THE ESPORTS ISSUE - CHINA SPORTS DIGITAL, DATA & INSIGHTS A REPORT BY - Mailman Group

 
THE ESPORTS ISSUE - CHINA SPORTS DIGITAL, DATA & INSIGHTS A REPORT BY - Mailman Group
CHINA SPORTS DIGITAL,
DATA & INSIGHTS
A REPORT BY

THE
ESPORTS ISSUE
NO03     NOV 2017
THE ESPORTS ISSUE - CHINA SPORTS DIGITAL, DATA & INSIGHTS A REPORT BY - Mailman Group
INTRODUCTION
Esports have never been bigger,     some way off being accepted by          global consumer spending on
hotter or more talked about.        the IOC, any discussion shows           esports in 2017, totallying $51.2
Over the last 10 years, esports     how seriously the rise of esports       billion, of which China makes up
have moved out from the             is being taken.                         more than half. One major
shadows and into the                                                        reason that esports has
mainstream with bigger              Much of the recent interest in          exploded to such a level in
competitions, more participants,    esports stems from the                  China is due to large levels of
and increased viewership            demographic which it attracts. A        investment. A lot of focus has
around the world. Since the late    recent study by Limelight               been drawn to the support that
2000s, they have also become        Networks found that men aged            the government has provided to
increasingly professional, with     between 18-25 in the US prefer          both football and basketball in
modern esports players making       watching esports over both              recent years, however, esports
huge sums from tournaments,         traditional sports and TV shows.        received more investment than
team membership, and                This resonance with the younger         both sports last year.
developing areas such as            generation of consumer is
live streaming.                     something that every sport can          With so many clubs,
                                    ill afford not to take an interest in   organisations and brands now
Esports are now attracting such     when considering their future.          looking to China with increasing
huge levels of investment and                                               focus, esports may offer a
interest that many of the world’s   China has long been the                 golden opportunity to engage
foremost sporting organisations     global leader in esports. It has        with huge numbers of fans who
are looking to esports to           a vast online population, with          are unlikely to take note of
increase their fan bases. These     the most recent estimates               traditional sports. This report will
include the NFL, Formula 1, Paris   putting the figure at over 800          offer a background to the
Saint Germain, the NBA and the      million people. Of this                 esports landscape in China, why
NCAA. There has also been a lot     population, over 25% played and         it’s so popular and who the fans
of talk about esports joining the   watched esports last year,              are. It will also give insight into
Olympics following their            putting the current active              how brands are approaching
inclusion in the 2022 Asian         Chinese esports market                  esports, where the industry is
games which will be held in         around 220 million people.              headed and what opportunities
Hangzhou, China. Although still                                             there are for sporting
                                    Asia will account for 47% of            organisations.

© MAILMAN
THE ESPORTS ISSUE - CHINA SPORTS DIGITAL, DATA & INSIGHTS A REPORT BY - Mailman Group
ESPORTS IN CHINA
Examining Esports                                  Who are the
Fans in China                                      Esports Fans?

                                                                                                79.8%
            A combination of factors are

                                                           81% male
            responsible for vast popularity
            of esports in China. At the core,                                                                    of
            is the lack of traditional sports                                            esports fans choose to watch
            culture in China. Whilst this is                                             tournaments at home
            now developing, it was not

                                                                                                33%
            widely present during the
            upbringing of most Chinese
                                                                                                           of audiences
                                                           19% female
            millennials, the demographic
            that is now driving the growth of                                            have watched tournaments at
            esports. This was due to a lack                                              internet cafés
            of facilities, access to sports
            broadcasting and very little
            interest in getting people into
            recreational sport from Beijing.                                              50%
                                                   60%
            These aspects, coupled with the
            huge numbers of only children,         of the esports audience is under 25
            made playing video games a                                                   More than 50% of esports fans
            more common pastime than                                                     watch tournaments for more than
            participating in traditional sports.                                         an hour at a time

            As the younger generations of                       Penetration               21.5%
            Chinese citizens have become                      rate of esports
            one of the main focusses of the                   in China’s 2nd
            world, their established passion                    tier cities is           21.5% of audiences watch for more
            for esports has come to the                          now 48%                 than 2 hours
            forefront. This has been aided
            by advances in technology

                                                                                                  50%
            making it easier, cheaper, more
            engaging and more social than
            ever to play esports.
                                                                                          of all users share their
                                                                                          experience with friends after
                                                                                          watching games.

