Abstract

Since the beginning of the century, a new form of competition has surfaced through the use of computer technology and global communications. Over these recent years the competitive play of video games, dubbed as electronic sports, or simply esports, has grown from a pastime to a fully professional activity. From all over the world, hundreds of players battle each other in virtual arenas for a chance to reach the millionaire prize pools the top competitions offer, and for the amusement of the millions of the fans who follow them. Not to mention, for a chance to play in some of the biggest sports venues, as these competitions have started to step out of the digital realm to fill live stadiums. Still, despite the fact that esports have grown so much in the latest years, not much is known about the teams that compose this universe. So, this research aimed to bring clarity to how electronic sports teams work, by using business models as conceptual tools to display the different elements of the team’s businesses. To do so, sports and esports managers were interviewed in order to better understand how they run their teams. Starting with traditional sports, identifying the essential details that teams need to operate and building their business models, and then moving to esports, where business models were not only identified, but also improved. Additionally, three generic business models were designed for teams with different objectives and in different organizational levels. Moreover, this researched also identified common elements between sports and esports, as well as the main catalysts behind the esports success.

 

 

                                                        

 

 

1.Introduction

1.1Background

With the advancements in computer technology, video gaming has risen. The entertainment sector has experienced increased revenues (Ascari and Gagnepain, 2006). While millions of individuals are playing computer games as amusement, few outstanding high skilled players are focused on making a living of the competitive play of videogames, also referred to as electronic sports. This new profession has been backed by the development of basic professional infrastructure whose features are somewhat similar to that of traditional ports and entertainment such as leagues, tournaments fans teams and team owners (Burk, 2013). In Southeast Asia, there is a growing trend of eSports including Indonesia, Vietnam, Thailand, Philippines, Singapore, Malaysia, Korea and China. The highest statistics for eSports have been seen for China and Korea (Baden-Fuller and Morgan, 2010). These games have been gluing millions of fans on-to their screens to follow the broadcasts of the games, but they have also moved thousands of spectators into stadiums, just to watch professional gamers battle themselves for prize pools that range, in the highest tiered events, from the thousands to the millions of dollars. This recent boom in the eSports market has many times been compared to the traditional sports market, even in terms of viewership performance and most recently in terms of prizes awarded (Cheung and Huang, 2011). The fact that there is a modality, adding on the to the extensive and rigorous training that the players need in the top competitive levels, plus the whole entertainment setting, including casters, commentators, hosts and top-notch productions, make the comparison and the parallels between these digital sports and the live ones seem rather apparent.

Just like in traditional sports, these pro gamers generally belong to teams, which are responsible for their training, sponsorships, travel and lodging when playing abroad, and many even lodge their players in their alleged team-houses. Noticeably, there is a solid and well-defined structure behind these professional video gamers just like there is one for the sports athletes (Demil, and Lecocq 2010) .So, in light of the recent growth of the esports and their huge movement towards stadiums, this dissertation is focused on studying the business models on which the professional teams run on and to ascertain how effective they really are when aiming to sustain the team and its entire infrastructure, as well as understanding the extent of how eSports can really be compared to the traditional sports, especially on the business end.

Just like sports, there are different kinds of games that can be played. These games will be mentioned multiple times throughout this research and thus, it is important to know them, or at least to know what they are and how they are played. StarCraft 2 is a real time strategy game, a game played from an aerial viewpoint of the map and a free roaming camera and usually involving military warfare. In StarCraft, players have to pick between three different races and start on equal terms, with just one main building and a few workers. Then, players proceed into building their armies and fight the opposing forces, until one player has no buildings left or is forced to surrender. StarCraft 2 is currently at its second expansion; StarCraft 2 is developed by Blizzard Entertainment. Its predecessor, StarCraft, Brood War, is considered by many to be the first esport title and was the most popular game during the esports boom in China (Khan, Ahmed and Abid, 2016).

League of Legends is a multiplayer online battle arena, or MOBA, a genre that mixes real time strategy and role playing games, where a team of five players battles another team, for the dominance of an arena or map. Teams spawn on the bottom and top side of the map, the blue side and red side respectively, and each player picks a champion, a character with four different skills, and then proceeds to dominate the opposing team (Kiendl, 2007). The map is usually composed by three lanes, commonly referred to as top, mid and bottom lane, where small armies spawn and move towards the enemy base. Along the way, players earn gold and experience by killing enemy units and enemy champions. Through experience players unlock new skills for their champions, while gold allows them to buy items for their champions, getting stronger as the game progresses. The objective is to destroy the enemy’s Nexus, which is placed in the centre of their base. The first team to do so, wins the match. League of Legends is a free-to-play game developed by Riot Games. Dota 2 is also a MOBA and is very similar to League of Legends. Players also spawn on a map with two bases, again bottom and top bases, with armies spawning alongside the three lanes, top, mid and bottom lane once again (King, 2009) Dota 2 is different from League of Legends on the champions, called heroes in Dota 2, and on the game mechanics. In Dota 2 for example, the player is allowed to kill his own units and allies in order to deny the opponent the gold and experience rewarded for their kills. Champions/heroes, items, neutral units and map secondary objectives are also different in Dota 2, making the game very different, despite being very similar in style. Finally, the objective is the same, to kill the enemy base main structure, called Ancient in Dota 2. Dota 2 is a free-to-play game developed by Valve Corporation.

These two games are very much alike, as they are both heavily inspired in the Blizzard’s WarCraft 3 popular custom map ‘Defense of the Ancients’, or simply, DotA. Counter-Strike: Global Offensive, on the other hand, is a tactical First Person Shooter. The game is played through the eyes of a counter-terrorist, or terrorist, character, who proceeds to defend, or destroy depending on the faction, the objective, or simply to eliminate the opposing team. The game is usually played in teams of five elements, in matches of thirty rounds. Players earn golds when achieving objectives or killing enemies, which they then use to buy weapons or tactical gear (Mac, 2014). This game is played in different maps or arenas, and players always rotate factions, as some maps may favor the terrorist or the counter-terrorist side. The game is developed by Valve Corporation and is based on the popular Counter-Strike custom modification for the game Half-Life. Hearthstone is a free-to-play digital collectible card game developed by Blizzard Entertainment. In this game, players build decks from cards earned or bought through either gold (in-game currency), or real money transactions, and face each other, playing their cards in turn based rounds. Each player choses a class and a deck, with decks being dependent on the class they chose and start with thirty hit points and a starting hand. Each turn gives the players a new card and allows players to play their cards. The first player to inflict enough damage to lower the opposing player’s hit points to, or below, zero, wins the game. Of these games, League of Legends and Hearthstone are clearly the most popular in China (Lariviere, 2014). League of Legends has a solid advantage against its competitors, especially against Dota 2, with both being games in the same genre. On the other hand, StarCraft 2 has suffered a huge loss in the player base, especially considering the game sold millions of copies, around 4.5 million just in 2010. However, this is a representation of the game’s ranked players, which are those who are active on the multiplayer ladders, which in turn may be different from those playing the single player campaign, as StarCraft 2 allows players to just play the storyline or against the artificial intelligence. There are, of course, more esports titles than those mentioned in this section, such as, for example, Smite, Heroes of Newerth, Quake Live, Call of Duty, Heroes of the Storm, World of Tanks, amongst others. However, these five comprehend very important and popular titles, as well represent three very important different game genres played in China. Additionally, it’s important to understand the while not always mixed together with eSports, sports simulators, such as Fifa, Pro Evolution Soccer, Gran Turismo, Forza and others, are, or can be, regarded as esports, depending of their ability to support competition between the players. This thesis studies the prospects and organisation of eSports in China (Lewis, 2014). This section is followed by problem statement, research objectives, key questions, methodology and scope of the Study. The structure of the dissertation is given in the end.

1.2Problem Statement

At a time esports are getting attention from the mass media (Gaudiosi, 2015) and esports players are even started to be recognised as professional athletes (Tassi, 2013), there is still little research done on esports and even less is known about the organisations that compose this universe, especially the teams. So, in the light of current events, this research is focused on bridging the gap and bringing clarity and deep knowledge about esports and the teams that battle each other in these competitions. Also, there isn’t much research done in esports, and even video gaming research is usually conducted towards the more psychological aspects that video gaming inflicts upon the players and audience. However, knowing that the esports market is a successful niche in the video gaming market, and acknowledging its fast growth, as well as the competitive sports nature of this scene and the economic values it moves, its academic importance cannot be indiscriminate. Thus, it is imperative to understand how esports teams work, how they are managed and how they deal with the challenges that are brought upon them. Especially since it is possible to compare them with traditional sports teams, and select what can be applied to them, by identifying the elements that esports and traditional sports have in common.

1.3Aims and Objectives

At a time esports are getting attention from the mass media (Gaudiosi, 2015) and esports players are even started to be recognised as professional athletes (Tassi, 2013), there is still little research done on esports and even less is known about the organisations that compose this universe, especially the teams. So, in the light of current events, this research aims to bring clarity and deep knowledge about esports and the teams that battle each other in these competitions. Also, there isn’t much research done in electronic sports, and even video gaming research is usually conducted towards the more psychological aspects that video gaming inflicts upon the players. However, knowing that the esports market is a successful niche in the video gaming market, and acknowledging its fast growth, as well as the competitive sports nature of this scene and the economic values it moves, its academic importance cannot be indiscriminate. Thus, it is imperative to understand how esports teams work, how they are managed and how they deal with the challenges that are brought upon them. Especially since it is possible to compare them with traditional sports teams, and select what can be applied to them, by identifying the elements that esports and traditional sports have in common. This research is focused on the managerial part and the challenges that professional organisations face, in order to survive in such a competitive and fast paced environment.  

The objectives are to:

• To identify and understand the main reasons behind the success of electronic sports as an entertainment;
• To identify the business models currently being used by professional esports teams;
• To design new business models for the studied teams, as well as any other professional team;
• To draw the parallels between traditional sports business’ models and the esports’ ones;

1.4Research Question

Even though it is possible to find a lot of information about eSports and professional eSports teams them in their websites, eSports news and events, there are still many questions about them that remain unanswered, especially on how the teams work and operate. This leads to many questions that revolve around eSports:

i. Why have electronic sports been so successful lately?

Electronic sports exist at least since 1999, yet only in the recent years it has registered a huge growth worldwide. It is important to understand this phenomenon and its main catalyst. It would also be interesting to predict how the eSports market will grow in the following years.

ii. What makes them interesting to watch?

Electronic sports didn’t grow only in practice and competitions, but they also grew in terms of spectatorship, either in viewers through broadcasting transmissions or crowds in local events. Thus, it would be meaningful to understand why esports have been so captivating and what really drives the fans into these competitions.

iii. Can they be considered sports?

There has been some discussion on whether electronic sports are, or aren’t, in fact a sport (Tassi, 2014). While many argue that either it is or it isn’t, it’s irrelevant, it would still be meaningful to see if esports can or cannot be considered sports in light of the academic definitions.

iv. What do they have in common with traditional sports?

While they may be as competitive as traditional sports, electronic sports lack many of their fellow counter-parts infrastructures or supports. So, in order to understand what could be replicated from one source to another, an understanding of what they share in common is necessary.

v. How do professional teams operate?

Probably the most important question asked and one of the most important motivations for this research. Understanding how these teams work is paramount to help them improve their operations and achieve sustainability.

vi. What is their business model?

Likewise, business models are possibly the best framework to assist with the previous question. The way they describe businesses will indubitably prove advantageous in understanding how these teams operate.

vii. Can it be improved?

Finally, one of the most important questions and the last propeller of this research, to ascertain if the business models currently being used are optimal or if they can be further improved to better assist the organisations that run on them.

In order to answer as much as possible and to keep the focus for this research, a main question was formulated:

What business models are the professional electronic sports teams currently using?

However, there are still the other questions that hang around that this research will also approach in order to achieve a better understanding of the universe in which these teams operate. Thus, in order to answer all these questions, while retaining a special focus on the question formulated above, research has been conducted.

