
• Brands: Activate esports properties with a trusted partner
• Teams: Partner with an agency that not only sells rights but also helps brands with activations
• Stars: Focus on winning and have world-class professionals handle content creation and personal brand marketing

Betting

Jordan’s unyielding, hyper-competitive nature drove him to become the icon of sports. For better or for worse, Jordan took that relentless competitive edge with him everywhere — other sports, business, hobbies, and most infamously, betting.

Jordan’s history with gambling has been well-documented. Once, he racked up a seven-figure debt in a golf duel. On another occasion, Jordan reportedly lost $5 million playing craps — in a single night. Some have labeled him a reckless gambler. We disagree.

Betting was a simply compelling way for one of the fiercest competitors of our generation to satisfy his need to compete. And according to the American Gaming Association, betting satisfies the competitive need for many Americans as well.

An estimated $100 million was wagered legally on Super Bowl XLIX. This pales in comparison to the estimated $3.8 billion worth of illegal bets made on the same game. That is equivalent to every American betting $12 dollars on the Super Bowl alone.

It’s difficult to pin down how much betting is done off-the-books for all sports — think about all the March Madness office pools. The high end of available estimates is $400 billion in wagers annually. The low end is $80 billion. This means that the amount of money being bet on sports eclipses the entire $70.7 billion American sports market itself.

A legal alternative to betting is fantasy sports. The recent investments in traditional daily fantasy sports demonstrate how big this market is. In August, FanDuel closed a $275 million Series E round and DraftKings closed a $300 million Series D round.

In esports, Unikrn is focused on betting while Vulcun and AlphaDraft are focused on fantasy esports leagues. While the stakes are orders of magnitude apart — millions in payout for esports vs. billions in payout for sports — we expect this gap to narrow as esports becomes more mainstream.

The bottom line is that spectating is not enough. Betting and fantasy offer a way to amplify the competitive thrill of esports.

Offline rewards

Almost every esports game has implemented a ranked system where players can compete with others of a similar skill level to achieve higher and higher tiers. At the highest tiers lie opportunities to play professionally, the start of a lucrative streaming career, and general bragging rights. We think that there is a huge opportunity to turn those bragging rights into value for players, brands, and game publishers.

Taking the game League of Legends as an example, there are seven tiers that players compete for: Bronze, Silver, Gold, Platinum, Diamond, Master, and Challenger. Players get in-game rewards for reaching specific tiers. Why not add out-of-game rewards?

Imagine Platinum players who have Starbucks cards can get a 10% discount on coffees. Or, Gold players who have an Apple ID can get 5% off on music through the iTunes store. Or, Silver players who have AMC Stubs cards get 15% off on movies.

• Players benefit because they are getting additional rewards for winning
• Game publishers benefit because there is an added incentive for their players to keep playing their game
• Brands with rewards systems benefit because they are acquiring new customers

This is our request for startup: an Apple Wallet for gamers. This startup will have access to buying behaviors for a large user base which skews 18–34 and male. This company could be a very valuable addition to app constellations such as Google, Facebook, Twitter, or Yahoo. Spreading the use of their single login promotes the use of their other apps.

Psychological needs trumps hype

The future of esports looks impressive — so impressive that reporting has reached hype-like levels. We’ve evaluated and explored opportunities in esports through first principles over the course of this three-part series.

The core of esports isn’t about large audiences or prize pools. The core is competition and our psychological need to satisfy that. We recommend investing in opportunities that amplify competition because:

• Humans need to compete
• Esports is a new mechanism to satisfy that need
• Esports games have much shorter lifespans than traditional sports
• Therefore, invest in companies that amplify competition (creating stars, betting/fantasy, and offline rewards) rather than a specific eSport

For the first time ever, there will be an opportunity to compare global streaming metrics between one of the most successful sports in the world and one of the most successful esports in the world. Those numbers could radically alter the future of sports, TV, and digital advertising because esports represents more than just competitive video game competitions. It represents digital stars, streaming rights, the global scaling of digital content, niche and mainstream content creators and how they monetize their content.

In many ways, traditional sports are becoming more like esports — global and digital, while esports is becoming more like traditional sports — local and live. There are challenges that both sports and esports will have to overcome to achieve those outcomes.

