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eSports Technology

Coronavirus May Have Effect On Esports

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Coronavirus May Have A Unique Effect On Esports ETFs

“ There’s certainly more to the story, but it’s worth noting that against the backdrop of rising coronavirus cases in China, the VanEck Vectors Video Gaming and eSports ETF (ESPO) and rival video game ETFs are soaring to the start 2020.

For its part, ESPO is higher by 8.51%. ESPO seeks to track the performance of the MVIS Global Video Gaming and eSports Index (MVESPO). The index is a rules-based, modified capitalization-weighted, float-adjusted index intended to give investors a means of tracking the overall performance of companies involved in video gaming and eSports.

It may seem like a stretch in terms of affecting ESPO and related ETFs, but with so many Chinese cities shutdown and travel within the country and to Hong Kong and Macau, among other destinations favored by Chinese tourists, halted, many in the country are coping by devoting even more of their leisure time to gaming and watching fellow gamers on live-streams.

“Usually, during the Lunar New Year that falls in January or February each year, gamers in China have more time to play games during the holiday season,” reports CNN. “But this year, following the coronavirus outbreak, authorities decided to extend the holiday by almost three weeks in many places, leaving millions of people with a lot of time to fill.”

China Gaming Connection

As has been widely noted, China is already the world’s largest internet market and it’s the biggest when it comes to esports and online gaming. That perch is reflected in ESPO as China represents 17.38% of the fund’s geographic weight, trailing only the U.S. and Japan.

The explosive growth of esports could even power the space past traditional sports where revenue generation is now heavily tilted towards enhancing a fan’s multimedia experience. This is an important concept in China where many younger demographics that are chock full of devoted gamers are highly technologically savvy.

“Tencent’s mobile game, ‘Honor of Kings,’ hit a new all-time high in daily average users during the week of January 30, according to Niko Partners, a research firm that focuses on the gaming industry in Asia,” reports CNN.

Tencent is ESPO’s second-largest holding at 8.62%. The coronavirus has forced the cancellations of some esports competitions, but that isn’t keeping Chinese gamers from gaming.

“Total game downloads on Apple’s app store in China increased 27.5% year over year and revenue rose by 12.1%, according to market research firm Sensor Tower,” notes CNN.

Rainbow Six Siege Structure

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Ubisoft Rolls Out Rainbow Six Siege Regionalization Structure

Today at the Six Invitational – Rainbow Six Siege’s annual championship event – developer Ubisoft announced plans to overhaul the game’s esports structure, moving it to a regional model.

The game’s four major regions (Asia-Pacific, Europe, Latin America, and North America) will each operate on a unique structure, each with its own organizing partners. While these regional systems will operate separately from one another, they will still feed into a global structure.

Each yearly season will be separated into four quarters, with the first three referred to as “Stages.” These Stages will each conclude with a Major in which the top four teams from each region will compete against one another in an international tournament. During the fourth quarter, each region will operate its regional finals and relegations for its divisions, qualifying top teams for the Six Invitational and promoting new teams into the pro structure.

Qualification for the Six Invitational will also involve a year-long points system designed to reward consistent performance throughout the season.

Asia-Pacific

The region will be divided into two divisions – North and South. The North Division will consist of a 12-team online league featuring teams from Japan, South Korea, and Southeast Asia. Oceania will operate in the South Division alongside newer regions such as South Asia. Details were limited regarding the South Division, but Ubisoft has contracted ESL to operate all Asia-Pacific programs and events.

Europe

Europe’s system will involve a 10-team league, an expanded version of the region’s current structure. Similar to League of Legends, Europe will feature national esports programs, creating a multi-tiered structure. Ubisoft will co-produce Europe’s competitions and events with FACEIT and LiveNation.

Latin America

The Latin America system will prioritize offline competition and support three divisions – Brazil, Mexico, and South America. Mexico will move to an offline structure while Brazil’s top competition will expand from eight teams to 10. Latin America’s system will be owned and operated by Ubisoft itself along with its contracted regional vendors.

North America

North America will also split off into distinct divisions for the U.S. and Canada. Details were limited regarding the specific structure of North America’s two divisions.

Finally, Ubisoft also confirmed the regional hosts for its Majors through 2021. While the Six Invitational will remain in Canada, the Majors will continue to rotate.

Following May’s Major in Brazil, the 2020 August Major will take place in North America, with the November Major occurring in Europe. In 2021, the May, August, and November Majors will be held in Europe, North America, and Asia-Pacific, respectively.