1.5Methodology

In order to answer the research questions and to reach the objectives proposed, a thorough research is necessary (Kaplan, 2005). Thus, this research started with a thorough selection of international literature in business models and electronic sports. The research then followed a methodology of qualitative nature, seeking to gather insights from different actors present in the electronic sports industry, with a special focus on those who run and manage the teams, through exploratory in-depth guided interviews. Through this method, many different opinions about the theme were collected amongst the different players in this niche market. Their experience and acumen were fundamental in understanding how these organisations work and where they are headed to. The methodology is approached in further detail in chapter five of this research.

Being a research of exploratory nature, as it aims to investigate a little-understood phenomenon and even tries to identify important elements of the same phenomenon (Marshall & Rossman, 1999), this is also a qualitative research, as it relies on human understandings, in this particular case the participants insights and experience, to gather information on the topic at hand. Qualitative research allows to withdraw a lot more information regarding a phenomenon, having fewer participants giving in a bigger depth of detail, even though that will compromise generalisation for the entire population (Jackson et al., 2007). With results of qualitative research being rather descriptive than predictive, as it uses in-depth studies of narrowed groups of participants to guide and support the construction of hypotheses, it can be said that qualitative research is designed to reveal a target audience’s range of behaviour and the perceptions that drive it with reference to specific topics or issues. The chosen data collection method to gather information relevant for this study was the interview, more specifically, in this particular case, the in-depth interview.

1.6Scope and limitations

These insights are not only valuable for the academia, but they might prove to be indispensable for both new and already established teams, especially at a time electronic sports are not only getting the interest and attention of major brands (Lariviere, 2014), but also, and more importantly, are in such an important stage of development that they are already perceived as a second level Olympic sport and could even be a part of the Olympic Games in a near future (Gaudiosi, 2015). Therefore, digging deep into the topic would be a significant contribution in the area of eSports. Since China and Korea are the two countries which are gaining recognition in eSports. This study discusses the current performance and future prospects of eSports in the mainland China.  

1.7Contribution to knowledge

This research adds to the readers’ knowledge of the eSports industry and how teams conduct their operations and manage their economics. Additional teams would be required for a full and broader comprehension of how they conduct their businesses as well as a deeper thought on the market. Moreover, game developers can provide a different and more widen angle on their view of the scene, especially for the games they developed. This research has the ability to determine many important factors that teams take in consideration, as well as how they are indeed, quite similar to traditional sports. It also can determine the managers’ perceptions of the industry as well as ideas and plans for the future which will boost eSports business.  Furthermore, this research presents a good setting of the current eSports situation. Finally, the business models designed in this thesis can be adopted and altered by any eSports team, leaving a contribution for those who wish to start their own competitive organisations and for those who wish to improve the management of their already established teams. This dissertation lays a foundation for research in the field of academia. For the people in academia, it would be compelling not just to get more insights from other traditional sports, but also more electronic sports teams studied, with their differences compared and explained.

1.8Structure of Dissertation

This dissertation is structured into five chapters, with multiple sections in each chapter, always starting with an introduction where the chapter and its objectives are explained and always finishing with a short summary and conclusion about what was discussed.

1. The first chapter, the introduction, describes this research, its context, objectives, research problems and the methodology on which this research was conducted.

2)  The second chapter reviews academic literature on business models and explains what they are, why they are important and what the Business Model Canvas is. It also reviews how business models work in the sports field and the usefulness of strategic sponsorships. It starts with the background and definition for electronic sports and heads into its viewership, its establishment as a successful niche market and a connection between esports and traditional sports. This chapter contextualises this research by depicting the global and current situation of electronic sports, distinguishing some cultural differences and identifying the most important industry players including China as well as naming some of the most important teams in the scene.

3)  The third chapter approaches the methodology on which this research was conducted, starting by the study description and heading into the business model canvas and how it was used. It also describes the participants in this research and interview guides used to gather information. It wraps up with the data analysis and a short text on research ethics.

4)  The fourth chapter heads into the business aspect in traditional sports. It starts by identifying and justifying the sports analysed in this research heading into their business models and closing with the participants’ opinion towards electronic sports and what electronic sports can learn from these business models. It focuses on the electronic sports and their management. It starts by identifying the researched teams, followed by an analysis of their operations and construction of their business model for China. In then moves into reviewing their business models based on the information gathered from the previous chapter and heading into what the interviewees thoughts of the industry were.

5)  The final chapter of this research draws the final conclusions. It starts with the first impressions regarding the overall research, moving on to the designing of business models for eSports teams in different situations. It then heads to an approach to each of the objectives defined on this chapter, followed by the limitations faced and suggestions for future researches. Finally, it wraps up with the final regards on the research.

 

 

2.Literature Review

2.1.Introduction

The second chapter reviews academic literature on business models and explains what they are, why they are important and what the Business Model Canvas is. It also reviews how business models work in the sports field and the usefulness of strategic sponsorships. It starts with the background and definition for electronic sports and heads into its viewership, its establishment as a successful niche market and a connection between esports and traditional sports. This chapter contextualises this research by depicting the global and current situation of electronic sports, distinguishing some cultural differences and identifying the most important industry players including China as well as naming some of the most important teams in the scene.

2.2.E-Sports

E-sports is termed as competitive gaming which is mostly done over internet. Players play game in opposed to other players in e-sports and in video games to identify that which one is the best. Based on the game which is played, competitors play fames either in teams or individually (Taylor, 2012) There are various genres of game in which the most common ones are e-sports and they give more profit to the players. Recently, MOBA is the genre which owns the most of the price money. Some of the instances of games are League of Legends and Dota 2. The developers of these games are Riot and Valve and both of them own tournaments which gives the most cost pools of the e-sports. Starcraft is the instance game for RTS which has get much fame in Korea and the domination of scene is done by them. Some of the examples of such games are Counter Strike: Call of duty series, Global offensive and some past iterations (Burk, 2013). Valve is also responsible for the development of Counter Strike but for this game none of the tournament has been held. To bet is a general part or sports and it is also responsible for many e-sports though money can be used some other way like in betting for Valves games as those own tradable in game products which can be utilised in order to place bets on websites owned by third party (Witkowski, 2012).

2.3.History of E-Sports

The formation of formal e-sports was spontaneous, which was resulted because of the competitions among video gamers state that 1980s are the time period of organisation of e-sports. Some of the arcade games such as Centipede (1981), Asteroids (1979) and PacMan (1980) were the most favourite ones in local arcades. During this time period, games were dependent on procedures of score tracking for measuring the success. Single players also worked in the games in opposed to the computerised machine. After failure or success, players used to get scores dependent on the performance (Raney and Bryant, 2009). The design of game mainly resulted into intrapersonal competition; every player had competition in order to improve their past scores. Because of the reason that arcades supported the social factor of gaming, players were acknowledged of how their peers performed. Numeric scores were mostly beneficial for comparing performance of different players at various times, one of the major milestones permitting for video game competition (Konzack, 2015).

In accordance with Lindsey (2016) equipped with the procedure of score tracking, the design of Asteroids was made for Atari’s 2600 home console in the year 1981. With approach to game players started to put more effort and time for improving their skills. The enhanced wish to compete others resulted into the development of tournaments, where different gamers gathered in order to compete at local venues for even more scores. In year 1981, the same year of the release of games for consoles at-home, more than 2,000 people were gathered for the international tournament. Atari then sponsored the event and gave Deluxe Asteroids Computer Console to winner, a product having value of 2,000.

One of the other milestones of e-sports was acquired in the year 1980 through development of the U.S. National Video Game Team which consisted of best players of home console games and famous arcade. Home-based games became more popular in 1980s and resulted into new decade for the development of e-sports. As estimated by Sitrangi (2016) the home then still proceeded solidifying the place being the centre of enjoyment. New technology allowed techniques of video games for creating household software and hardware that revealed the quality of the famous arcade games. Publisher of video game published the Street Fighter II in 1991. The series of Street Fighter was mainly to target the elements of game design to cater a competitive play, a technique that can be improved and employed upon in other video games with their progress towards the titles of e-sports that are present today.

Street Fighter was such type of video game in which players had completion directly with the other players through different controllers over the console. Two of the players made participation on fixed screen in mixed martial arts. The series did the popularity of the genre of fighting game, in which winner drains the health of loser through landing different moves of attack. The popularity of interpersonal competition through genre played the most significant role in the progress of culture of video games. For participation in sports, social interaction is the major motive (Liboriussen and Martin, 2016).

It has been stated by Jacobs (2014) the e-sports industry of 1990s is based mainly on regional and local competitions such as for Street Fighter II. The competition was based on the niche body of customers who got motivation for competing in opposed to other and for improving. The quality and popularity of events were not that much high for supporting something that made a sport league. It was till 1990s, by following the popularity of the computer, the modern sample of the e-sports system started to get into form.

The 1990s look over the modernisation of system of e-sports. Using software for computers, developers made such games which cater mainly to the competition of e-sports. Now technology permits different simulations involving different players and 3D surrounding, advancements that permit the development of new games genres, like the first-person shooter. An FPS locates the player at the position of an armed fighter. The camera is responsible for the maintenance of first person objective basically only depicting the player arms and weapons. First-person shooters gave a battle-field such as simulation for player teams, a video style acquiring that dominate the landscape of American e-sports. Console controllers own more of the buttons and allow more possible result and more control. Computers which are used now-a-days own a keyboard and mouse with different possibilities of input. Hardware and software capabilities have approached to a level where video games can build up quality simulation of real events (Taylor, 2015).

In late 1990s the competition between different video gamers got benefits mainly from the internet in developed countries such as United States. The player needs to have game console, an internet access and computer in order to link different players from various positions for playing in one arena. In the past, the software used to provide opponents to the players in the form of bots or artificial intelligence. Mainly, games provided support to the capability of multi-player such as Street Fighter that allows gamer to play in opposed to others. After the development of internet, gamers can now make participation in different matches mainly from different locations between human gamers. The entrepreneur Angel Monez founded Cyberathlete Professional League or CPL in year 1997. In the past phases, the league arranged different tournaments for famous FPS titles such as Counterstrike, Quake in 1997 throughout the 2000s (Hibberd et al, 2014). Counterstrike, a famous FPS such as the series of Quake, got much prosperity being the platform for competition in CPL. The CPL World Championship featured Counterstrike in 2001, with cost of $150,000. Despite of the large cost pools, competition was not enough able to break the sport barrier. Tournaments were mainly like the regional and local competitions that were present in the 1990s, although the quality of competition and software has enhanced. In 2007, CPL managed events have reduced in number and in 2010 the organisation has achieved Wolong Ventures PTE LTD, an organisation targeting the digital media and entertainment. Though the CPL was not enough able to sustain, it had showed that through sponsors, viewers, gamers and tournaments with popularity and substantial prize pools were also possible. The history of progress of e-sports belongs to the 1980s. 21^st century has given a chance for more competitions, however there is less legitimate event organisers in industry which are enough able to sustain the competition and mass participation (Witkowski, 2012).

2.4.Business Models and their importance

Nowadays, the terms ‘business model’ and ‘strategy’ are amongst the most used terms in business (Magretta, 2002). According to the research in the past, business models can be useful as they provide means to describe businesses and serve as recipes for creative managers. They are rewarding in that they make it possible to see how they embody multiple and mediating roles (Baden-Fuller & Morgan, 2010). For example, these models can be used to demonstrate a technology, as they give instructions and steps on how to build something, so that the final result comes out correct (Baden-Fuller & Morgan, 2010). Business models can be established as paragon models that can be duplicated, or even presented as summary descriptions of business organisations: clear descriptions identical to scale models. But, they can also work as models in the scientific sense as they can be researched as models that backup for a class of things. While business model innovation may not seem bold, without it there would be no rewards for pioneering individuals or organisations. The best business model is rarely evident early on, so managers who are well positioned and able to learn and adjust are more likely to thrive. Provisional business models must be appraised against the ongoing state of the business environment, as well as against how it might grow, and chances are greater if managers have a deep comprehension of that environment. So, in a way, designing exceptional business models is practically like an ‘art’ (Teece, 2010).  Business models change focus from the resources to their management. Two different approaches to the business model concept can be recognised. The static approach and the transformational one. The first approach considers the business model as the utmost blueprint which renders important functions enabling description and classification. In this perspective, the business model integrates a way of building value in a business. In the second approach, the business model is regarded as theory or a mean to address transformation and focus in innovation, either in the organisation or the business model itself. New business models have been perceived as radical innovations with the power to revolutionise entire industries. However, in this approach, a viable business model is seldom found immediately and involves continued improvements to secure an internal consistency and/or to readjust to its environment (Demil & Lecocq, 2010).