Sports Leagues

Leagues are at the center of sports and the money flows through them. As one of the most financially successful sports league in the world, the NFL serves as a good representative of the sports ecosystem.

The league makes money in three ways:

• Media rights: 54.4%
• Sponsorships: 10.3%
• Local revenue (ticket sales, merchandise, etc.): 35.3%

All figures are estimates for 2014. Total revenue: $11.2 billion (source). Sponsorship revenue: $1.15 billion (source). National revenue: $7.24 billion (derived from source). Local revenue: total revenue — national revenue = $3.96 billion.

Media rights are not increasing in the near future as the NFL’s broadcasting contracts have all been recently renewed. CBS, Fox, and NBC’s contracts expire in 2022. ESPN’s contract expires in 2021; DirectTV in 2023. While sponsorship revenue continues to increase, there are only a few sponsorship categories left untapped. As a reference point for local revenue, the Green Bay Packer’s local revenue increased 9% last year ($12.9 million). While impressive, that growth rate isn’t high enough to reach the $25 billion in annual revenue that the NFL Commissioner wants by 2027. The NFL needs to increase revenue by more than one billion per year and the two most likely sources of revenue growth are international and digital.

There are already some digital deals with Yahoo and Twitter. On the international front, the NFL has been hosting the International Series in London since 2007. In 2015, three regular season games will be played there. The trend of growing internationally and digitally can be seen in other sports as well.

In 2014, the NBA Global Games appeared in Brazil, China, Germany, and Turkey. A regular season game will be played in London next year. On the digital front, the NBA’s five-year digital partnership with Tencent became effective July 1, 2015. American sports are taking a cue from Hollywood and video games: sell American-made content internationally, especially in China.

Fast and Furious 7 was very successful domestically, earning $351 million in box office sales. It was even more successful internationally, earning $1.16 billion, of which $391 million was from China alone. It’s impossible to ignore the Chinese in films, games, or sports. Increasingly, they want to be a part of the distribution. A recent example is Alibaba’s partnership with Mission: Impossible — Rogue Nation.

In video games, Tencent’s Games business owns stakes in companies such as Epic Games (maker of Unreal Engine), Riot Games (maker of League of Legends), and Activision Blizzard (Call of Duty). Call of Duty was the best-selling console game of 2014 and Tencent partnered with Activision to launch a modified version in China.

As American sports seek to grow internationally and digitally, the key challenge is to convince networks and advertisers that streaming audiences are valuable. The numbers of the NFL’s first streaming-only game will likely be impressive and no one is better at selling new forms of media rights than the NFL. Ironically, it will be sports that will increase streaming media rights valuation for esports. Until that happens, esports is moving towards generating more local revenue though live events.

Esports Teams

There are two models for esports: the central league model, which resembles major American professional team sports such as the NFL, the NBA, and MLB, and the decentralized tournament model, which resembles PGA Tours and NASCAR Series.

The main benefit of a central league is more control: protections for players, established rules, and the enforcement of those rules. The main benefit of the decentralized tournament model is shifting the costs of the “regular season” and qualifying tournaments to third-party tournament organizers like Major League Gaming or Electronic Sports League. The center of both models are teams and it is critical that the money flows through them. Teams make money in the following ways:

• Prize winnings
• Merchandise
• Transfer fees
• Sponsorships

Prize winnings have become very impressive. Bloomberg published a piece about Sumail Hassan, a sixteen-year old Pakistani teen, who plays the game Dota 2 for the team Evil Geniuses. One week later, Sumail and his team won the 2015 International, the world championship game for Dota 2. The team of five won $6,630,109. ESPN’s SportsCenter covered the event.

Merchandise sales are an ancillary revenue source but not a game changer. Transfer fees could be substantial, according to this article, but it isn’t a steady source of revenue as most teams are in the business of winning competitions rather than developing and trading players due to the low average career length of esports players.

The final source of revenue, sponsorships, represents the largest share of a team’s revenue. esports sponsorships are typically within the range of $3,000 — $30,000 per month. Multiple sponsorships add up quickly, but it can also presents cash flow problems due to staggered start and end dates. esports team owners have multiple teams that compete in multiple seasons all around the world. There is a high level of cash flow required to pay for all of that. One solution to cash flow issues is a multi-year sponsorship from a single title sponsor.