The Army Wants More Soldiers Using Esports

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The Army wants more soldiers, and it’s using esports to put a ‘finger on the pulse’ of potential recruits

 “ After whiffing on its recruiting goal in 2018, the Army has been trying new approaches to bring in the soldiers it needs to reach its goal of 500,000 in active-duty service by the end of the 2020s.

The 6,500-soldier shortfall the service reported in September 2018 was its first recruiting miss since 2005 and came despite it putting $200 million into bonuses and issuing extra waivers for health issues or bad conduct. Within a few months of that disappointment, the Army announced it was seeking soldiers for an esports team that would it said, “build awareness of skills that can be used as professional soldiers and use [its] gaming knowledge to be more relatable to youth.”

By January 2019, more than 6,500 soldiers had applied for a team that was expected to have about 30 members. In September 2019, the Army credited the esports team, one of two new outreach teams set up that year, as having “initiated some of the highest lead-generating events in the history of the all-volunteer force.” 

“It’s essentially connecting America to its Army through the passion of the gaming community,” Sgt. 1st Class Christopher Jones, noncommissioned-officer-in-charge of the team, said in January 2019. Team members who were competing would train for up to six hours a day, Jones said at the time, and they received instruction on Army enlistment programs so they could answer questions from potential recruits.

“They will have the ability to start a dialogue about what it is like to serve in our Army and see if those contacts are interested in joining,” Gen. Frank Muth, head of Army Recruiting Command, said in early 2019. Thousands of soldiers play esports, Muth said, and the audience for it has grown into the hundreds of millions — West Point even recognized its own official esports club in January — but the appeal wasn’t obvious at first to Army leaders, Army Secretary Ryan McCarthy said Friday.

“This was one [idea] that when the first time Gen. Frank Muth briefed … Army senior leadership, we’re like, ‘What are you talking about, Frank?'” McCarthy told an audience at the National Press Club in Washington, DC. 

“We’re about 18 months into it,” McCarthy said, and with that team, Army recruiters were “getting their finger on the pulse with 17- to 24-year-old Americans. What are they into? How do they communicate? And [finding] those right venues and shaping our messaging to talk about here’s the 150 different things you can do in the Army and the access to education and the kinds of people that you can meet and being a part of something as special as this institution.”

In 2019, the Army rolled out an esports trailer with four gaming stations inside, as well as a semi-trailer with eight seats that could be adjusted so all eight players played the same game or their own on a gaming PC, an Xbox 1S, a PS4 Pro, and a Nintendo Switch, Jones, the NCO-in-charge, told Task & Purpose in October.

One of the senior leaders dispatched to an esports event was Gen. Mark Milley, who was Army chief of staff at the time and is now chairman of the Joint Chiefs of Staff, which is the president’s top uniformed military adviser. 

“He said, ‘You’re going to make me do what?'” McCarthy said Friday. “Then when he went, he learned a lot, and he got to engage with young men and women, and what we found is we’re getting millions of leads of 17- to 24-year-olds to feed into Army Recruiting Command to engage young men and women to see if they’d be interested in a life of service.”

The esports team is part of a change in recruiting strategy, McCarthy said, that has focused on 22 cities in traditional recruiting grounds in the South and Midwest but also on the West Coast and the Northeast with the goal of informing potential recruits about what life in the Army is actually like as well as about the benefits of serving, such as money for college or soft skills that appeal to employers.

The service has also shifted almost all its advertising spending to digital and put more uniformed personnel into the Army Marketing Research Group to take more control of its messaging. McCarthy on Friday called it “a comprehensive approach” to “improve our performance in a variety of demographics, whether that’s male-to-female ratios or ethnicities.” That geographic focus yielded “a double-digit lift” among women and minorities, McCarthy said last year.

The outreach hasn’t been universally welcomed. After the 2018 recruiting shortfall, service chiefs, including then-Army Secretary Mark Esper, said schools were not letting uniformed service members in to recruit. Anti-war activists attempted to disprove that claim by offering $2,000 to schools that admitted to barring recruiters.

Suggestions the Army start recruiting children in their early teens also received criticism for both its impracticality and the harm it could do to the military as an institution. But recruiting has improved year-over-year, hitting the goal set last year and being ahead of pace now, McCarthy said.

“This has been a major turnaround because I think we just got a little lazy and we started losing touch with young men and women … but you have to sustain this,” McCarthy added. “We’re in a war for talent in this country — 3.5% unemployment, they have a lot of opportunities.”