2.5.Business Model Canvas

It is a tool for designing and visualising business models and motivates people to contemplate over their business models, which make the communicability much easier and standardised. It was devised to facilitate business model design and to drive business men into thinking differently about their business models. It structures the business model into a canvas with nine building blocks, in which the main four key elements of the business model dimensions are covered: value proposition, relationship between organisation and its partners, what the firm is doing, blocks that create a unique business model (Osterwalder & Pigneur, 2010). Business Model Canvas has value proposition building block at its centre.  The value proposition is delievered to the targeted customer segment, the channels building block comes to action. Through this block, organisations communicate and reach their customer segment raising awareness among customer. Linking the value proposition with the customer segment is the customer relationship building block. These relationships depict the way an organisation connects and interacts with its customers. The objective is to improve this relationship and as a result, to sell more products or services. Since an organisation usually doesn’t possess all the necessary resources in-house for generating the value proposition itself, networking has a relevant position in the Business Model Canvas in the key partner’s building block. When compared to other business model frameworks, the Business Model Canvas offers many strengths and limitations. The main advantages include its visual representation, making it easier to design, adapt and communicate business models, the coverage of the various elements of a business model, with nine very specific building blocks and the centrality of the value proposition. Nonetheless, it is not without several limitations, which include the ignorance of external factors, such as competition, the fact that human interaction is not considered, which causes value proposition’s incomplete identification, and the missing strategic purposes implying that profit generation are focused (Coes, 2014).

2.6.Traditional Sports & eSports

While video game related studies have recently started to become more accepted by scholars, very little scientific research has been done towards its competitive play. Competitive videogames, most commonly referred to as esports, date back to the late nineties, with its first official use by the Euro gamer Mat Bettington when he first compared esports to the traditional sports in 1999 (Wagner, 2006).The emergence of esports can be explained as a follow-up from the communication based society of today. Whereas in Europe and the US, competitive video game play is linked with the first shooting games that supported network play, namely ‘Doom’ and ‘Quake’, circa 1996, China had a different preference, more inclined towards ‘Massively Multiplayer Online Role Playing Games’ (MMORPG) and ‘Real Time Strategy Games’ (RTS), particularly ‘Lineage’ and ‘StarCraft’. The latter being especially well suited for competitive play and being undisputedly dominant for the following years (Wagner, 2006). In fact, with the rapid growth of the Chinese broadband infrastructure, it was possible to create television stations that focused only on broadcasting computer gaming events. This resulted with a gaming culture where StarCraft players were able to gain cult-like status similar to professional athletes competing in major sports leagues (Wagner, 2006).

2.7.Traditional Sports Business

Evaluated in 2011 at €450 billion, the sports industry of today goes way beyond the playfield, with a wide range of different participants, all the way from the food and memorabilia stands at the stadiums to the sponsorships and media rights (Zygband et al., 2011). Inside traditional sports, teams and individual athletes can be considered as profit maximising organisations that serve a demand for their products in their respective sports markets. Additionally, this generates demand on the production factors, namely the players. However, the value of a player is usually tied to his skill, but while skill and capacity and be measured, their actual value cannot. So, player prices are typically estimated and based on negotiations. In the end, teams often pay more than what a player is worth, as there are no guarantees that a traded player will keep the same performance at a different team (Hein, 2012).

2.8.Current eSports Situation

With the videogame industry revenue reaching over 76 billion US dollars, surpassing both the movie and music industry, it’s clear that videogames are an important element of entertainment in nowadays society. This study however, focus on a niche of the videogame market, the competitive play of videogames. These so called “eSports” have been gaining ground in the last years especially the last four years, mainly thanks to the boom in media streaming through the Internet. And, as if the rise in game play wasn’t enough, the rise in media consumption of both competitive and casual play of videogames, entitled as eSports, allowed the eSports market to reach more that 76 million people in 2013 and to distribute over $25 million to its players. With this rise, eSports are now an industry of its own, “living and breathing” inside the videogame industry. With professional players and professional teams, the competitiveness as risen with its rewards, and teams now compete in many different ways between themselves, not only inside the games, but outside, for resources, stability, improved infrastructures, players and fan bases. Esports can be classified as a global phenomenon, no place still compares to South Korea, and its capital Seoul, considered by many as the “Mecca” of eSports. It is there that eSports have grown the most and have the deepest impact, even having attracted big companies as sponsors, such as Samsung, SK Telecom and Korea Telecom, three of the largest Korean companies

Most non-Korean eSports organisations can’t reach the same level of sponsorships that KeSPA organisations can and thus have built their business models around sponsorships, streaming and tournament exposure (Zacny, 2014). Although almost all videogames do not support professional competition, there are still a small variety of games that do. Most popular titles, as seen in chapter 1, include League of Legends, Dota 2, Counter-Strike: Global Offensive, StarCraft 2 and Hearthstone, amongst others. These games are not only different titles but different genres as it was explained, for example, League of Legends and Dota 2 are ‘Multiplayer Online Battle Arenas’ while Counter-Strike: Global Offensive is a ‘First Person Shooter’ and StarCraft is a ‘Real Time Strategy Game’, and even run on different business models, with some of them being free-to-play and others being the traditional pay-to-play. These differences, combined with cultural differences from different countries, have a strong impact in a game, or eSports title, popularity. For example, in the Asian market, South Korea and China are famous for the advanced level of its StarCraft players who reigned supreme at the 2014 WCS Global Finals, where only the top sixteen players worldwide can qualify, based on their WCS points. China, on the other hand, is much stronger in its Dota 2 teams, even having two Chinese teams taking the first and second place at The International 2014. Both however, seem to be in equal footing in League of Legends teams, where both are top contenders. In the 2014 World Championship of League of Legends, Korean team Samsung Galaxy White took out the Chinese team Star Horn Royal Club by 3-1. In the meantime, while both the United States and Europe are also trying to compete in the League of Legends game, they both seem to be strongly inclined towards ‘First Person Shooters’, but whereas the North Americans choose Call of Duty as their most popular title, the Europeans go for Counter-Strike: Global Offensive. This can be noted when looking at further detail to the competitions. In the 2014 Call of Duty World Championship, the top four teams were all American whereas the top four in the ESL One Katowice 2015, were all European teams. It’s interesting to note, that even though running on something as global as the Internet, eSports, much as traditional sports, are still subject to the regional and cultural differences of their fans.

2.9.Industry Players

Evidently, the most important players in the esports industry are the game developing companies, since without them, there would be no games to start with. Valve Corporation, despite not publicly publishing its revenues, the company’ equity is estimated to be around $2.5 billion (Wingfield, 2012). Founded in 1996, despite being a very successful game publisher that started with the game Half-Life, Valve also owns Steam, the biggest digital distribution platform for PC games, with an astounding, estimated 75% market share (Edwards, 2013). On the other hand, Activision-Blizzard was a result of the merge that took place in 2008, between Activision and Vivendi Games a videogame publisher and holding company for Blizzard Entertainment and Sierra Entertainment. As for Electronic Arts, it was founded in 1982 and is one of the largest gaming companies, just like Activision-Blizzard. Additionally, just like Valve Corporation, the company has its own digital distribution platform named Origin. Finally, Riot Games was founded in 2006, being fairly young when compared to the previous companies. Also, the company has only one game at the moment, the popular League of Legends, released in 2009. In early 2011, Riot Games was bought by Tencent Holdings Ltd., one of the biggest Chinese Internet companies (Edwards, 2011). However, much unlike traditional sports, where usually there is an international federation regulating the sports practice, esports are usually controlled and regulated by the companies that develop the games. For example, the League of Legends World Championship series is owned and operated by Riot Games, just as the StarCraft 2 World Championship Series is owned by Blizzard Entertainment, a subsidiary of Activision-Blizzard, even though it is operated in different countries by both the  esports League, owned by Turtle Entertainment, and the Korean eSports Association. The International eSports Federation, or IeSF, is another organisation much like KeSPA that tries to focus more on an international aspect, having many different countries collaborating with them. The United Kingdom eSports Association, or KeSA, is another example of esports associations, but this time for the United Kingdom. It also tried to be a governing body for esports and it is a member of the IeSF. Another fine example, albeit a bit different, of esports associations is the Texas e-Sports Association, or TeSPA, that focuses on competitive gaming for students in the state of Texas in the United States. Finally, beyond the game producing companies and the external regulating associations or federations, there are companies that focus on organising competitions and events and creating esports spectacles for the fans, such as Turtle Entertainment and the Major League Gaming. These companies organise different types of events from online tournaments to events taking place in convention centers, such as the ‘Intel Extreme Masters’, to stadiums, such as the ‘ESL One’ and aim to profit from the selling of tickets to the fans and publicity to the sponsors.

2.10.Broadcasting & Live Streaming

Broadcasting in eSports happens mostly through Internet live streaming. Although there are many different live streaming services available online such as YouTube or Daily Motion, there are currently just a few dedicated only to eSports. These services are available for both players and organisations for free, and it allows them not only to broadcast their games, events, or any other content through their live streaming services, but it also offers tools to monetise the streamed content. Looking at table 8 it is easy to notice a large discrepancy and favouritism towards the Twitch service. Twitch.tv was born from a streaming service originally called Justin.tv. Originally intended as a general streaming service, Justin.tv saw its popularity grow between the video gaming community, more noticeably the eSports one. It wouldn’t take long for the managers of Justin.tv to launch a dedicated service just for the eSports fans, and thus, Twitch.tv was born. By mid-2013, Twitch had already achieved an average of 40 million viewers per month, and its popularity completely eclipsed that of Justin.tv who would be eventually shut down in August 2014. More than helping broadcast content throughout the Internet for all the fans to enjoy, Twitch also allowed players and organisations to monetise on the content they create, giving in not only an extra financial help, but delivering that help at a time the economic recession had hit the gaming industry (Popper, 2013; Morris, 2013). Moreover, small details such as the Twitch chat, a much criticised part of the service, where spectators can communicate with others via text messages, are also an integral part of eSports, providing instant feedback and helping communities bond, much like sports fans can talk with each other’s at sports bars (Mitchell, 2015). Twitch’s success didn’t go unnoticed by the giant corporations and one of the most interesting rumours was the acquisition of Twitch by Google. However, after a long term of negotiations, it would be Amazon that would end up buying the eSports streaming service for $970 million (Mac, 2014). More than just investors and buyers, Twitch’s incredible growth and success brought new players into the dedicated eSports live streaming services. Azubu, Hitbox and D!ngIT, are relatively new streaming services that provide a similar service to Twitch, who are betting on earning their share of the eSports market. Esports also have a strong presence in TV channels in South Korea, with cable channels dedicated to eSports, such as On GameNet and SPOTV Games. Nonetheless, eSports are starting to get the attention from Western broadcasters as well. ESPN partnered up with Valve Corporation to stream the Dota 2 tournament, The International 2014, through their online service ESPN 3 (Newhouse, 2014), and was so pleased with the numbers that are considering to increase their investment (Lewis, 2014). Furthermore, Swedish national television channel, SVT, has also started to broadcast eSports, namely the Swedish event Dreamhack (Mitchell, 2014).

In China, the streaming phenomenon hasn’t gone unnoticed either, where the four Chinese streaming platforms, ZhanQi, Douyu, YY, and Tencent Gaming are spending a considerable amount signing in star players to increase their services’ popularity. This is having a strong impact in players, such as the former professional League of Legends player Han-Dong ‘CaoMe’ Wei, who signed a contract with ZhanQi TV, where 90 hours of streaming per month are compensated with five million RMB, approximately over $800,000. Streaming attracts players not just because of its highly attractive rewards, but also because it is a lot less stressful for the players (Moser & Kulasingham, 2014). The LR matrix [See Appendix 1] gives a clear reflection of the studies conducted earlier.