Multi-year sponsorships pose a risk for single title sponsors because of the rising prices and the lack of proof that esports sponsorships work. The cost of being a single title sponsor for the best esports organizations exceeds $2 million per year. For that amount of money on a multi-year basis, sponsors can get traditional stars.

This is where esports can learn from sports. With the amount of money involved with sports sponsorships, sponsors understandably want proof of value. There are many consulting firms and sports market research firms ready to provide that service. As an example, McKinsey & Company, a consultancy, suggests these five metrics for scoring sports sponsorships:

1. Cost per reach
2. Unaided awareness per reach
3. Sales/margin per dollar spent
4. Long-term brand attributes
5. Indirect benefits

Coke, as the most iconic brand in esports, should partner with McKinsey or a sports market research firm and publish their return on investment on sponsorships. This would pave the way for many other brands to test the waters with esports.

In the meantime, there are simple ways for brands to analyze the effectiveness of esports campaigns.

In part one of this series, I covered how sports sponsorships work and compared State Farm’s Born to Assist campaign with NBA stars with HTC’s campaign using esports stars.

How effective were these campaigns digitally? To find out, I analyzed the most recent 3,200 tweets ending August 9, 2015 of three accounts:

• @cliffpaul: the account for Chris Paul’s fictional twin brother who stars in the ad campaign
• @htcesports: created when their esports sponsorship started
• @cokeesports: created when their esports sponsorship started, included as a comparison

Using percent of tweets retweeted and favorited as a measure of digital engagement, esports sponsorships have the potential to rival sports sponsorships in digital engagement. Note: State Farm’s campaign is primarily for TV versus HTC and Coke which are primarily digital.

Metrics like long-term brand attributes and indirect benefits are always going to be murky. Counting how many people attended an event and measuring their engagement through actions is not. Live events is a concrete way of demonstrating return on investment.

Last October, Major League Gaming secured a 14,000 square feet arena for esports events. Last weekend, the Dota 2 International was played at KeyArena in Seattle. Next weekend, League of Legend’s North American Summer Finals will be played at Madison Square Garden in New York City; the European Summer Finals will be played at Hovet Arena in Stockholm.

Similar to the “cord-nevers” (“kids who have never and will never subscribe to cable television”), there are kids who never got into sports for whatever reason — the “sports-nevers.” For this demographic, their first live competitive event usually is an esports event. The VICE documentary on esports offers a glimpse of just how intense esports fans are. esports events are increasing in production quality every year and eventually will be on par with sporting events.

Sports 2.0

The core appeal of sports is its fulfillment of the human need for competition. esports does the same thing. These two businesses are beginning to look a lot like each other and in some ways, can even help each other. If streaming-only sports games becomes a thing, esports will certainly benefit. As more “sports-nevers” discover the appeal of live competitions through esports, they may become fans of traditional sports as well.

Sports 2.0 is going to merge the best parts of sports with the best parts of esports.

Steven Levy’s deep dive into Yahoo, “Marissa Mayer Has Completed Step One,” asserts that the first three years of Mayer’s tenure has been dedicated to step one: restoration. Step two is transformation. I believe that having a young and highly engaged user base is crucial to whatever that transformation may be.

The Tumblr acquisition added many young and highly engaged users to Yahoo’s app constellation. esports (organized video game competition) is the next contested frontier for many tech constellations (Google, Facebook, Twitter, Yahoo). For a brief intro on esports , read this.

Google fired the first salvo by announcing YouTube Gaming in June. Facebook followed up by announcing a partnership with Major League Gaming, an esports media company, in July. The next logical step is for Yahoo to launch a central destination for esports, which fits neatly with their mavens (Mobile, Video, Native Advertising, Social) strategy.

Currently, esports is fragmented across the web — reddit, game websites, live streams, twitter, closed platforms with social networks (Steam, Battle.net), etc. Having a central destination, like ESPN, can help onboard new users, retain casual fans, and educate brands and sponsors.

Esports = Tumblr 2.0?

