"[Esports] is never going pay-per-view and it shouldn’t”. This unequivocal comment, made as recently as September 2018 in a public forum by data firm GRID’s CEO Moritz Maurer and backed by industry leaders, neatly sums up one side of the debate over the future of esports. It holds that a shift to a PPV model would damage the current, sponsorship-based revenue model of esports, with any potential boost in short-term revenue ultimately undercut by a declining viewership. But there are dissenting voices: esports commentator Paul “RedeYe” Chaloner feels a new esports revenue model is inevitable, arguing that “The bottom line in any business is to make money, and with more and more tournaments being run by large media companies or publishers, they will eventually have to answer to shareholders.”

How does esports make money?

Esports has traditionally drawn its revenue from sponsorship, media rights and advertising – according to Newzoo’s Global Esports Market report, of the USD 1.1bn esports is expected to make in 2019, nearly USD 900m will come from these three revenue sources. But with the cost of tournaments and prize money rising yearly, many organisers are looking for new ways to increase revenues. We have already seen exclusive streaming rights deals emerge, notably Twitch’s USD 90m two-year exclusivity deal with the Overwatch League. Many see esports following in the footsteps of boxing and MMA, with tournament organisers taking a shift away from free streaming of content over Twitch or YouTube to running their own events, with high-priced tickets to attend and fans buying the right to stream it on their own.

On paper, the logic behind this new business model is sound. The impressive buy-rates – and the winners’ purses on offer – for the largest MMA fights over the last few years speak volumes. The 2018 League of Legends World Championship peaked at over 200 million concurrent viewers during the finals, beating the peak viewership for several worldwide sporting events, including the Super Bowl. Even accounting for attrition that would come by pay-walling content, this viewership represents an enormous untapped revenue resource for tournament organisers.

First steps towards pay-per-view?

2019 has already seen some steps towards this new model, with Riot Games’ premium Pro-View and Twitch announcing its Subscriber Stream feature. Pro-View, which debuted at the LEC and LCS leagues this summer, lets fans switch between point of view streams for all ten players in a single League of Legends match, or view four at once via customisable split screen. It also includes advanced player statistics and highlights “big moments” on the match timeline. Twitch’s Subscriber Streams allow content creators on the site to broadcast exclusively to their fans who pay for “subscriber” status. These premium services are not intended to completely replace existing free offerings on the market, but sit as a higher level experience for fans who are willing to pay for them.

Risks and concerns

Whether these intermediate steps will be enough to convince the viewing audience to move to the PPV model is a different question. Historically, fans have shied away from paid events: MLG’s Winter Arena in 2012 was broadly successful, but many fans balked at the USD 20 price tag, while Championship Gaming Series (CGS) folded after only two seasons of regular telecasts. Admittedly, these two efforts lacked modern technological infrastructure, and there has been a massive upswing of cash in esports since then – the winner of the first series of CGS came away with USD 500,000, the winners of the 2018 League Championship took home USD 6,450,000. But history suggests that fans are not too keen on parting with their cash to view exclusive content.

There is also a potential legal issue. After the announcement of Subscriber Streams, many in the gaming community noticed that these PPV streams could be violating terms of service for some game developers. Blizzard and Valve both have clauses in their ToS which state that the monetisation of the content of their games is acceptable, provided it is in a “non-commercial” manner. Riot Games has a similar policy, with the caveat that a written licence agreement can be arranged. While these tournaments could simply play other games that do not have such restrictive terms, losing popular titles like DotA 2, Counter-Strike: Global Offensive and Overwatch could be a serious blow for any potential PPV event.

And, if MMA and boxing is a prime example of how successful PPV esports could be, it is worth highlighting an issue which has plagued them since their first broadcasts: piracy. Two of the biggest fights in recent boxing history, Tyson Fury v Deontay Wilder last December and Anthony Joshua v Andy Ruiz Jr in June of this year, saw over ten million people illegally watch the fight. In the UK, nearly a million watched the fight on YouTube, compared to 562,000 legitimate streams – representing lost revenue of nearly GBP 20m for Sky Sports Box Office. It seems inevitable that esports, which draws a more tech-savvy audience on the whole than traditional sports, would face the same concerns. A 2017 BT Sport-commissioned report found that more than half of 18 to 24-year olds, the key esports demographic, have illegally streamed a live event, with a third admitting they do it regularly.

While it is tempting to look at the numbers who tune into esports today and simply multiply this number by the price of a ticket, any group looking to build a PPV scene in esports will have to seriously think about how to deal with piracy. If, like boxing, they see two-thirds of the audience not paying a penny for the event, is PPV really more profitable than the current sponsor-led model?

Premium add-ons

In theory the PPV model looks enticing to esports tournament organisers, but it seems likely that the switch would ultimately damage the industry. Esports revenue continues to grow year-on-year, and the current advertisement model and fan base have proven to be resistant to change, particularly in relation to the consumption of esports content. When you add in potential legal battles with game publishers over whether their content can be monetised in this way, not to mention the risk of the fan base simply accessing the material illegally, it looks more and more likely that esports PPV will not emerge as the dominant revenue source in the market. However, response to the premium Pro View was substantially more positive than expected, with many fans on social media asking for a similar view to be introduced for other esports mainstays. Could premium add-ons, then, be the next step in esports monetisation?