2.11.Summary & Conclusion

Putting it simply, a business model is a very versatile conceptual model of a business. It is more universal, and yet, more practical than a strategy. Business models can be tested, adopted, evolved and replicable, provided all the conditions are there which in turn make it more complex to protect from competing business. However, business models that secure key resources can guarantee that they aren’t replicable and thus secure competitive advantage. Hence the importance of competitive strategy, and means to obtain it, such as sponsorships, in this particular case, in the field of sports. And, when setup correctly, securely and sustainably, business models have the potential to revolutionise entire industries. Due to the proliferation and vast advancement of computer technology and global communications, namely the Internet, a new form of competition was born from the computer gaming entertainment. Though culturally born from different      modalities, eSports are now a global factor, featuring different titles where players compete with each other, either in teams or individually, through the use of information technologies, professionally and for the amusement of thousands of spectators. However, despite the fact that they can be very similar to traditional sports in the competitive sense, their differences put serious questions into what direction they should take for the future. Running for more than 101 million viewers and giving away more than 35 million USD in prize money in 2014, the eSports market niche has made itself aware in more than many forms and its attractiveness brings new industry players and new teams every year. Focusing on the teams, we know that despite the rewards being substantially high, they still face many different and hard challenges, in order to achieve sustainability. Thus, this research will be conducted in order to explain how these teams currently operate and how they can achieve that sustainability, and share it with the academic world.

 

 

3.3. Methodology

3.1 Introduction

As the academic setting gets more and more demanding, research methodology is important as it ensures research quality and not only it explains how the research was conducted, but it also justifies the decisions taken by the researcher. Thus, this chapter addresses the methodological approaches used when running this research and justifies every step taken during the process. It details the research perspective, types of data and its collection methods as well as the research participants and starts by the study description, moving to the business model canvas into the participant description. From there, it approaches the guided interviews used and it finishes with a brief wrap on research ethics and a short conclusion on the methodology this researched was based upon.

3.2 Research Methodologies Available

The research strategies and methodologies collectively influence research approach which might be quantitative, qualitative, or mixed. A quantitative approach is enables the researcher to develop knowledge (i.e., cause and effect thinking, reduction to specific variables and hypotheses and questions, use of observation and measurement, and the test of theories), employs inquiry strategies such as experiments and surveys, and data collection on predetermined instruments yielding statistical data. Alternatively, a qualitative approach often makes knowledge claims influenced by constructivist perspectives (different meanings of individual experiences, meanings socially and historically constructed with development of a theory) or advocacy/participatory perspectives (political, issue-oriented, collaborative) or both. The researcher collects open-ended, emerging data with the primary intent of developing themes from the data. Finally, in a mixed methods approach the researcher uses base knowledge claims on practical grounds (consequence-oriented, problem-centred, and pluralistic). It employs inquiry strategies which comprises of data collection sequentially or simultaneously to fully understand research issues. The collection of data involves gathering numeric and text information such that final database represents quantitative and qualitative information.

3.3 Choice of Research Methodology and rationale for selection

As stated earlier, this paper uses a qualitative approach. I am interested in getting familiar with the eSports activities of various organisations and their engagement in these activities. While adopting qualitative research methods, I was able to ask the concerned audience for their reflections and perspectives about the eSports organising process. The qualitative research design enabled me step into the learning zone and observe the events occurring in real world. I was able to uncover much evidence regarding eSports during this process. Since a very little has been written about eSports, I wanted to create and document a resource for present and future researcher who can learn from research identities introduced in this thesis.

3.4 Research Method Adopted

3.4.1. Step 1: Development of Qualitative Research Instruments

With the previous discussion in mind, the subsequent tools will be set as ideal tools within this thesis.

3.4.1.1. Semi-Structured interviews

Qualitative methods in research include in-depth interviews, group discussions, diary and journal exercises and in-context observations. They can be conducted in person, via telephone, video conferencing and the Internet. The chosen data collection method to gather information relevant for this study was the interview, more specifically, in this particular case, the in-depth interview. In depth interviewing is currently generally used in education research and is universally considered an important tool in data extraction, notably in qualitative research (Berry, 1999). The chosen approach for the interviews, was the general interview guide approach, also known as guided interview, where, as described by Patton (1987), a basic checklist is prepared to ensure that all important topics are approached while the interviewer still has the freedom to explore, probe and ask questions that the researcher considers interesting or relevant.

These interviews were conducted in two different settings, either face-to-face interviews, or telephone interviews via the Internet service, Skype. These two interview techniques offer many different advantages and disadvantages, but the latter is a mandatory tool in order to be able to interview participants from different countries. Face-to-face interviews are a good technique in many different ways, as they have no delay between the conversations, allow the interviewee to be more spontaneous, may be held in a good environment, can be easily recorded and then transcribed, which is much more accurate than taking notes. It is also the only technique to give in social cues, which may provide a lot of extra information from the interviewee behaviour, but this factor is non-important due to the research question in focus. Nonetheless, face-to face interviews also have their disadvantages, the first being the requirement that both the interviewer and the interviewee be at the same location. Also, with recorded interviews transcriptions notes may be skipped, but notes are still an important part of an interview, as they assist the interviewer in many ways, such as making sure all questions are answered and as a backup in case of a recorder malfunction. Additionally, even though transcriptions are more accurate than taking notes, transcriptions are very time consuming. Finally, face-to-face interviews may incur in many travel expenses, and may result in extra time loss, not only with the travelling, but also if the interviewee happens to be unavailable (Opdenakker, 2006). Indubitably, the biggest problem of face-to-face interviews is the requirement for both participants to be in the same place. However, this problem can be solved by another interview technique, the telephone interviews. Telephone interviews, or in this particular research case, Skype interviews, take advantage of the asynchronous communication of place, giving the interviewer extended access to participants, thus allowing interviews with participants on remote distances and foreign countries. They grant the interviewer a wide geographical access, and allow access to hard to reach populations, such as shift workers or participants with disabilities, closed sites, such as hospitals or military installations, and dangerous or political sensitive locations. Telephone interviews also give room for the interviewee to be more spontaneous and less deliberate in the answers and they can also be recorded, just like face-to-face interviews. On the other hand, telephone interviews give no social cues except for voice cues, which are still perceivable. This however, as mentioned before, shouldn’t be a problem do to the nature and objectives of this research. Still, telephone interviews still have a few more disadvantages, such as the lack of interview environment and the fact that these interviews will still be transcribed, and, again as mentioned before, transcription is a heavily time consuming activity (Opdenakker, 2006).

While face-to-face interviews are the one that should be favoured, and will be when possible, it should be expected that most interviews happen via telephone, as most participants will be in remote locations, thus making telephone interview the favourite method by the researcher. Important to note, that both these interview techniques, require a lot of concentration on the questions that need to be asked by the interviewer, in order to maintain the proper direction and the focus on the objectives. Thus, in order to assist the interviews and to provide guidance, as well as serve as the basic checklist for the guided interview, a script has been written for each type of interview conducted.

Since this research aims to study how electronic sports teams work and to draw its parallels with their counter-parts in traditional sports, two different interviews were prepared for two different types of participants: sports managers and eSports managers.

Consequently, two different interview scripts were written, all interviews followed these scripts. Finally, the interviews were being recorded, then transcribed and analysed with special focus into the answers regarding the business models, in order to build them.

3.4.1.2. Business Model Canvas

The Business Model Canvas is a strategic management tool to establish new business models or detail already existing ones. It’s a pre-formatted visual map holding nine blocks, or elements, describing an organisation’s key partners, activities and resources, plus value propositions, channels, cost structure, revenue streams, as well as costumer segments and relationships. This research however, will not focus on all elements of the BMC, but only on a few, namely the revenue streams and cost structure, thus securing the whole financial aspect of the team; key resources, key partners, key activities and channels, approaching the complete infrastructure as well as the channels to reach the customers. The other aspects of the BMC, the value proposition, customer relationship and customer segments, won’t be studied in depth, as they should be similar to all the teams. Keeping all these aspects in mind, the researcher has drafted the relevant question in the interview guide (Appendix 2 and 3) in order to have a clear understanding on the cost structure, key sources, channels and key activities of eSports teams.

Figure 3.1: The Business Model Canvas Source – Hewitt (2015)

So, in order to draw a sustainable business model for an esports team, this research will focus on identifying:

• Cost structure – expenses the team needs to hold in order to successfully operate;
• Revenue streams – how the team generates income from the customer segments, usually sponsors and fans;
• Channels – how the team will deliver its value proposition, as well as its content or products, to the different customer segments;
• Key resources – resources mandatory to create value for the customers, in the sports team case, usually to achieve success in the competitions in participates for the fans, or to increase visibility for the sponsors;
• Key partners – relationships with other organisations that may optimise team operations and facilitate sustainability, as well as other complementary business alliances;
• Key activities – the most important activities the team needs to operate in order to execute and achieve its value proposition, usually to achieve success in the competitions it participates;

While the value propositions, customer relationships and customer segments weren’t given much attention in this research, based on the interviews with sports managers and the similarities between the sports, the figure below identifies the most common of these fields and will be considered as default for the upcoming business models.

Easy enough to understand, either teams or professional athletes that run solo, such as tennis players, all deal with two customer segments, the fans and the sponsors. Unless they lack sponsorship at all, but usually top competitive players and teams all deal with sponsorships. Also, they all strive to earn the devotion of their fans and to keep their trust. Finally, their value propositions all revolve towards entertaining their fans, into keeping and growing their passion for the sport and to provide high quality matches for them to watch. All business models in this research were designed using the BMFiddle online tool.

3.4.2. Step 2: Piloting

Tejlingen and Hundly (2001) explained a pilot study in two different ways, it can either be various trial runs carried out to make sure that everything is well perceived during the interview, or it might be to fully understand the research feasibility. In context with this research, pilot studies were carried out for ensuring quality data collection and avoiding any misunderstand related with the questions. The pilot interview was completed by fellow students at University of Lancashire. The pilot of the semi-structured interviews performed well, and almost all questions were well perceived and understood by the participants. However, the interview guide was morphed into a simple one and few questions had been deleted.

3.4.3. Step 3: Choice of Sample

The interview scripts were written aiming to interview two different types of participants: traditional sports participants and esports participants. Traditional sports participants were people responsible for the management of sports teams. Likewise, esports participants were also team managers, but for electronic sports teams.  The unit of analysis is these individuals who organise these sports. The have been chosen as these companies have a track record of being actively involved in organising the games worldwide and contributing to the growth of eSports. Before all interviews, the following information regarding the participant was recorded:

• Profession;
• Organisation;
• Age;
• Experience (years in office);
• Academic background;

Table 3.1: identifies the six participants interviewed for this research.

Organisation	Type of participants
AbouaAboua	Traditional sports (Paragliding)
SC Braga Kickboxing	Traditional sports (Kickboxing)
New York Red Bulls	Traditional Sports (Football)
LGD Gaming	ESports (Dota 2)
OMG	ESports (StarCraft 2; League of Legends)
New Bee	ESports (Hearthstone)

 

3.4.4. Step 4: Data Collection and Recording

As stated previously, since this research aims to draw the lines both sports and eSports teams have in common, two different interview guides, or scripts, have been written. One to interview sports managers and another to interview eSports managers. To gather data on how traditional sports teams, work and elaborate their business models, as well as how they conduct their operations in general, an interview script was elaborated. Table 3.2 shows the objectives of the interview, as well as the topics covered, while the Appendix 2 and 3 shows the full guide used for these interviews.

Table 3.2: Traditional Sports Participants Interview Guide by Research Objectives

Objectives	Topics
To identify and understand the main reasons behind the success of electronic sports as an entertainment;	Esports awareness; Esports opinion; Reasons for esports’ success; Esports future; Opinion on esports being software and relationships with game developers and governing bodies;
To identify the business models currently being used by professional teams;	Team goals; Team’s expenses? Team’s revenue streams? Team’s communication channels; Team’s resources; Key activities; Key partners;
To design new business models for the studied teams, as well as any professional team;	Use of business models; Business model changes; Suggestions for eSports teams business operations
To draw the parallels between traditional sports business’ models and the eSports’ ones;	Common elements between sports and eSports; Opinion on eSports being considered sports; eSports comparison and relation with sports;

 

Additionally, to gather data on how professional electronic teams work and elaborate their business models, as well as to grasp a full comprehension on how they are managed and what their current situation is, an interview was elaborated. While very similar, this interview guide has a few differences when compared with the previous one.

Table 3.3 shows the objectives of the interview and the topics covered, while the Appendix 2 and 3 presents the full guide used for these interviews.