Two years ago, Yahoo acquired Tumblr and its 300 million monthly active users for $990 million. This February, Marissa Mayer stated that the company projected $100 million in ad revenue for the site which now has 460 million monthly active users. Mayer wrote in her Tumblr acquisition post, “the combination of Tumblr+Yahoo! could grow Yahoo!’s audience by 50% to more than a billion monthly visitors, and could grow traffic by approximately 20%.”

Likewise, I believe that building a central destination for esports fans will be an audience growth play. esports could grow Yahoo’s audience by 20% (Base = one billion monthly users from the 2014 10-K, growth = 205 million esports fans based on this esports market research report). And this audience is very valuable to advertisers.

Young and Highly Engaged

The first search result for “esports” in Google is lolesports.com, the esports site for the popular online game, League of Legends. While League of Legends is just one of many games in the esports realm, it serves as a good representation of esports as a whole because it is the biggest and most popular game.

Millennials (18–34 year olds) are a coveted demographic and they are moving to digital platforms in droves. Millennial TV viewers in the US dropped 10% (~2 million) in Q4 2014. Unsurprisingly, Netflix added 4.88 million subscribers in Q1 and 3.3 million subscribers in Q2. Netflix stock jumped up 12% in after-hours trading after each earnings announcement.

This year, Millennials overtook Baby Boomers to become the largest demographic group in the US (75.3 million). Furthermore, Millennials now account for more than one-third of all US workers. With stats like that, it’s no surprise that advertisers covet this demographic.

High engagement is also important to advertisers due to the plethora of entertainment competing for the consumer’s leisure time. Time spent on platform is one metric that represents engagement.

Tumblr users are only second to Facebook users in terms of time spent on their respective platforms according to this survey. If Yahoo is impressed with the average Tumblr user spending 34.2 minutes per day on the platform, they should really be impressed with esports fan data.

The average Twitch user watches 106 minutes of content per day (triple of Tumblr). And that’s just the average user. Power users (~58%) spend more than 20 hours a week (2.8 hours per day) watching streams on on Twitch. That’s roughly the amount of time (2.8 hours per day) the average American spends on on watching TV in 2014, according to the Bureau of Labor Statistics (BLS).

The esports fan base is a younger, more engaged, and more male version of Tumblr. They are moving away from print, radio, and TV and moving to the internet and mobile. Closing the gap between advertising spend versus time spent on mobile is roughly a $25 billion dollar opportunity in the US.

Strong Growth in Mobile Advertising, Native Apps Prevent Ad Block

KPCB’s 2015 Internet Trends Report presents a strong argument for mobile advertising growth on a macro level:

• Global mobile population penetration is 73% versus 39% for internet penetration
• Mobile advertising is under-indexed relative to time spent: 8% of advertising spending versus 24% of time spent
• Mobile advertising growing at +34% Y/Y versus desktop, growing at +11% but decelerating

Micro level data tells the same story. Tumblr’s mobile app monthly users grew by 32 percent in 2014. Twitch’s mobile figures (including browser and app uniques) grew at a CAGR of 174.36% from April 2012 to July 2015. Twitch launched it’s mobile app in April 2012 with 573,566 monthly uniques and last month, that figure was up to 15,244,998, according to quantcast.

Another great thing about mobile is that native apps prevent ad blocking (for now). Ad blocking is such a big problem that according to Darren Herman, “we are three clicks away from an ‘oh shit’ moment for the web.” Since eSports fans are tech-savvy, it comes as no surprise that the gaming site category have the highest rates of ad blocking.

Content consumers “pay” for content by viewing ads. But if they block it, how can content creators make a living? Since Hank Green is causing a stir with Facebook this week, it’s timely to look at his suggested monetization model for content creators — “Just Ask” model, which is popular with eSports content creators and their fans.

By my count, sodapoppin was the seventh most popular Twitch streamer by subscriber count as of July 2015. To the left is a list of people who have donated money to him. The top person has donated over $50,000. Yup.

Here’s a video of sodapoppin receiving $7,639K from Twitch user Amhai during a stream.

Why is this happening? Because digital stars, especially those who focus on gaming content, are more influential than traditional Hollywood stars among US teens.