                                                                                                  40%
                                                     34.1% of esports fans would
                                                     buy a ticket to attend
                                                     esports events
                                                                                          40% of audiences watch
© MAILMAN
                                                   Source: Penguin Intelligence Report    games alone.
                                                   on Trends of China’s Esports
                                                   Viewership 2017
China’s
Favourite Games

ONLINE BATTLES                                            FIRST PERSON SHOOTERS
No.         Game                         China Operator   No.     Game                       China Operator

1.          League of Legends (LoL)      Tencent
                                                          1.      Counter-Strike:
                                                                  Global Offensive (CS:GO)   Perfect World

2.          DOTA2                        Perfect World
                                                          2.      World of Tanks             Kongzhong

3.          Heroes of the Storm (HotS)   NetEase
                                                          3.      CrossFire                  Tencent

4.          King of Glory                Tencent

5.          Starcraft                    NetEase

CARD COLLECTION                                           TRADITIONAL SPORTS
No.         Game                         China Operator   No.     Game                       China Operator

1.          Hearthstone                  NetEase
                                                          1.      FIFA Online 3              Tencent

© MAILMAN
Where Do Fans
Watch Esports?
POPULAR DIGITAL               VIEWERSHIP ACROSS PLATFORMS                KPL (KING PRO LEAGUE)
PLATFORMS                     IN ONE GAME SEASON                         TOURNAMENT

Live streaming
                                                5 billion +
                                                                                                 2016
                                                                             560 million         total viewership in a
                                                                                                 22-day session

                                                700 million +
Douyu          Huya

                                                                                                 2017
Panda          NetEase CC
                                                                             2.1 billion         total viewership for the

                                                130 million                                      spring session

Shihou                        Source: Tencent                            Source: Tencent

TV                            2016 CUMULATIVE VIEWERSHIP

GTV            Game Fengyun
                                                   480 million +

Guangdong TV                     460 million +

                                                           160 million

© MAILMAN                     Source: Twitch
WHAT’S HAPPENING IN CHINA?
Sponsorship

WHY BRANDS SHOULD PAY                 Esports has its origins in social   gain a great deal from esports
ATTENTION TO ESPORTS                  media, however, over the past 5     sponsorship, is home food
                                      years it has broken out beyond      delivery. As mentioned, esports

1
                                      online video and into major live    events attract huge crowds both
     Esports is a new growing         events. In 2016, the League of      in the venue and tuning into live
     market platform that allows      Legends World Championship          broadcasts and streams. For
     savvy marketers to reach         Semifinals were held at Madison     many fans, glued to their phones
     new audiences. Marketers         Square Garden, NY, which was        and computers, ordering food
     must be aware of trends and      followed by its finals which were   will be a very popular option,
     how untraditional platforms      hosted by the Staples Center in     much as it is during traditional
     work and create specific         Los Angeles. Each event             sporting events. However, a
     content around them.             attracted more than 20,000 fans     brand’s association to a game

2
                                      and another 43 million viewers      goes deeper than this, in that
     Most of the esports              online. This year, the Worlds       fans are likely to also want to
     community are millennials        have returned to China, where       order food when playing
     and generation Z. Engaging       the finals will be held at the      for themselves.
     with these audiences and         91,000 seater Bird’s Nest
     building relationships will be   Stadium following a series of       Brands that do not have a direct
     key to success over the next     other events held around China.     link to Chinese esports must
     10 years.                                                            play a longer game. The aim

3
                                      Esports is an example of a          must be to become synonymous
     Gamers and esports events        developing platform where           with a game, thereby building a
     have a lot in common with        marketers can reach their           much deeper relationship with
     premier athletes and             most-coveted audience:              the esports community. Jeep, for
     traditional sports. High         millennials and generation Z.       example, are a major sponsor of
     recognition of esports will      However, the current landscape      the 2017 LPL tournament. Given
     give sponsors huge               in China is far from a              the demographics of Chinese
     brand awareness.                 sponsorship paradise.               esports audiences, they cannot

