Telcos bet on eSports to get down with the kids

In some circles, attempting to shrug off the image of being a bunch of crusty old network engineers by buying an eSports team would be regarded as the very definition of having a midlife crisis.

But mindful that they are struggling to engage with young people by pedalling connectivity via brands that barely register on millennials’ radar, buying the equivalent of a bright red Tesla is precisely what an increasing number of operators are doing.

Three hundred and eighty million people – the number research house Newzoo estimates the global eSports audience will be this year – can’t be wrong, they reason.

Telefónica was one of the first to show its hand in January last year, when it announced a deal with online gaming company ESL to develop an eSports platform, create exclusive content and set up a professional team in Spain.

Speaking ahead of an event to mark the first year of the team, Movistar Riders, Telefónica Spain’s Chief Strategy and Data Officer Oscar Candiles says: “We decided to enter this space at the beginning as a communication tool… in order to start engaging with young people.

“eSports is a territory very linked to connectivity and technology, so it is very aligned with our business and our brand.”

The deal with ESL gives Telefónica presence at events such as League of Legends tournaments, where fans turn up in person and online to watch teams battle it out to destroy the Nexus – a building in the opposition’s base.

If that sounds niche, bear in mind that analysts at Superdata Research estimate the audience for the 2017 League of Legends World Championship peaked at 106 million.

Telefónica says 145,000 people turned up to eSports events it organised last year.

It is planning to build a Movistar Riders Acadamy this year in an effort to discover new talent, which builds on the eSports centre it has already created in Madrid that lets existing stars hone their skills.

Channels dedicated to eSports on the Movistar TV service, as well as on Youtube and Twitch.tv, complete its line up, as the company looks to become the largest generator of Spanish-speaking eSports content in the world.

“It’s a new territory, there are no clear winners,” says Candiles. “We can set the rules.”

Newzoo forecasts that the global eSports market will grow 38 percent this year to $905 million, driven by sponsorship, advertising and the sale of media rights.

Western Europe is the second largest region, behind North America, with revenues this year predicted to top $169 million.

The research firm also estimates that the ARPU of what it terms “eSports enthusiasts” – as opposed to occasional viewers – will grow by 20 percent this year to $5.5 and reach $6.6 by 2021.

In a mark of just how far it has come, eSports will feature at the 2022 Asian Games as a medal event.

Joost van Dreunen, CEO of SuperData Research, says it is the games publishers who hold the power in this emerging area.

“They invent and distribute the games, it’s their IP,” he explains.

So what, then, of telcos?

“Telcos are doing a smart thing [by getting involved],” van Dreunen responds.

“It’s a really good time to get in a take a big piece of the market.”

MTS is another operator that has made a bet, acquiring Praliss Enterprises, owner of Gambit Esports in January this year.

Gambit has four teams that compete in Counter-Strike, League of Legends, Dota 2 and FIFA, as well as its own line of branded clothing and a studio for creating media content.

The company makes money from sponsorship deals for its teams and even transfer revenues.

MTS plans to use the acquisition to promote its brand and to add new content to its overall entertainment portfolio.

Back in Spain, Candiles says Telefónica is looking to push on now that the first 12 months have delivered on three KPIs – engagement, brand perception and purchase intention.

Movistar Riders have amassed around 20,600 followers on YouTube and Twitch.tv – the two main platforms eSports fan use – to help with the first KPI.

On the second, Candiles says: “When we launched last January nobody recognised Telefónica/Movistar in eSports.

“When we did a second survey at the end of the year, it was recognised as the [number one] brand for eSports in Spain.”

Regarding the third, the exec says gamers’ intentions are “changing” when it comes to buying from the operator thanks to the credibility it has gained from being part of the eSports world.

As a result, he says Telefónica is targeting them with relevant messages.

“We are putting on the table that we have the best fibre in terms of latency,” he says, by way of example.

SuperData’s van Dreunen thinks this has traction.

“Gamers are interested in a very solid broadband plan,” he says.

But Candiles is aware this is not going to deliver anything like an overnight success.

“It is a project for the future, it is growing and I think there will be new revenue streams in terms of ticketing, for example,” he says.

To date, the challenges faced by those leading eSports at Telefónica have been two-fold, according to Candiles.

On the one hand, it has been a case of “managing the expectations” of staff who thought Movistar Riders would sweep all before them and, on the other, explaining to management why viewers prefer to watch the content on third-party platforms over Movistar TV.

Another, arguably more surprising challenge has been batting off companies that have approached Telefónica about buying the Movistar Riders team.

Candiles confirms the operator is not looking to sell up.

“In 12 months time, we want to have the best team in Europe,” he says.

van Dreunen has a view on why the team is in demand.

“The things sponsors want always is a story,” he says.

“They want to be there when your team is having an amazing moment.”

Writing in his company’s 2018 Global Esports Market Report, Newzoo CEO Peter Warman warns that working out a way to grow the bottom line remains a key challenge for everyone in the industry.

“As a business, eSports is now entering a new and critical phase toward maturity,” Warman writes.

“Big investments have been made, new league structures have been launched, sponsorship budgets have moved from experimental to continuous, and international media rights trade is starting to heat up.

“At the same time, player salaries have soared and the eSports ecosystem and viewership hours still very much rely on a select number of globally operating teams and game franchises.

“Profitability and return on investment is, for many organisations at the heart of the eSports economy, a challenge.”

They might still have plenty to learn about how to navigate Summoner's Rift, the most popular map in League of Legends, but working out how to make money from players is a challenge telcos going through a metaphorical midlife crisis should feel more comfortable with.

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