Top Three Influencers for US Teens are YouTube Stars Focused on Gaming Content

Variety conducted a survey on US teens in 2014 and found that ten out of the top twenty figures most influential to teens were YouTube stars. The survey was conducted again this year and the top six figures are YouTube stars (KSI, PewDiePie, VanossGaming, Nigahiga, Smosh, and Markiplier), of which the top three are focused on gaming (KSI, PewDiePie, VanossGaming).

Gaming plus comedy seems to strike an algorithmic chord with a global audience. While these influencers focus on gaming, they don’t focus on esports. Why?

To answer that question, we need to answer these first:

• What is an esports influencer?
• Should esports influencers become YouTube influencers?
• Can esports players become YouTube influencers?
• What’s the opportunity for Yahoo?

What is an esports influencer?

An esports influencer is someone who derives their followers mainly through their history of playing video games competitively. As of July 2015, only two of the top twenty Twitch streamers are active esports players (Bjergsen and Dyrus) and two are retired esports players (TheOddOne and imaqtpie).

The paucity of esports players in the top streaming list is due to the fact that pro players have to practice and compete which takes up most of their day. Ironically, the intensive demands of being a pro player sometimes results in a weird compensation model: players could make more money by purely being a streamer rather than play for a professional team.

That’s like saying Michael Jordan should just stream himself playing pickup basketball games with his friends rather than play for the Chicago Bulls.

Should esports influencers become YouTube influencers? Yes.

YouTube influencers have become mainstream and brands know how to work with them. Virtually every top YouTube influencer is represented by a multi-channel network (Fullscreen, Maker Studios, etc.) with a huge sales team. Some influencers are even getting picky about their endorsements.

Onboarding esports influencers to a central destination for esports would be critical for Yahoo. Advertisers are more likely to partner with esports influencers with the metrics and campaigns they are familiar with — YouTube influencers.

Can esports influencers become YouTube influencers? Maybe.

Most esports influencers receive some level of media training. They are aware and careful of what they say or do during streams. Media training is important as evidenced by a popular Twitch streamer being banned this week. trick2g, the eleventh most popular Twitch streamer, was banned for staging a fake swatting on himself. Swatting is the act of tricking an emergency service (usually involving the police and/or SWAT units) into dispatching an response based on the false report of an ongoing incident.

YouTube influencers have to tread a fine line between pleasing brands (“selling out”) and pleasing fans (being cool). Not every esports influencer has the desire or capability to step into the next stage. Some of them are content just streaming, saying whatever is on their minds, and getting $50,000 donations.

What’s the opportunity for Yahoo?

YouTube is going to be the dominant video sharing platform and that’s fine for Yahoo. Help esports influencers build up their audience on YouTube and then create exclusive content for Yahoo. This is an example (more) of exclusive esports content.

After all, content is king. If House of Cards or Game of Thrones was exclusively on Hulu, I would have a Hulu subscription. You would too.

Most esports influencers have a small YouTube subscriber base which is why they aren’t getting much attention from multi-channel networks. Yahoo should step in to fill that void. Once they build a sizable YouTube audience, focus on creating exclusive content and monetize that through native advertising.

What if advertising is just going to be more expensive and less scalable?

Jeffrey Rayport asserts in his article, “Is Programmatic Advertising the Future of Marketing?”, that,

“Soon, every display will be an addressable medium — that is, each will be individually targetable by device and, in many cases, down to a specific user; and interactive displays will not only deliver ad messages but also track consumer response. The result is a new era of marketing accountability, in which advertising ‘budgets’ will have turned into marketing ‘investments.’”

I hope that this isn’t going to be the only model for the future of advertising. What if advertising is just going to be more expensive and less scalable? What is wrong with that? While native advertising is less targeted, it is great for brand equity. I understand the importance of demonstrating ROI for brands and advertisers but include some brand equity valuations (albeit fuzzy) on top of CPM rates.

Humans love storytelling and the best brands tell stories. Look at this Swedish tannery’s website for example. It’s chock full of stories, information, and brand heritage. Isn’t that so much better than programmatic advertising — some ad that was specifically served to me because of my demographics or past purchases?