4
                                      The biggest opportunities,          be expecting to make many
     There is still risk. Esports     clearly, are afforded to tech and   direct sales of their Renegade
     is a very new area to            gaming companies that provide       SUV as a result of the
     marketers. Brands that have      products related to esports. To     partnership. However, their
     already engaged with the         this end, the majority of the big   presence has begun to build
     esports community are still      events in China are run by          recognition with all who interact
     trying to figure out how         companies like Tencent and are      with this year’s tournament,
     to leverage attention            designed as a powerful              many of whom will soon become
     from esports.                    marketing tool for their games.     members of China’s ever
                                                                          growing middle class and, as
                                      One sector that does not have a     such, Jeep’s target market
© MAILMAN                             direct link to esports, but can     in China.
Licensing

WHY LICENSING MATTERS                Very similar to sports licensing,    FOR EXAMPLE:
                                     esports licensing is a contractual

1
                                     agreement by which an esports        Merchant Bank - LoL Credit Cards      Sprite - Honor of Kings edition drink
     Esports licensing has the       club or organisation gives a
     potential to generate huge      company a license to use its
     levels of income for clubs,     name, logo, image or trademark
     events and operators. It also   on the company’s products.
     offers another way to grow      Licensing an esports product
     awareness of esports and        gives your business an
     engage with fans.               opportunity to reach a market of

2
                                     sports fans that could be local,
     Anything can be licensed:       national or global, depending on
     from conventional               the game or team and its
     merchandise all the way to      popularity.
     traditional Chinese
     mooncakes, ever more            Licensing provides an important      Tencent - Häagen-Dazs LoL Mooncakes   vivo - Honor of Kings edition smartphone
     creative licensing ideas and    source of revenue for both
     crossover products can, and     esports bodies and licensees.
     are, being produced.            Teams or organisations gain a

3
                                     new revenue stream and the
     There is an estimated $1        licensor receives a royalty for
     billion of counterfeit          each licensed product that they
     products produced each          sell. Meanwhile teams or
     year. This huge figure shows    organisations use esports
     both the appetite for           licensing to build relationships
     branded goods and a major       with their supporters.
     challenge to be considered
     when looking to establish
     licensing deals.

© MAILMAN
Investment

The esports industry is             investors have chosen them          to the lack of regulations           in. An ownership stake in one
estimated to be worth $696          over traditional sporting arenas.   involved compared to venue           ‘sub-team’, as opposed to the
million and shows no sign of                                            ownership. This trend is taking      umbrella entity, represents a way
slowing. Indeed, research firm      The current rate of development     off in all esports markets and       into the market without the risk
Newzoo have predicted it to         of Chinese esports facilities is    several major sports teams have      and expense associated with
surpass $1.5 billion by 2020 as     well ahead of the global trend.     already invested. PSG, Schalke       owning an entire team.
brand investment doubles.           There are relatively few esports    ’04, Lyon, and Manchester City       Sub-teams will also reap the
                                    specific venues outside of          all own professional esports         benefits of the parent
According to Lanxiong Sports,       China. As such, the likelihood of   teams and both the NBA               organisation’s global success
between Jan 2016 and Feb            many of the major tournaments       and NFL are in the process           and so this sort of investment
2017, esports received RMB 5.3      choosing China as a regular host    of creating leagues for              can offer a major upside.
billion investment in China,        is further increased, thereby       their games.                         Money making in Chinese
making it the most heavily          solidifying China’s status as                                            esports is also distinctive
invested-in sport over that         industry leaders.                                                        because of the
period. Tencent, OFC, IDG                                                                                    teams-within-a-team structure.
Capital and Sequoia Capital                                             WHAT YOU NEED TO KNOW                Team organisation is premised
have all been very active in                                            ABOUT CHINESE ESPORTS                on different games that,
esports investment. Two areas                                                                                unsurprisingly, have different
of esports investment in China       ¥ 5.3 BILLION - ESPORTS            TEAMS                                revenue generation potential.
that are particularly popular are    ¥ 886 MILLION - FITNESS            Esports teams can be organised
facility construction and team                                                                               The more popular and
ownership.                           ¥ 665 MILLION - FOOTBALL           as domestic companies,               well-established competitive
                                     ¥ 36 MILLION - MMA                 international companies, or as a     scenes, such as LoL, CS:GO, and
China has a shortage of sporting                                        group of individuals playing         Dota 2, offer bigger prize pay
                                     ¥ 32 MILLION - CYCLING             together under a common team
facilities, which has been                                                                                   outs, wider marketing appeal
recognised by the government.        Source: Lanxiong                   name. Many esports “teams”           and far more substantial,
Part of their approach to fixing                                        actually consist of multiple teams   dedicated fan bases. These
this has been to encourage                                              that play different games,           games also typically involve
investment by offering incentives                                       compete in different                 players who benefit from
such as tax breaks, discounted                                          tournaments and as a result,         individual success on streaming
leases and capital to companies     Investment into esports teams       enjoy varied revenue                 platforms, such as Twitch. The
looking to build new facilities.    has also become a popular           streams – all whilst coexisting      esports organisation model can
Esports arenas are very much        route to involvement in the         under a single banner.               offer investors built-in
included in this scheme and         market. This is an opportunity                                           diversification, with teams
given their trajectory, many        that is open to a much wider        Depending on a team’s                competing on multiple
                                    range of potential investors due    structure, there are different       platforms, an investor’s bet is
                                                                        ways in which investors can buy      automatically hedged.