We travel to a lot of American cities, and we meet with mayors and superintendents of schools and other civic leaders to try to educate those influencers, to try to help us in recruiting, and it’s yielded tremendous benefit.

 

Esports Adderall Drugs

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‘Nobody talks about it because everyone is on it’: Adderall presents esports with an enigma

 Aspiring to become a full-time streamer and make a career out of his love for gaming, former semipro Halo player Matthew “MellowMajik” Murphy follows a weekly ritual. Every Friday and Saturday night, he comes home and gets on his new favorite game, Fortnite. But before he logs on, Murphy swallows a pill he thoroughly believes will aid him in becoming the best player he can be.

“Typically I would be exhausted, tired and lose motivation after only a couple hours,” Murphy said. “With Adderall, I am able to play better than I ever have for up to 12 hours.”

The use of Adderall, a drug often prescribed by doctors to treat patients with attention deficit hyperactivity disorder (ADHD), or other substances that help people focus like Vyvanse and Ritalin, has long been associated with students pulling all-nighters and cramming for a test or finishing a research paper. More recently, though, they’ve been used by competitive gamers as a kind of performance enhancer to sharpen their response times and reflexes during gameplay. While at least one esports league regularly tests for these as banned substances, others have left them unchecked. As the appeal of competitive gaming continues to rise — with robust prize purses and lucrative sponsorship deals hanging in the balance — gamers across multiple esports properties have recounted stories of Adderall use by themselves or others.

The use of such drugs has introduced significant questions into esports. What exactly constitutes a performance-enhancing drug? Could their use potentially disturb a league’s competitive balance? Should prescribed substances be regulated by a league at all? These questions are not so easily answered.

‘Nobody talks about it because everyone is on it’

Professional Counter-Strike player, Kory “Semphis” Friesen, admitted in a YouTube interview that he and his entire team had taken Adderall while playing in a tournament with a $250,000 purse. Timo “Taimou” Kettunen claimed during a live stream session that “like 20 players or so” in the Overwatch League use Adderall. In response to that claim, Jimmy “HighDistortion” Moreno, former Gears of War (GoW) pro turned Fortnite streamer, tweeted that “the GoW community has easily over half the players using it.”

According to a number of professional gamers who spoke with The Washington Post, Adderall has been an open secret in the esports community for years. “Nobody talks about it because everyone is on it,” former Call of Duty World Champion, Adam “KiLLa” Sloss said. When asked if Adderall abuse at events was something he had ever witnessed personally, Sloss replied, “Witnessed? Yeah, very frequently and a lot to be honest. It’s a major problem.”

After an eight-year career, Sloss stepped away from professional play in early 2019. Sloss said a big reason he has stopped competing was due to the rampant drug abuse. “The Adderall abuse was too much to keep up with,” Sloss said.

The drug’s use presents a complicated problem for leagues and tournament organizers. Shortly after Friesen publicly admitted that his Counter-Strike team used Adderall during an Electronic Sports League (ESL) sanctioned tournament, the ESL employed the help of the Esports Integrity Coalition (ESIC) and began conducting drug tests. As of February 2016, all ESL tournaments are subject to the ESIC’s Anti-Doping Code. Included in the Anti-Doping Code is the ESIC’s prohibited substances list. The list is made up entirely of stimulants commonly used to treat ADHD such as Adderall.

In comments to The Post, the ESL and the ESIC said they believe testing is crucial because it acts as a deterrent and discourages competitors from using PEDs. Ian Smith, Commissioner of the ESIC, said there have been zero anti-doping rule violations since testing began. Those with prescriptions for ADHD medications can be granted a waiver for a positive test. Smith acknowledged that this only applies to Counter-Strike and that “no other game gets tested by any other tournament organizer.”

Most leagues do not fully prohibit or test for, Adderall or similar substances. For example, the policy of Epic Games, which administers competitions for Fortnite, states, “Prescription drugs may be used only by the person they are prescribed to, and in the manner, combination, and quantity as prescribed.” It does outlaw the unauthorized use or possession of prescription drugs, as well as alcohol or illegal narcotics.

The Overwatch League follows a similar policy, stating in its code of conduct that “prescription drugs may only be used to treat the condition for which they are prescribed and may not be used to enhance performance in a game, match or tournament.”

Asked for comment on the use of Adderall by players, Epic Games and Activision Blizzard, the parent company of the Overwatch League and Call of Duty League, both provided their league policies and declined further comment.