Table 3.3: ESports Participants Interview Guide by Research Objectives

Objectives	Topics
To identify and understand the main reasons behind the success of electronic sports as an entertainment;	Reasons for eSports’ success; ESports future; Factors that should be changed; Current local eSports scene; Opinion on eSports being software and relationships with game developers and governing bodies;
To identify the business models currently being used by professional teams;	Team goals; Team’s expenses? Team’s revenue streams? Team’s communication channels; Team’s resources; Key activities; Key partners;
To design new business models for the studied teams, as well as any professional team;	Use of business models; Business model changes; Sports business model adoptions; Suggestions for eSports teams business operations;
To draw the parallels between traditional sports business’ models and the esports’ ones;	Common elements between sports and eSports; Opinion on eSports being considered sports; Sports perceived as familiar with eSports; ESports comparison and relation with sports;

 

Additionally, and as mentioned previously, taking notes during an interview is also important. Thus, an interview sheet was prepared, in order to facilitate the process of taking notes of particularly relevant information during the interviews.

3.4.5. Step 5: Data Analysis

The present research requires specific result, hence, thematic analysis has been conducted. Thematic analysis goes through the content as well as looks for patterns already predefined as themes. Moreover it uses a technique called coding, which identifies the explicit and implicit contents of the raw data and analyses it (Boyatzis 1998). The thematic analysis gives businesses actionable insight as well as value measurements and performance measurements. It enables the researcher to have insights into the future based upon its themes, thus making it highly applicable in this dissertation (Stubbs 2013).

3.5 Credibility, Reliability and Validity

Different measurements are used while evaluating the goodness of the collected data. The most popular ones are reliability and validity, which collectively lead to the research credibility (Bashir et al. 2008). Joppe (2000) define reliability as the extent of accuracy of the representation of the total population being studied. Reliability is checked when conducting quantitative as well qualitative research, and is mostly based upon numbers (Bashir et al. 2008). Validity is defined as the measure of truthfulness of research findings (Joppe 2000). To further explain the reliability and credibility Patton’s (2001) formulated three questions which ensure credibility of the research, shown in table 3.4.

Table 3.4: what have been done to increase the credibility based upon Patton’s (2001) questions

Patton’s (2001) questions	What can be done to ensure credibility
What methods and techniques were used for ensuring accuracy, validity and integrity of the findings?	Extensive literature review Critically evaluating project conduct
What has the researcher done for adding value to research in terms of qualification and experience?	A vast experience of the eSport community considering the viewpoint of consumer. Working Experience from within the gaming community
What assumptions undergrad the study?	That eSports has witnessed undergoing consumption growth. That there are different trends in the eSport events conducted since it first started in 1980

 

Patton’s (2001) three questions show that the collected data show signs of credibility.

3.6 Summary

In short, due to the exploratory nature of this research, the qualitative research method was deemed more appropriate, as this research aims to understand how professional electronic sports teams are managed and why are they managed in such way, as well as to design improvements in their business models that lead to an increased sustainability these teams. To gather data to support this research, in-depth interview was the selected method, with face-to-face and telephone (via Internet) interviews were the chosen techniques. With two different interview guides for two different kind of participants, the data gather was ideal and provided the necessary insight to reach the right conclusions in this research.

 

 

4.Analysis and Investigation

4.1       Introduction  

Before diving into the analysis and discussions, this chapter takes a look at some sports and the way their teams conduct their business. This allows a broader perspective in general sports management. This chapter firsts explain the traditional sports considered for this research and the teams selected as study objects. It then moves to analyse how these organisations conduct their operations and build their business models base on that information

4.2       Details of the Participants/Organisations/Case Studies   

During the conduction of this research, three different traditional sports and eSports were studied. Three organisations/ teams were studied for each game the details of which are given below:

i. New York Red Bulls

The New York Red Bulls (NYRB) are an American professional football team from Harrison, New Jersey. The team was originally founded in 1995 as the New York/New Jersey Metro Stars and was bought by Red Bull GmbH in 2006. The team competes in the Eastern Conference of the Major League Soccer (MLS), and it’s one of the ten charter clubs of the MLS, being present since the beginning of the League. Being an American football team, the New York Red Bulls can present a lot of interest for this research, as not only are they a football team, but they are one on a sports market where football isn’t the main sport, unlike the European market, which leads to a series of difficulties that the team has to deal, which presents valuable insights. Football, also known as soccer, is the world’s most popular sport, being played in more than 250 million players in over 200 countries. While football needs no introduction, its 150 years of existence has given the sport a lot of attention and research. And, since this research aims to bring some knowledge of traditional sports to electronic sports, football was always an obvious choice of a sport to analyse. From a managerial point of view, football allows many possibilities. Not only in terms of staff requirements, as football also needs to deal with athletes practice, team mind set, player transfers, infrastructure maintenance – mainly the stadium, marketing options, communication, gear, and much more, thus being an optimal source of information in general sport management. To understand the general management of football, or soccer, the choice landed in the New York Red Bulls.

ii. SC Braga Kickboxing

Originally born from a mix of martial arts, Kickboxing is a stand-up combat sport based, as it name suggests, in kicking and punching. Kickboxing may also provide interesting insights as a sport, as it is also an individual sport where players tend to practice in teams. Additionally, players are also heavily reliant on their reactions speed and their ability to maintain their focus during fights, similar in a way to eSports athletes. Furthermore, kickboxing deals with two problems that also affect electronic sports, such as the product placement on players, and the fact that both are looked upon with some negativity due to their connection with violence. Additionally, the modality is running for acceptance in the Olympic Committee, being somewhat similar to eSports.

iii. AbouaAboua

AbouaAboua, holds their practice in different locations away from their headquarters, with practice sessions starting at a ‘take off’ place and finish at the ‘landing’ zone. Paragliding can be an interesting sport to study, when basing a research for electronic sports, as it is an individual sport that is practice inside of a team. Also, it’s a sport with a lot of theory that needs learning behind and relies heavily on decision making. Furthermore, it’s a niche sport, much like eSports. Paragliding is a free flight recreational activity and competitive adventure sport, with the use of paragliders, rectangular parachutes with direction controllers. In this particular case, the studied team, to explain how paragliding teams work and how they are managed, AbouaAboua team, was interviewed”. The AbouaAboua team, besides their sporting objectives, also work towards improving the popularity and security of their sport. For that, respondents consider their headquarters to be of high importance, alongside their takeoff and landing spots, spread out across the north of Portugal. Besides the basic infrastructure required to run their headquarters, the team takes care of their athlete’s entry fees for paragliding competitions, as well as the expenses involved in their traveling.

To understand how electronic sports teams conduct their operations, three teams were studied.

iv. OMG

OMG is an esports organisation popular in Asian market. Originally. it was founded in the end of 2012. While the team is most popular in the Asian market, their recent performance in League of Legends and StarCraft 2 has brought the team to the global spotlight. Their League of Legends squad has shown a lot of progress, taking first place in the Intel Extreme Masters Season IX in China where the team qualified for the Intel Extreme Masters World Championship where they would finish in 3rd/4th place, and finishing the 2015 LMS Spring Round Robin in first place which was followed by a second place in the playoffs. This, just in early 2015 alone. As for their StarCraft 2 roster, the team comprises four Chinese players and three Koreans, of which they include the former BlizzCon and World Cyber Games champion Won Lee Sak, also known as ‘PartinG’ and the former two time Major League Gaming champion Lee Dong Nyoung, known by the alias ‘Leenock’.. OMG is a great example of how a top tier Asian esports team work and operate, and thus, the team manager was interviewed for this research.

v. LGD Gaming

LGD Gaming is an official sports non-profit organisation in China after experiencing a huge growth in players and the number of different games in which they competed. Currently, they are one of the oldest and most known organisations in electronic sports, with almost 900 associates and present in almost 20 different games. While the team can be regarded as a professional eSports team and it is much more active in their national territory thus they consider themselves more of a semi-competitive team. Also, LGD Gaming already have quite a history of attending international events even managing to reach the podium in some of them, such as the European Pro Evolution Soccer championship in 2013. Nevertheless, the team upholds a strong focus in working with young players and assisting in their evolution and growth through eSports as well as the development of online communities. LGD Gaming are an interesting team to study, as their thirteen years in active are quite an accomplishment in eSports, especially when they operate in Asia. To understand how LGD Gaming manage their operations, the team’s president was interviewed. The team plays Dota 2, third popular in China and second in Korea.

vi. New Bee

New Bee first started as a Call of Duty Modern Warfare 2 team in 2014. The team has upraised for their Hearthstone team and academy (Details of the game are given in Chap 1). While currently running as a semi-professional team, the organisation is preparing the jump into a professional organisation, as they are preparing to properly set the organisation as company, having already registered the brand. With only five years on top of them, they have risen to one of the most popular teams in China and have also started to compete in international such as the Dreamhack in 2014. While not present is as many games as LGD Gaming, for example, their fan base dimension is almost the same. This team represents a fine case of a new upcoming eSports team trying to establish themselves in a competitive market such as eSports, with the difficulties of a team operating in Asian Market. The team’s global administrator was interviewed to explain how the team works and managed to get this far, as well as what plans there have for the future.

4.3       Main Findings

Following the conducted interviews, three business models were designed for each sport. To note, that the designed business models aren’t necessarily the ones used by the organisations studied, but are built with the insights they provided.

i. New York Red Bulls

Starting with the expenses and cost structures, the most important expenses are obviously the salaries, of both players and staff, with whom the team could not run without, and the stadium, that is not only necessary for the team to play, but it is also one of the most important revenue sources that will be taken into consideration next. According to the respondent, the NYRB supports all costs of the players their academy receives. Also, the team bets on a strong and intelligent digital advertising campaign, the Internet and the social media enable to communicate and engage with the team’s fans, especially taking into consideration that New York is the most expensive media market in the United States. Finally, team travelling expenses as well as general infrastructure needs are also expenses that the team has to support financially according to the respondent. Going to the revenue streams, ticket sales, as mentioned before are the most important one, especially since the NYRB are quite popular and sell-out their tickets quite often. The channels through which the NYRB reaches their fans are quite normal for a team of their dimension, using television, radio and the Internet, but the way they communicate is where the team’s organisation really shines. Running on a considerably lower budget, when compared to other teams in the most popular sports in the US, the NYRB bet on intelligent, engaging content to entertain their fans and to lure out new potential fans who are more than willing to participate.

Respondent reported that advertising is important key activity in the NYRB alongside practicing and getting their way with the local media. Team’s communication needs to reach both the people who have come to the NYRB games before and those who are like minded to come out. To do so, the content that the team shares must be extremely high quality, with the right messaging, giving the fans what they really want as reported by the respondent during interview.

Additionally, and obviously important in every team is the sports practice. The RBNY also take this part very seriously and are always improving their system through better use of player data, medical data, and tactics, to push their athletes to be the best they can be, and through keeping the academy close to the main team and its needs in order to build a better faster, stronger team.

To run these activities, there are many needed resources, such as the physical facilities and the capital to fund these expenses. No other resource is more important than the team’s staff and everyone who works for the organisation. Additionally, to the competition, MLS teams, or football teams don’t have the same budgets or resources as other teams in most popular sports. Respondent highlighted the difficulties the NYRB staff has to deal, when for example, the marketing staff is only of three people, unlike the basketball team, New York Knicks, who have around thirty people just for the same department.  When talking about partners, Red Bull, plays a significant role. Being part of the network of the global brand, increased the resources available for the team and vastly amplified their voice. The team’s future objectives and how there are planning to grow, not only in performance, but improving their academy and increasing their ticket sales, as well as doubling the sponsorship revenues. Figure 4.1 depicts the business model used by the New York Red Bulls according to the input given by respondents at New York Red Bulls.