© MAILMAN
WHAT WILL HAPPEN NEXT?
More facilities,                        TV
more events                             broadcasting
China is well positioned to             Esports gaming grew up with
become the leading nation to            online media. Now TV networks
host esports events. With the           will try to catch up. ESPN and
construction of more esports            BBC were the first to start airing
specific venues it is                   esports tournaments, and Turner
strengthening its hand. It is also      has created its own CS:GO
a very safe place to host events        tournament to air on TBS and its
which, in the current climate, is a     other channels. In China
more attractive prospect than           Guangdong TV started to
ever. Gaming giants Tencent are         broadcast esports games in
clearly aware of this opportunity       August. For years streaming was
and are going all in to solidify        the only way to follow esports
themselves as the defacto               remotely, now the numbers are
leaders in esports events by            big enough to attract the big
creating an entire town                 network television organisation.
dedicated to esports. It is of little
wonder that Tencent is willing to
invest so heavily in the industry.
Over 47% of Tencent's 2016

                                        Esports for social
revenue came from games, with
Tencent's gaming unit posting
revenues of nearly 70.84 billion
yuan ($10.2 billion) last year,
dwarfing that of rival NetEase,
which posted revenues of 28
billion yuan ($4 billion).
                                        People now play and watch
                                        esports on mobile anytime and
                                        anywhere. Mobile esports will
                                        drive growth through to the
                                        proliferation of smartphones,
                                        enabling games to be played
                                        and streamed on-the-go.
                                        Meanwhile, the reason people
                                        play esports is changing.
                                        Originally, people played for fun,
                                        however, there is an increasing
                                        community surrounding esports
                                        that will continue to provide the
© MAILMAN                               backbone to it’s growth.
OTHER WAYS TO GET INVOLVED
IN ESPORTS
Engaging KOLs                         Playing Esports                     Social Campaigns

Key Opinion Leader marketing is       Sports stars and icons engaging     All sports fans enjoy
a well established method of          with the interests and traditions   competition, however, many
engaging fans in China. The           of Chinese fans is generally very   traditional physical challenges
development and integration of        popular. This tactic is widely      are both hard to implement and
esports into social media and         used by football teams,             will only appeal to a small
live streaming make leading           particularly when touring China,    number of fans. As such, esports
players very well positioned to       and has included activities such    can offer a perfect way to
command large fan bases.              as trying out traditional martial   engage much larger numbers of
Ensuring an authentic                 arts to making popular Chinese      fans, both established and new.
connection between KOL and            foods. In the case of expanding     Esports spans numerous interest
project is crucial to success and     into esports fan bases,             demographics thereby opening
in the case of esports, it is often   producing content around            up well designed campaign to
easy. For example,                    famous players playing League       larger audiences. One example
mini-tournaments are easy to          of Legends online would both        of how to leverage this interest
arrange and stream to large           give fans a chance to play          would be to run a campaign to
audiences whilst also inviting a      against their favourite players     find an account’s best gamer.
small number of well selected         and also allow clubs and players    This can be easily publicised
fans to attend live. Four             show their appreciation for their   and the addition of competition
mid-level esports players and a       fan. Best practise for such         among the fans will boost
handful of fans of both the brand     events would be to partner with     engagement. Campaigns such
and the players/game can make         a network or game operator in       as this, although focussed on
for a very engaging entrance          China so as to ensure               current fans, are likely to create
into the esports space and will       maximum exposure and a well         buzz in esports communities and
feel authentic to the wider fans.     produced broadcast.                 so will begin to introduce brand
                                                                          recognition among new
                                                                          audiences too.

© MAILMAN
WHAT’S NEXT?
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© MAILMAN
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