Riot Games, which operates the League of Legends esports leagues, stated that its rules prohibit the use of illicit substances by players. “We regularly review these rules for compliance with local laws around substance classifications and player privacy rights. We will continue to consult with medical experts, regulators, and player representatives to properly safeguard the well-being of our players and the long-term health of the sport.”

A common argument against banning Adderall and similar substances is that there is no proof the medication makes the user better at video games. When asked if the Overwatch League would consider drug testing in a 2018 interview, former commissioner Nate Nanzer responded that “Adderall is a legal prescription in the United States of America and … there’s no data that suggests that it makes you better at playing Overwatch.”

The costs, and disputed benefits, of performance enhancement

Gamers themselves have mixed opinions on whether Adderall is a performance enhancer or not. Professional Counter-Strike player, Emma “Emy” Choe, doesn’t think drugs like Adderall play much of a role in a player’s potential for success.

“Countless players below pro take Adderall but will still fail to beat the best of the best,” Choe said. “If there was a huge difference between players on Adderall and not, I think people would make a bigger deal about banning it at all gaming events.”

In fact, Choe believes Adderall even has the ability to make a player worse. “They get too focused on one aspect of the game and forget other important/crucial game-winning factors such as communication,” she said.Murphy, the Halo pro turned Fortnite streamer, admits the drug has its limits. “The drug can only have such an effect on your game … it’s not some magical pill that instantly makes you amazing at a game. You still need the skills to compete.”

But some pros believe they have a clear benefit. Aspiring Fortnite pro, Jack Watson, told The Post he often takes either Adderall or Vyvanse when he competes in the various online Fortnite competitions such as the Cash Cups and the Winter Royale. Watson, who has prescriptions for both Adderall and Vyvanse, has over 41,000 eliminations on Fortnite — a number that at one point ranked him third in the entire state of Maryland, according to Fortnitetracker.com. Watson attributes much of his success to these ADHD medications. “I notice very significant differences in my gameplay,” Watson said. “My reaction and processing time is exponentially greater than playing without [Adderall]. It feels like steroids for video games.”

“It just kinda makes people do better jobs,” said Yeonjoon “ArK” Hong, a professional Overwatch player for the Washington Justice. “While others don’t use it and [stay] underrated.” The motivation for players to take Adderall, in Hong’s opinion, is derived from personal gain. “[It’s] not like peer pressure or, ‘I should do it for the team!’” the Overwatch All-Star claims. “It’s more like ‘f— it, I just wanna [destroy] that guy.’”

Sloss agreed with Hong. “A lot of these kids are hearing [that] some of the best players in the world are taking Adderall. They wanna either experiment and see if it helps or just do what it takes to be the best.”

Maria St. Pierre, a Clinical Project Manager in the Neurological Clinical Research Institute at Massachusetts General Hospital, worked as a Laboratory Manager and Lead Research Assistant for the Teaching and Gaming Lab during her graduate and undergraduate studies at Towson University. She, too, believes there are clear advantages to those using the medication.

“It is like PEDs in sports. They use it as an enhancer to gain an advantage over their opponents,” St. Pierre said. “This is why steroids and PEDs are banned from traditional sports. … Those taking Adderall have an unfair advantage over someone who is not taking Adderall or any other stimulants.”

St. Pierre believes that Adderall and drugs like it should be banned from competitive gaming events, as they have been by the governing bodies overseeing traditional sports. Both the World Anti-Doping Agency (WADA) and the U.S. Anti-Doping Agency (USADA) consider Adderall to be a performance enhancer. The NFL, NBA and MLB all have Adderall on their banned substance list.

As with any drug, abusing Adderall can have long-term consequences. “Taking any medication that is not prescribed to you can have long-lasting, detrimental effects,” St. Pierre said. “Physically, Adderall is like taking speed or meth. … Psychologically, not only is it a highly addictive drug, but it can also cause psychosis and paranoia.”

The problem of where to draw the line

On the surface, it might seem like the obvious solution for leagues and tournament organizers is to just copy the ESL; mandatory drug testing at tournaments and if you are prescribed, you get a pass. But some, like Murphy, said that obtaining a prescription for Adderall under false pretenses is relatively simple.

“It’s everywhere and it’s easy to get,” said Murphy. As an owner of both an Adderall and Vyvanse prescription, Watson agreed he didn’t think it would be hard for gamers to get a prescription for these drugs.

Another concern is the cost and difficulty to implement drug testing. In a behind the scenes video on the ESIC YouTube channel, Smith claimed that the ESL spends an excess of $40,000 per year on drug testing. While that sum would be more than manageable for a publisher-backed league like League of Legends’ League Championship Series or Overwatch League, smaller tournament operators would find it much more of a burden.