 

Figure 4.1: New York Red Bulls Business Model (SOURCE – AUTHOR)

ii. SCB Kickboxing

Like most sports, sponsorships are a source of income, but respondents shared that it’s not easy to get sponsors for kickboxing clubs, since its correlation with violence. However, he highlights two other sources, more important than the traditional sponsorships: tournament prizes and event ticket sales. Tournament prizes are an important source of revenue, but as it suggests it is very reliant on the performance of the athletes. However, respondents explained that when in need, the team is able to run an event for extra income. Additionally, since the team runs on a professional and semi-professional level, the team generates revenue through the monthly fee that amateurs pay in order to practice. To reach their fans, the team communicates mostly through social media, namely through Facebook. Similar to other sports, athletes usually run their own athlete pages and share their sporting actions through those pages as reported by the respondent. Additionally, the team shares information through local press, and through television on the most premium content. To reach the team’s goals, respondent considers that the most important activities are attending competitions, events and practices. These are very important as to train the mindset of the athlete to deal with pressure. Practicing is obviously absolutely crucial to improve the athletes for them to be in the best shape possible.  Respondent indicated that special workshops, from where the athletes can always get great tips, like, for example, nutrition tips to improve their eating habits. There was a special focus of respondent on the human resources, who aren’t not only key, as they are the athletes, but that the spirit team and bonding is something very special, which can make something really good happen even when many things go wrong.

As for partners, there aren’t none at the moment, with the team currently handling everything they can. Respondent aim to reach the very top of the national competition in kickboxing and to increase the team roster of professional kickboxing athletes.

As for management, respondents admit not using a business model, dealing with the management and the challenges it encounters on the fly. Following the information shared by respondents, figure 4.2 depicts the business model for the Sporting Clube de Braga kickboxing team.

 

Figure 4.2: SCB Kickboxing Business Model (SOURCE - AUTHOR)

iii. AbouaAboua

Respondent reported that to support the expenses, the team generates revenue from the club member dues, as it is a sports association, and through sponsorships. Additionally, the team invites outsiders to try paragliding in two-sited paragliders, where one of the more experience practitioners or athletes carries an extra passenger, as a paid service. To reach their fans as well as conquer new ones, the team communicates mostly through the local press and the Internet, namely their web page and social media.

When it comes to resources, respondents have made it clear that nothing is more important than human resources, which reduce the need for financial resources, that they can help the team generate even more revenue.

Getting to the team’s activities, this particular team places an extremely high importance in the early training, mandatory for paragliding practitioners. After this training, attending practices is the next step, as it is important to practice in different locations and different weather settings, provided that they are ideal for free flight. Finally, it is important to attend competitions as they provide the most valuable experience when going for the competitive mindset.  Closing up on the business model components, respondents highlight the importance of the public entities, namely the city halls where the team conducts its practicing sessions. For the future, the team aims to continue to maintain their current momentum and take the gold in national competitions, as well as improving their school and the team’s overall organisation.

On the managerial side, while the team does not use a business model, it does have a strategy, or at least a direction, as to how it should conduct its operations and its business. Figure 4.3 depicts the business model for the AbouaAboua team based on the interview with the team’s president of general assembly and school director.

 

Figure 4.3: ABOUAABOUA Paragliding Team Business Model (SOURCE - AUTHOR)

Just like for traditional sports teams the previous chapter, three more business models were designed according to the input provided by the interviewees. Once again, the business models might not be exactly the ones these organisations use, but are built based on the information the participants shared.

iv. OMG

As a fully professional electronic sports team, OMG have three types of main expenses: the players’ salaries, the team house where they practice and the travel and lodging in order to attend tournaments overseas. Finally, the team house, the house where the team lives and practices, is an expense respondents consider important in order to improve practice and to build team synergy.

On the other hand, the team lacks multiple income sources, with sponsorships being the sole revenue source. Respondent admits that the team expenses exceed the team revenue through sponsorships, but since the company that owns the team takes care of that, he can clearly focus on the performance, which he considers to be the most important part of the scene. Like most teams, eSports or not, OMG reach their fans through social media, namely Facebook and YouTube as well as their main Web page. At the moment they communicate mostly towards their Chinese fans, but respondents admit to have plans to reach for the Western audience in the future, as well. Adding to the digital communications, the team also creates multiple live events for fans to engage with the team.

Players need to focus on their training in order to improve, while it is the staff duty to support the players the best they can, and that the financial resources are crucial to motivate their roster of professional players. Finally, the respondent considers their sponsors, such as MSI, Zowie Gear and even hair salons, to be key partners in their organisation, as they also support the team differently, either it is from hardware and gaming peripherals, or working and improving the players’ image when going to live events.

As for the team mindset, it’s very apparent that it’s heavily focused on the team’s performance. On the team’s management, respondent admit that there isn’t a business model for the team, yet. However, the team has already considered looking into other sports and one idea they have for the future is to sell merchandised gear to their fans, however, and once again, since the finances aren’t currently a priority, the team chose to delay that option for now and preferred to focus on the performance of the players.

Figure 4.4 depicts an approximation of the business model that the team is currently using, according to the insights provided by respondent.

 

Figure 4.4: OMG Business Model (SOURCE – AUTHOR)

 

v. LGD Gaming

As a semi-professional eSports team, there are still many expenses the LGD Gaming team has to deal. While player or staff salaries aren’t one of them, as both parties participate in the team by volunteering themselves, the team still has to afford the basic expenses in order to have the proper infrastructure to allow players to practice, as well as support their expenses in order to allow them to compete in the most important competitions. So, the team needs a lot of different types of servers, which include game servers, for private practice sessions or game hosting, TeamSpeak server for team communication, among others. And, just like any other team, they need to support the travel and lodging expenses for players to attend far away competitions. Additionally, since the team organises events for eSports fans in China, they incur on many different expenses to be able to setup the event. On the other hand, while event planning is one of the main expenses for the organisation, it is also one of the main revenue streams, as they require a ticket purchase in order to participate. Also, like most teams, sponsorships play an important part in the team’s finances. Furthermore, being a non-profit sports organisation, not only are the almost 900 associates a considerable revenue source, as they all have to pay their club member dues but this statute gives the organisation access to public funds set by the state for these kind of organisations.  Interesting to note however, still on the revenue sources, that while the organisation does monetise on their digital content, such as streaming, Respondent consider the income to be insignificant when compared to the other revenue sources and the expenses the team has. Respondent consider the social media to be very important, especially Facebook, but believe that the team should place more importance on their web page. Furthermore, the organisation uses their events, not only as a way to reach, and more importantly, to engage with their fans, but also as a way to gather their community. Nothing is more important to respondent than the people that work hard every day for the organisation, especially considering that they aren’t remunerated. However, the respondent doesn’t discard the importance of financial resources, but add that throughout the team’s history, there have been other organisations that had much more financial resources available to them and that it wasn’t the extra funding that prevented them from collapsing. When speaking of key activities for the team, respondent highlights an interesting point. In an industry where most of the action happens online, it is considered that the direct contact with the team players and staff is extremely important, especially to motivate the team members and build team spirit.  Practice is important for the players. The team places a lot of value in teaching younger players the importance of time management, respect, discipline and sportsmanship, and always makes sure that their school performance isn’t harmed by their eSports practice.

Finally, when talking about key partners for the team, respondent considers all those who support and work with the team to be meaningful for the team, all the way from the sponsors, to the associates who collaborate with the team internally.  Future objective is to establish a relationship with a partner they plan on keeping it for the long run. Additionally, on this aspect, respondent emphasises the difficulties of finding partners as well as sponsors in Asian eSports market, and explains that many times it’s easier for the organisation to find international partners rather than local partners.

While the team doesn’t have a business model, there are many plans for the future, especially in the management side.  Respondent admits that the team has plans of expansion, having already set presence in new markets and is preparing a new competitive model for the most performing squads. Additionally, there is a lot of investment on the events created, which, unlike the team, does have something that is very much alike a business model.

 

Figure 4.5: LGD Gaming Business Model (SOURCE – AUTHOR)

Still, despite the lack of a business model for the team, a business model was built following the information provided by the respondent depicted in Figure 4.5.

vi. New Bee

Currently running a semi-professional team, although really close to establishing themselves as a formal company, New Bee deals with pretty much the same expenses as the previous studied team, LGD Gaming. In order to operate, the team has to secure game and communication servers, entry fees as well as travel and lodging for players to attend tournaments, and, even event planning, as they also organise their own events for eSports fans to attend as reported by the respondent. However, since their staff is not as vast as the other team, they have an extra expense to deal with. While LGD Gaming get most of their merchandising and advertising material, or marketing material, through the work and collaboration of their associates, New Bee has to deal with this as an extra expense. Likewise, they share two of the same revenue sources, which are sponsorships and the ticket sales for their events. However, since they aren’t, and neither have they planned to be, a non-profit organisation, they are unable to count with the additional revenue streams as the previous team. Respondent points out, is that the team is looking out for more than just the regular types of sponsors normal for esports team, such as hardware brands or IT shops.  Respondent is inclined towards marketing and engaging power of esports and is trying to introduce esports to new brands and get those brands as sponsors for the team. The team has even up-do-date market researches on their home market that they use in order to explain and show why esports are, for example, a better investment than just the paid reach through Facebook posts. As for their communication channels, they are pretty much the same as the previous team. With a respectable presence in social media, being the 4th most ‘liked’ chinese esports team on Facebook, and a YouTube channel where the team regularly shares content, as well as their own web page and Twitch channel, the team knows well how to reach their fans. Additionally, the events they organise, help the team to communicate and engage with their fans. Human resource is deemed important. As for the key activities of the team, respondent places a great importance on captivating new investors for the team. Additionally, and just like the previous team, New Bee places great value in teaching their younger players how to manage their time and to make sure their eSports objectives do not conflict with their school or academic performance.

The major partners for the team have been the other eSports teams present in the market. When operating in such a small market, teams must work together in order for all of them to grow, rather than just fight each other outside of the matches.

On a managerial aspect, there isn’t exactly a business model defined for the team, there is a business structure setup as well as a growth plan. Additionally, the management team has already considered the models used by bigger teams in professional sports, but believe that it would be the best fit for such a small market. Still, following the interview and the clues provided by respondent, figure 4.6 depicts what the current business model for the team is.

 

Figure 4.6: New Bee Business Model (SOURCE – AUTHOR)

4.4 Discussions and Synthesis

Looking at those three business models designs, it’s possible to infer what elements could be useful for electronic sports. For instance, the stadium, one of the most important assets of a football team, is something completely unrealistic for eSports to have at the moment. However, sponsorships will be indubitably one of the main sources of revenues, alongside the tournament prizes. Additionally, club member dues can also be a possibility for non-profit eSports organisations. Interesting to note however, is that eSports could easily be able to capitalise on events. Not just through ticket sales, like kickboxing, even though that could also be done, similar to events that have already been organised, but through digital streaming, where the organisation could monetise through one of the media streaming services that exist just for eSports.

Furthermore, as eSports are a vastly digital and online phenomenon, it is clear that the Internet will be the main channel through which the teams will reach their fans. Also, while it’s hard to see teams getting broadcast revenues through the main TV channels at the moment, they could be a possibility in a near future, especially if they are able to get TV stations as their partners. Additionally, public state entities, such as City Halls, may be an important partner to help organise local eSports events which the teams could use to generate additional revenue, as well as increase their promotion and organise competitions to gain experience and improve their practice and skill level. Finally, while the cost structure for electronic sports will most likely be very different from those of traditional sports, the importance of practice and attending competitions will most likely be the same. While it is clear that not all of the management used in traditional sports could be used by electronic sports, there is still a lot of helpful information that could be taken from their management, especially when dealing with more complex situations. For example, the importance placed by the New York Red Bulls on the team’s communication, the events performed for an extra revenue by the Sporting Clube de Braga team and the meaningful contribution of a solid theory before practice that the team AbouaAboua demands from their athletes are all valuable insights that could be applied to eSports, amongst many others. Moreover, it is also interesting to note the positive reactions the research participants showed towards eSports, recognising these competitions as actual sports, despite the fact that they are in fact videogames. Taking into consideration OMG team’s position, with top tier players and lacking communication to the Western fans, the changes made were more into the production of content that would please the team’s fans, as well as searching for media partners who would help share that content. Additionally, the focus on content production could help the team strategise a way into streaming content that wouldn’t give away their tactics but would create exciting matches for fans to enjoy. Further on the financial side, the team could actually pick up on the plans they have for merchandised gear and sell it once their fan base had grown with the previous suggestions.

So, the following additions were made:

? Key activities:

o Content production;

? Key partners:

o Media partners

? Channels:

o Internet – streaming;

? Revenue streams:

o Monetising digital content;

o Merchandised gear sales;

With these updates, the business model is now as figure 4.7 depicts.

