2024 Recap: The Business of Gaming and Esports

Hello everyone,

welcome to the last episode of Gaming Science in 2024. I hope all of you had fantastic holidays with your loved ones. In this episode, we will have our final look back at 2024, recapping the most impactful studies and guest episodes on gaming and the esports economic environment and business. Sit back and enjoy.

🤑 The Business of Why We Keep Playing and Watching

🕹️ Playing: Game developers use human biology and psychology to keep us playing their games (increase game loyalty). In gaming, businesses' aim to increase the loyalty of their players towards the game(s), franchise, and ultimately game developer. It should come as no surprise that game time is also associated with higher game loyalty. The challenge, skill, immersion level of video games, as well as our drive for building relationships influence our game loyalty.

Also, getting and keeping us in a Flow State (a mental state where we're neither bored nor overwhelmed by what we have to do) is crucial to prevent gamers from getting bored or anxious. The following aspects are used in games to achieve these goals: adjust the challenge level, release add-ons and updates, have friend lists, and great visual effects. The image below shows the basic principle of the flow state.

Another way to increase our loyalty is to "play" our human temperament and character. For instance, dimensions of temperament, such as novelty seeking, persistence, and reward dependence, and cooperativeness impact game loyalty. Temperament and character are used by game developers (e.g., rewards, ladder rankings, friend's list, and realistic environment) to keep us hooked to their games.

👀 Watching: There are many push (our motivations) and pull (external motivations) factors that make us watch streams and engage with streaming content. These factors determine how we interact with content e.g., play the game, watch streams, or tell others about it. "Notably, the results suggest that pull factors have a greater impact on commitment than push factors do..."

It should come as no surprise that things, such as esports tournaments, chatting during a stream, or the feeling of belonging to a community, are important aspects when it comes to us watching.

🏭 The Gaming and Esports Industry Environment

💼 Riot Games: The goal of Riot Games was to create a new MOBA game with more services (maps, modes, champions, skills) and making it accessible to a wider audience; and they undoubtedly have. Over the years, Riot Games have made many smart moves to become one a giant in the industry. For instance, they stabilized its professional scene by providing special contracts and guaranteeing a minimum wage for team members. Streaming, storytelling, and in-game purchases help Riot Games bring the casual and professional ecosystems closer together... and make money.

🥶 Esports Winter: The Esports Winter (the financial struggle of esports organizations) may still be ongoing. As Victor Goossens, founder and co-owner of Liquid, said: in a recession companies cut back on their expenses for marketing. Undoubtedly, sponsors are a cornerstone of the gaming, but especially esports, industry. In addition, the number of teams and players, similar to prize money, fell to or even below pre-COVID levels.

The current economic situation, with high interest rates and an inflation well above 3%, is not a business-friendly environment we have been in for the past 2 years.

The image below shows the impact of the COVID pandemic on esports, specially tournament prize money, the number of teams, players, as well as the median and mean earnings per player.

🎲 Gambling: With the growth of esports, gambling has become a part of it too. Today, esports gambling transactions exceed the revenues generated by esports tournaments themselves. In esports, people can bet with real money, but also with skins, which is unique compared to traditional sports betting.

📊 Marketing: Promotion is crucial for every business, and live events are an especially effective channel of advertising. Tournaments, for video game publishers, are a marketing investment with the goal of increasing revenue in the long run. In this episode, we saw that sales of game copies have dropped sharply since 2010, mostly due to changes in the business model (free-to-play and microtransactions are today's standard). With that, the users' ratings of a video game online significantly drive revenue. No one is going to play or even download a game with a terrible rating or reviews.

Looking at data from over 20 years, the authors found that 83 tournaments per year is the optimal number when it comes to maximizing sales.

🏅 Olympics: As the popularity of gaming and esports grows, there is an ongoing discussion about whether esports should be included in the Olympic Games. The inclusion would benefit game publishers and the IOC, mainly for financial reasons, but also the gaming community. However, there are challenges that remain,

• Some games (e.g., Counter-Strike) do not align with Olympic values,
• There is a lack of governing bodies on the national and international levels, and
• mental health concerns, such as 'gaming disorder'.

Two problems will be especially hard to overcome. First, games are owned by the publishers that will always have the final say. It is their game, they own the rights. Second, the uncertain nature of esports. A game that is big now will not necessarily be big in five or 10 years. However, that's how long the planing for Olympic Games can take.

🧑‍🏫 Coaching: "While the competitive landscape continues to evolve, the structures supporting esports athletes haven’t fully caught up..."

"[At this point,] many teams view performance coaching as a luxury rather than an essential part of their structure, and players may not fully grasp how specialized support can enhance their performance and wellbeing."

Nina Zweifel, in her article, describes why esports need integrated support teams, similar to traditional sports. Such teams would provide benefits, like expertise, injury prevention, career longevity, mental resilience, better team culture and sustainability for all parties alike.

⚖️ Esports law: "We need Esports-Specific Regulations!", says Dr. Nothelfer, an expert in gaming and esports law. "[On an international level], the picture is fragmented. In the vast majority of the world, there is no esports-specific state regulation. There are, however, some laws."

Regulating esports has many obstacles, for instance the publisher holding all rights (intellectual property) making it hard to regulate. The same problem we saw with adding esports to the Olympic Games. However, Dr. Nothelfer sees three different approaches esports could be regulated in the future.

Have a wonderful week. Best,

Christian 🙂