Let’s look at two compelling native advertising examples from this year that could serve as a model for esports content: the “StartUp” podcast’s marketing campaign with Ford and Esquire Magazine’s What I’ve Learned feature on Medium. Here’s a New York Times article on native advertising on podcasts and Esquire’s editor’s note on the collaboration with Medium.

If you click to 11:50 in this podcast, you can hear an interesting story about a Human Factors Engineer at Ford and then it directs you to go to www.ford.com/startup. What the heck is a Human Factors Engineer? That piqued my interest and I went to the link. I was interested in that story and started exploring that site because nothing was directly about buying a car. Even though I didn’t run out and buy a car from Ford, my view of Ford’s brand has definitely increased.

Similarly, my impression of Microsoft’s brand has been elevated by a notch due to the What I’ve Learned series. I’m sure Microsoft could have been more efficient if it used programmatic advertising and bid on ad exchanges to find the specific people to advertise this to for the best price, but they didn’t in this case. As a reader, I was able to consume all the content without distraction before I saw this ad.

Consider how this model could work for Microsoft Edge, their rebrand of Internet Explorer, with Yahoo’s help. The esports demographic is exactly what Edge needs — young, highly engaged, and generally early adopters of technology. This is the demographic that put IE in its grave in the first place. Microsoft could sponsor high quality esports content through native advertising to increase its overall brand equity. Since self-deprecation didn’t work, try being cool. If Microsoft is cool, that demographic would be more inclined to give its products a shot.

Currently, there is lack of a high quality content publisher in esports. Reporting is rarely critical because criticism can lead to denial of access. Long-form pieces on esports are few and far in between: the New York Times wrote a great piece in 2014 and ESPN The Magazine published an issue solely on esports this June (check out the featured article here). There is an opportunity for Yahoo to create high quality esports content through the launch of a fourteenth digital magazine, “Yahoo Esports,” or at least a new series for esports mimicking something like MLB Condensed Games.

Create great content to get users to come and build great social features to get users to stay.

Build Low-Resource Voice Chat Software, Migrate Yahoo Empire

The low-hanging fruit in social is daily fantasy sports, which has been blowing up. Last week, DraftKings announced that it received $300 million in financing. Three weeks ago, FanDuel announced a $275 million Series E round. According to their websites, DraftKings guarantees that it will pay out $1 billion this year; FanDuel guarantees $2 billion.

Will daily fantasy esports be as big? The two players in fantasy esports, Vulcun and AlphaDraft, have paid out $6 million and $5 million this year respectively, according to their websites. Yahoo already has a daily fantasy site, why not make one for esports as well?

Esports daily fantasy would just be the first step in social for Yahoo. More importantly, Yahoo should build a low-resource voice chat software (PC and mobile) and migrate the entire Yahoo empire onto it.

I thought of voice chat after reading a piece by Dan Grover on Chinese mobile app trends. Chinese mobile apps have been expanding in services (payments, food delivery, taxi services, etc.). In the US, the trend has been the opposite — single function apps. I never thought that voice chat could serve as the centerpiece of a constellation versus a messaging platform (example: messaging apps in chart below). But it does, and an example of that is the Chinese company YY.

YY started off as voice chat software for gamers in 2008 and has transformed into video-based social network. Think Twitch but with much more social features and karaoke. YY’s stickiness in voice chat is so strong that even Tencent, who owns the largest stand-alone messaging app in China, WeChat, can’t displace it. For more on WeChat, read this article.

Last month, Tencent’s subsidiary, Riot Games invested $30 million in Curse to support their eponymously named voice chat software. This could be part of Tencent’s “pan-entertainment” strategy which seeks to tie in all of their businesses into the mother-of-all constellations (PC and mobile).

Fred Wilson writes, “If you own a leading constellation, you can use your apps and your relationship with the users of those apps to promote and distribute new apps that you either build or buy.” Yahoo is one of a few companies that has a leading constellation. Building a low-resource voice chat software is a great way to attract esports fans.

Building a central destination for esports is a huge opportunity but also a risk as development resources would have to be shifted from other projects. I think that risk is well worth the potential 20% increase in an audience coveted by advertisers. Tencent and other Asian tech companies understand the growth of esports and are on it. In the West, Google and Facebook started making moves this summer and they are moving fast.

Yahoo, don’t be left behind.