 

Figure 4.7: OMG Improved Business Model (SOURCE – AUTHOR)

Regarding the LGD Gaming business model, only three changes were added. First, was to put a special effort on marketing as a key activity. Not only for the team, with content production, brand care and to increase their reach and fan base, but also for the events they are organising. Alongside with an extra effort for marketing, comes the search for media partners to help on that strategy. Finally, the last suggestion was on the revenue streams, adding the sale of merchandised gear, not only for the associates but also for the fans of the team.

Changes to the business model:

? Key activities:

o Marketing;

? Key partners;

o Media partners;

? Revenue streams;

o Merchandised gear sales;

Figure 4.8 represents the business model with these changes.

 

Figure 4.8: LGD Gaming Improved Business Model (SOURCE – AUTHOR)

Finally, as for the New Bee business model, it can be a slightly more sensitive case. Starting with key activities, one that should be taken care of is their communications. Building and sharing their stories, without necessarily requiring communication partners at this time, as it would probably best serve their interest to be noticed, rather than just trying to put content by force. As for key partners, team manager wants to introduce new brands for eSports, at this earlier stage a partner that would provide with the basic infrastructure might be ideal and it would save an extra expense. Additionally, since the team has put quite an effort into studying and analysing the market, there could be a potential for some partnership with market analysis companies to work and sell those reports, even providing with some extra revenue for the team. Finally, and also on the revenues, since their Hearthstone academy is so popular and has produced great results, charging a small entry fee could also bolster the team’s finances, which is always helpful at this early stage.

In this way, these business model updates were suggested:

? Key activities:

o Communicating;

? Key partners:

o Server providers;

o Market analysis companies;

? Revenue streams:

o Market reports;

o Academy entry fees;

Following these suggestions, figure 4.9 represents the improved business model for the team.

 

Figure 4.9: New Bee Improved Business Model (SOURCE – AUTHOR)

4.5. Summary

Overall, all participants had a positive view on the eSports industry and looked rather optimistic towards the future. When questioned about why they believed eSports have been so successful recently, all agreed that Riot Games and League of Legends was one of the major influences behind of the success of eSports. League of Legends is more accessible, being free to play, as well as easier to play and understand, the Steam platform by Valve Corporation has been around for more years than League of Legends, but even such a tool was unable to make Counter- Strike as successful as League of Legends is. League of Legends played a key role in turning eSports to what they are now, but he considers that there are many different reasons, such as the technology leap and the evolution of the Internet, as well as the fact that computers are much more accessible nowadays than ten years ago and that youngsters nowadays spend more time at home than playing outside. As for the future and the growth of eSports, all three participants agreed that they could equalise or even surpass any traditional sport.  It is apparent that sponsors have an important role in eSports, as they do for every sport. Interesting to note however, that most teams seem to have found another way to secure some financial help, either from their main sponsors or partners, or from other activities, such as events or monetising on their digital content, mostly streaming. The costs seem to vary, depending on the team dimension, with player salaries and team housing being the main expenses for professional teams. The channels seem to be very much alike, with a strong presence on digital media and so is the focus on team performance. As for activities, while practice is always at the core, teams seem to have different activities as they change in their dimension. Finally, it seems that most teams do not place a high importance in their partnerships and neither on building and sharing their stories

 

 

5.Conclusion

5.1 Introduction

This chapter wraps up this dissertation, presenting and synthesising the most important conclusions regarding this research. It starts by discussing the first impressions moving onto the objective reflection, discussing results for each of the objectives defined earlier and giving recommendations to academia and industry.

5.2 Overall Summary

In the first chapter of this research one main question was formulated and four objectives were determined: What business models are the professional electronic sports teams currently using? This researched was able to successfully answer this question based on the interviews realised.

To identify and understand the main reasons behind the success of electronic sports as an entertainment;

While chapter 4 proves that eSports are in fact a successful niche market, there are different reasons to justify the success of eSports. However, throughout this research three main points can be identified.

First, the technological advances in communications, namely the Internet, provided the infrastructure needed for these games to be played in a competitive, fair and enjoyable way. Broadband Internet was indubitably one of the main factors that allowed the esports success. More information was to why fans enjoy watching esports as well as explanation on the information asymmetry can be found in chapter 3, section 7.

Secondly, League of Legends played a huge roll in these last few years. Introducing another competitive game, League of Legends pioneered the free-to-play market, making the game instantly available to millions of fans. Additionally, the company committed itself to making amazing productions for the fans that would mimic, and even use, sports venues. Examples include the League of Legends World Championship Finals in 2013 and 2014 that took place in the Staples Centre in Los Angeles, United States, and in the Sangam Stadium in Seoul, South Korea, respectively.

Lastly, the role that streaming services played, delivering eSports content worldwide to millions and millions of users for free. Not to mention that this service not only allowed eSports content to be broadcasted globally, it also offered the teams a tool to monetise their broadcasts, practices and digital content, providing another very important source of revenue, and thus helping them to achieve sustainability.

To identify the business models currently being used by professional eSports teams

Chapter 6, of this research identifies three different business models used by eSports teams, based on the information provided by their managers through the exploratory in-depth interviews.

To design new business models for the studied teams, as well as any other professional team;

In chapter 6 of this research, three of the business models built for the eSports steams researched were improved based on the findings of the previous chapter.

Furthermore, three more business models were built in this chapter, section 3, for three types of teams: professional eSports teams focused on performance, professional eSports teams focused on generating additional revenue and semi-professional and amateur teams.

To draw the parallels between traditional sports business’ models and the

eSports’ ones;

Many common factors between sports and eSports were identified over this research. From the clubs, to the emotional connection, the vibe fans have when watching eSports to the adrenalin rush felt by players, as well as the hard work necessary for players to thrive and the recognition they get when successful, adding to the fact that successful eSports players share traits with successful traditional sports players. As for their common elements in business models, there were many as well. Firstly, the expenses in salaries, as well as the main infrastructure, such as the stadium in football or the team house in professional esports teams, and the entry fee for tournaments and the travel and housing expenses involved in attending remote tournaments. On the revenue side, sponsors are the most common factor and one of the most important revenue streams. Moreover, while both sides can also monetise from merchandised gear sales, and digital content, esports appear to be the ones ahead in the last scenario, with streaming being a valid extra revenue source for teams and players. Regarding channels, Internet plays a huge roll for both sides with the social media and the web pages. However, traditional sports seem to take better advantage of TV, radio and printed press, than eSports. On the resources tab, it’s pretty much all about human resources and financial resources for both sides. As for key activities, both sides put a lot of effort into practicing, as it should be expected, but while traditional sports seem to put an additional effort into marketing and content production, as well as investing in the theoretical part of their sport, eSports tend to focus more on helping support their players, whether that be preparing for future matches or managing their time. As for key partners, both sides tend to work well with their sponsors, but traditional sports seem to place more importance on their media partners as they can provide a key assistance with communications.

5.3 Overall Conclusions

This dissertation dived into a fairly new industry, where there still isn’t much research done on the subject, and while it aimed to shed some light on the way professional teams operate, it also provided a deep and wide view of the market as well as its main elements. In addition, this researched focus heavily on business models as a tool. This versatile conceptual model of a business, in this particular case, the Business Model Canvas, is more practical and more universal as well as more concise than a strategy. Not to mention that the fact that business models can be used, tested and rectified by any organisation makes this work interesting for any team, trying to establish themselves in this market, as well as for already established teams to study and consider changes to their operations. Moving to electronic sports, this work approached this industry from its origins, to where it stands now. Starting with the rise of this new type of competition, born from the computer gaming entertainment and made possible by the advancement of computer technology and global communications, to the full stadium events distributing millions of dollars in prizes, the eSports niche market has caught the attention of many outsiders of the industry. The way these games have been shaped and the growth they have been experiencing have brought to them the common elements in traditional sports, such as organised competitions, teams, fans and spectators, turning these video games into actual sports. While some dispute the fact that eSports shouldn’t be considered sports, this work proves that by all means, either from the academic definition of ‘sport’ to the elements in common with sport, eSports can be, and should be considered sports. Still, it is clear that eSports haven’t reached the status of the biggest traditional sports, but every year they seem to be getting closer to that point. Besides, it seems that electronic sports teams are still maturing in terms of management and aren’t still tantamount with their counter-parts in traditional sports. Reasons for this could be the inexperience, when compared to organisations with more than thirty years, the young age of most their participants and managers, the negativity that violent video games still have around them, or the simple fact that most organisations have trouble trying to get sponsors from outside the eSports atmosphere. Nevertheless, it is undeniable that there are many common factors between sports and eSports and this researched provided many examples. From costs with players and infrastructures, to revenues from sponsors and merchandising, from communications through social media to the importance of practicing, many elements were shared by the teams. Yet, there was one element that all teams shared, whether from traditional or electronic sports, which was the focus on performance, or the will to win. Whether on the ground or on the computer, managers shared their will to improve and win titles. Also, looking at the teams studied in this research, it is possible no note that sponsors do play one of the most important roles with the teams’ revenue sources and sustainability. It is also interesting to note that all teams searched for additional revenue sources, such as organising events or the sales of merchandised gear, even though the latter is just part of the plans for the future. Curious, however, was the fact that monetising on digital content, such as streaming, which can be a meaningful source of revenue in popular teams, is set aside by teams who wish to focus heavily on their performance, which was the case of OMG and can be seen in many Chinese teams. In the case of semi-professional teams, steaming also plays an important role, but more as a communication tool rather than financial, due to not having enough viewers to effectively monetise it. One important point that the studied eSports teams seem to lack when comparing with the traditional sports teams, is the lack of importance placed in the teams’ communications with the fans, or at least in producing content for the fans that follow the team, even despite the fact that these teams already have a significant fan base, albeit considerably small when compared to the most popular professional eSports teams. Still, considering the many different tools to monetise digital content, these teams could favor the production of quality content that would help them reach their fans, and possibly increase their fan base, and also provide some extra financial help. On a management perspective, the use of business models is almost inexistent in the studied teams, with the exception of the New York Red Bulls. Nonetheless, some of the organisations were aware of the advantages business models can offer, and while not using in the management of their teams, they recognised to be using them on other projects they are involved, such as organising events. Also, most of the eSports participants made evident that they held traditional sports teams as inspirations in their management decisions, and that they tried to emulate many of their aspects, with football being one of the most influent sports in their decisions. Looking to the future, most participants believe it to be very promising, even though it is very hard to predict where eSports will go. Many assume they will grow even more, and many believe they can actually rival or even surpass the most popular traditional sports. Still, one important fact to take into consideration, is that while the oldest eSports title, StarCraft: Brood War, has little more than fifteen years, football, for example, has been practiced for over a century. This inconsistency with eSports may lead to changes that one way or another can have an impact on the market. On the other hand, for some it is apparent that the stability for the eSports scene also passes by the empowerment of governing bodies in eSports.

5.4. Recommendations

5.4.1 To Academia

This research enabled the author to identify more business models for professional esports teams, as well as to determine significant differences from Western to Asian teams, or even from American, European, Chinese and South Korean teams. These differences could provide valuable information on how teams conduct their operations in different markets, as well as what are their main priorities and why are their mindsets so different, as the Asian performance seem to excel over Western teams. People from academia must fund future research, which would be compelling not just to get more insights from other traditional sports, but also more electronic sports teams studied, with their differences compared and explained. Another interesting topic, would be to study the case of solo players, such as the case of StarCraft 2 players, Choi Ji Sung, also known as ‘Bomber’, and Choi Seong Hun, best kown as ‘Polt’, who despite not having teams, are individually sponsored by Red Bull and CMStorm, respectively.

5.4.2 To the Industry

While this research can be regarded as successful, it is only but a glimpse of the eSports industry and how teams conduct their operations and manage their economics. Additional teams would be required for a full and broader comprehension of how they conduct their businesses as well as a deeper thought on the market. Moreover, game developers can provide a different and more widen angle on their view of the scene, especially for the games they developed. Nevertheless, this research was able to determine many important factors that teams take in consideration, as well as how they are indeed, quite similar to traditional sports. It was also able to determine the managers’ perceptions of the industry as well as ideas and plans for the future. The business models designed in chapter 4 can be adopted and altered by any eSports team, leaving a contribution for those who wish to start their own competitive organisations and for those who wish to improve the management of their already established teams.

 

 

 

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Appendices

Appendix 1: Literature Review Matrix

S.N0	Research Author and additional information (*)	Researcher’s aim/purpose	Data Collection (Main Findings)	Linking Findings to Objectives
1.	Pioneering ESport: Early 1980 Arcade Gaming Contest, the marketing and the experience economy by Borowy and Jin., 2013.	An article set off to historicize the expansion of eSport, by inspecting its roots as both an experiential service and marketised event.	In 1980, Atari organised the first ever  video game competition and developed around the VGSI (Video Game Space Intruders). There were other milestones too such as Electronic Circus), according to Borowy and Jin, throughout 1983, made esports a success. . Also there were TV promotions which were really helpful in making esports a success.	Objective 1
2.	Resistance is pointless: eSports is massive ……………...and growing by Casselman, 2015. Additional Info (*) Report based data is not used yet by Newzoo’s, 2015.		Time spent watching  traditional sports: 2012: 1.3B 2013: 2.4B 2014: 3.7B: eSport audience: 2012: 58 Million 2013: 74 Million 2014: 89 Million	Objective 4
3.	A History of eSports by Olson(2015): Additional Info (*) Text translation of different podcasts, divided into centuries	To discover the complete history of competitive gaming through a forum post.	The researchers found out the reasons for the popularity and success of esports. In the early 1990s, the upswing of multiplayer games, like Doom 1 & Doom 2 has been witnesssed. In 1995, the enhancement of eSport tournaments, where Microsoft’s Judgement Day 95 and Death match 95 is realised as the biggest event. In mid-2000, the escalation of latest technology has been witnessed. In 1994, the formation of the Warcraft video game, that showed RTS in the competitive area. In 1997, the establishment of the FRAG & CAPL (Cyber Athlete Professional League), events. In 2000, the WCGC (World Cyber Games Challenge), which functioning as an Olympic encouraged events for eSports globally.	Objective 1
4.	Successful Knowledge & Management Projects by Davenport, Beers and Long., 1990	A Journal article which reviews different business model.	The components of the business models studied were Connect towards industry value or economic performance Organisational & Technical arrangement Flexible & Standard knowledge setup Friendly culture Knowledge Language and Clear purpose Variation in motivational strategies For information sharing there are Several channels	Objective 2
5.	A small Story of nearly everything by D. Devil., 2011	According to the forum post to create a short story of what move esports to be where it is nowadays.	The significant milestones in eSport era by D. Devil is the major discoveries through the events that are as follows: In 1997, the CPL is developed In 2000, the CPL Razer event, through complete prize poll of over $100,000 In year 2000, the WCG event was held in South Korea, through a complete prize pool of $200,000. In the historic aspect the WCG events through the other years is also very essential seen. The Turtle entertainment event is developed in 2000, which is one of the 1st skilled leagues in the eSports history.	Objective 1
6	Rise and Rise of eSports by Heaven., 2014a	In this journal article to describe the attractiveness of eSports.	eSport are getting big all over the globe and not only in Asia In UK only G3 helped, with 8.5 million Online watchers $140,00 prize pool and $4,000 live audiences. Like baseball and football stars the outstanding players that do well can be seen as superstars. The popularity of eSports is depending upon both high speed internet connections and good quality video-streaming instruments.	Objective 1
7.	eSports by numbers by Heaven., 2014b	A journal article meant to draw parallels between esports and traditional sports.	2.5 billion Hours of traditional sports are watched in comparison with 3 billion hours of esports. The number is expected to rise by 6.5 billion by 2018. Due to the opening of stadium in 2017 in Hengqin China almost 16,000 available seats in the world's first devoted esports. In 2014, during the international event (DOTA 2), Newbee mutually shared the large winning price of $5 million.	Objective 4
8.	Will esports ever become widely ………………and how will they affect the way we entertain ourselves………...? By Hewitt., 2015.	Article describes how the esport and traditional sport industry influence each other.	Within the brief overview of games as StarCraft II & League of legends, the competitive field of eSports did not blow out of the water before. For the advancement of the eSport, the major risk is that it lacks of physicality, and many are afraid off while using of a computer for the promotion of lifestyle. . On contrary traditional sports are more encouraged because of the physical activity involved in it. In Korea there is another threat i.e. mainly seen is that many youngsters are quitting their study to become eSport experts. In the matter of scope, leaves the probabilities of actually fetching recognised low, as the sport itself is very limited, therefore, doing so is quite unsafe and this might be lead to bad approach towards the eSports. Only eSport has really been commercialised specifically therefore, its future is viewing very bright. Moreover, Hewitt elaborate that in the recent years the future f eSports is going to be a massive donor to the amusement industry. Traditional sports do not have legal considerations. The legal considerations are also a concern within the eSports prospect. There are different events that displays tournaments in various games and this might be main cause in the future. Due to this traditional sports take an advantage over esports.	Objective 4
9.	ERP plans and decision support benefits by Sena and Holsapple., 2005.	A journal article for exploring connections between business models and decision making models that boost the growth of esports perception of 53 ERP system adopters.	Benefits of models outlining key stakeholders Decision time would be reduced Decision cost would be reduced Reliability is 100% Excellent communication More exploration & discovery Motivates new perspective Coordination would be better Satisfaction levels would be increased Improvement in decision making Economic advantages	Objective 2
10.	Before eSports: Nintendo World Championship by Heyoka., 2011.	To provide a vision on the initial Nintendo eSport events in this forum post.	The name NWC (Nintendo World Championship) was given by Heyoka, that was organised in 1990s, i.e. one of the highest milestones in eSport era. The Nintendo pursued their eSport achievement with the NPF (Nintendo PowerFest 94) and NCC (Nintendo Campus Challenge).	Objective 1
11.	The evolution of the Electronic Sports Entertainment Industry (ESEI) and its ……….. by Hope., 2014.	In this article to investigate and create a thoughtful and most essential historic events within eSports field, by incorporating the relevant components in the business models in future.	Following elements can be incorporated: Intricate channels Key stakeholders Key acticvities	Objective 3
12.	eSport on a rise: Critical consideration on the Growth ………… Organised Digital Gaming ……………………. by Witowski et al. 2013.	Article describes that how to implement a written panellists’ argument, where the theme of debate is the use of business models in eSports and have influence on sporting events.	The leading live games, CEO of Twitch TV, Reddit AMA (Ask Me Anything) and Emmett Shear demanded that in last 10 years eSports would be larger than athletic sport but currently reduces the spaces and daily routines that supported a key characteristic of and it must be incorporated in business models in future.	Objective 3
13.	Korea’s online gaming empire by Jin, 2010. Additional Info (*) Literature based data obtained from Korea	In Korea, an e-book designed to scrutinise sections of gaming culture and for the political economy of Korea, what the culture means.	In 2006, the online game market value was $4.96 Billion, while in 2011, it estimated to stretch $11.88 Billion. In 2006, Korea established 49 % of the world online game market. In 1998, the 1st TV eSport tournament was showed in Korea, where the event for the game StarCraft was generated. In 2001 in Korea WCG was held and in that event they specified the Olympics of Video games. According to the Oxford definition, eSports is an electronic game that played in professional ways, particularly when it is viewed by fans and play on television & Internet. According to Michael Wagner 2006, an eSport events that contains sport events, in which people prepare and train physical or mental skills with the help of communication and information abilities/technologies. 21.4 % of the internet customers of Korea utilised their computers for internet gaming in 2000 and in year 2006, this number enhanced to 55.5 %. A program in Australia, where children competitively played Nintendo games against one another and it was the 1st television eSport event that was amazing. Between 1991-2000, enhanced the growth of eSports, through the Dot com boom. In 2004, eSport market worth was $26.7 million and while in 2005, it enhanced to $39.5 million. In 2007 to 2010, it is predictable to enhance this estimation from $77.4 to $120.7 Million. The growth of number of games correlates with eSports: In 1999, $1.5 Million were granted in 72 Games. In 2000, $2.0 Million were granted in 82 Games. In 2001, $3.0 Million were granted in 93 Games. In 2002, $3.5 Million were granted in 187 games. In 2003, $4.0 Million were granted in 144 games. In 2004, $4.5 Million were granted in 98 games. In 2005, $5 Million were granted in 278 Games.  In 2006, $3.3 Million were granted in 124 Games. In 2007, $1.8 Million were granted in 70 Games. In 2008, there were being played 21 online games for compatibly and audience were mainly 18 to 34 years old (74).	Objective 1
14.	Business Intelligence ………… economy: opportunities, ………. and risks by Raisinghani., 2004.	In this book, the author describing the Business models and its fundamental impressions.	Business models serve as Decision Support System, containing databases, applications, architecture, analytical tools and methodologies which help boosting esports business.	Objective 3
15.	On The scientific relevance…... of eSport by Wagner., 2006.	This conference article presented to amateur a base for an appropriate academic behaviour of eSports, comprising a definition & historic overview.	Common outcomes: The earliest usage of the time eSports was at the press statement of the OGA (Online Gamers Association) in 1999. In our culture, the eSport seems to be transmitted intensely in digital form. eSport era & historic milestones: The game Doom, announcement in 1993. The game Warcraft, announcement in 1994. The game Quake, announcement in 1996. The foundations of various gaming tournaments, comprising CPL, announcement in 1997. The FRAG: CPL leagues, which prepared eSport that reflected as a developing spectator sport, announcement in 1997. The game StarCraft, announcement in 1998. The game Counter Strike, announcement in 1999.	Objective 1
16.	eSports: Market Brief 2015 by Super Data Research., 2015. Additional Info (*) The data is worldwide, but neither material is given regarding the participants nor countries.	A systematic dataset prepared to elaborate the eSport industry through large information, track the main implements through electronic markets and find-out different values and developments in the field of eSport. This has been done using business models.	This research has used business canvas for the said purpose and gave detailed business analysis of the European countries popular for epsorts.	Objective 3
17.	Most Played PC Games ………... Platform ………...in February 2015 by Statisa., 2015.	In this report, a monthly, scientific dataset depend upon, which computer games are played the most by audiences.	There are some computer games that are most played by the audiences are as follows: 25 % (League of Legends). 8.03 % (World of Warcraft). 7.17 % (DOTA 2) 5.15 % (Counter Strike Global Offensive) 2.5 % (Smite) 1.6% (Hearthstone) 1.09 % (Heroes of the Storm)	Objective 1
18.	Twitch Annual Report 2014 by Twitch TV., 2015.	In this annual report prepared to provide an outline of its streaming digits in 2014.	Almost 16 billion minutes viewed/month by Twitch TV Almost 100 million exceptional viewers/month by Twitch TV Almost 1.5 million distinctive broadcasters/month by Twitch TV Almost 11 million videos viewers/month by Twitch TV Almost 10,000 affiliated channels by Twitch TV	Objective 1
19.	eSports are Growing Up by Williams., 2015.	In this newspaper article to apprehend the fluctuations that is practised in the competitive field of gaming.	eSports technology is growing surely but slowly. eSports technology is receiving more structured. To stretch a large quantity of viewers in the eSports field, additional channels make it probable. Whether eSports is a sport or not, there occurs a vast discussion.	Objective 1
20.	Global Growth of eSports Report: Trends, …………... Audience Towards……… by Newzoo., 2015. Additional Info (*) The full report is not accessible for academic evaluation, so the free 11 pages were used. Data obtained is based upon 25 countries worldwide.	This annual report is based upon statistical style (dataset), generated to deliver the industry with a worldwide summary of the eSport economy, viewership and contributors in addition to give a genuine assessment of the revolutionary prospective of eSports using business models with different elements as their components. .	Globally, 205 million audiences, which lookout eSports. These viewers were studied as one of the major components in business canvas.  They were divided into 4 sections as follow: 13 Million (Regular members/watchers) 19 Million (Special watchers/members) 56 Million (Regular Watchers) 117 Million (Special Viewers) The business model showed that the growth of esports will rise From 50.7 % (2014)   to 63.4 % (2017) if the eSports depends upon leagues, publishers, events and organiser team, which is funded by brands and customers.	Objective 2 &3