Thomas Schofield, CEO of Smash.gg, a platform used by tournament organizers to operate events for a broad mix of game communities, explained that while there are large organizations and leagues that use Smash.gg, most of the events on the platform are amateur tournaments with fewer than 32 participants. Very few tournament organizers have the means necessary to implement drug testing at their events.

There’s also the problem, if not the impossibility, of administering testing for online tournaments and events not held in one physical location. In late December of 2019, Epic Games hosted the annual Fortnite Winter Royale. The total prize pool for the tournament was a whopping $23 million. Participants in that tournament’s qualifying rounds all played from remote locations, where there is no feasible method for Epic or another governing body to know if the participants are using PEDs.

Banning Adderall and similar drugs outright could lead to a slippery slope when it comes to other legal substances like caffeine. Professional Call of Duty player Zach “Zed” Denyer said in a direct message exchange with The Washington Post that he used caffeine pills. WADA has caffeine on its prohibited substances watch list and the NCAA currently limits caffeine consumption for college athletes. But caffeine products and energy drinks are often frequent sponsors of esports competitions. Banning those could carry a financial cost for leagues and tournament runners.

Esports leagues and tournament organizers must grapple with these questions and arguments, and clear-cut solutions are in short supply. An outright ban on ADHD medications risks hurting players with legitimate prescriptions. But if organizers begin testing for Adderall but allow those with a prescription to use it, they risk encouraging players to seek a prescription illegitimately. Ignoring the issue completely may lead to competitors, fans and spectators questioning the integrity of esports as a whole — not to mention any consequences surrounding the overlooked dangers posed to players through abuse of these drugs.

“People are destroying their lives and futures,” Sloss said. “There’s no limit … one of these days you’re gonna see somebody have a heart attack or something serious happen.”

A correction is unlikely to come from the players themselves. As Murphy said, competitors will do whatever it takes to make it big in esports, myself included.

 

Youtubes Ad Rev Esports

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Is YouTube’s $15B in Ad Revenues a Map to Esports Business’ Holy Grail?

  On Monday, Google’s parent company Alphabet reported its 2019 annual financial results. As part of that report, the company disclosed the ad revenues of its subsidiary YouTube for the first time. According to the company’s SEC filing, YouTube generated $15.2B USD in ad revenues for 2019, up 36% from $11.2B the year prior. In 2017, the video-sharing platform’s ad revenues were $8.2B.

Putting the 2019 ad revenues in perspective is the fact that it is just over nine times the amount ($1.65B) that Google spent to acquire YouTube in October 2016. Although impressive, this number does not necessarily indicate that Google’s investment in YouTube is breakeven or profitable yet. In the Q4 2019 earnings call on Monday, Ruth Porat, the chief financial officer of Alphabet and Google, said, “We pay out a majority of revenues to our creators.”

YouTube is a platform catering to a broad audience, of which gaming and esports is just a minor share. A rough estimate is that about 7% of all YouTube hours watched are gaming and esports related, which is taking about 1B total hours watched daily and 50B gaming content hours watched in 2018 into account. When neglecting uneven distribution of ad revenues by video category, that would be approximately $1.1B in ad revenues generated by gaming content. For the sake of completeness, it should also be noted that YouTube has over 1B active monthly users and made $3B in non-advertising revenues, which included 20M YouTube Premium and YouTube Music paid subscribers as well as 2M YouTube TV paid subscribers.

I’ll take this occasion as an opportunity to look at the importance ad revenues might have in developing a profitable esports ecosystem. As many esports teams and leagues model their revenue streams after traditional sports teams and leagues, I will look at those for comparison. Most major sports leagues make more than 50% of their revenues from media rights, which are usually paid for by broadcasters covering them. Broadcasters, in turn, make a majority of their revenues in advertising revenues and subscription fees. Considering the overlap in business strategies, it is likely that media rights will be one of the most important revenue streams for the esports ecosystem going forward as well.

With that in mind, the advertisement revenues published by YouTube provide an indication that there is money to be made for video-sharing and streaming platforms through advertising and subscription revenues, which can be used to purchase media rights. YouTube did just that last week when it entered into a multi-year strategic relationship with Activision Blizzard, including exclusive worldwide streaming rights for the developer’s two franchised leagues, the Overwatch League and the newly established Call of Duty League.

Aside from the $15.2B landmark from YouTube, there are several more numbers that we can look at for orientation. The Information states that Amazon-owned Twitch brought in about $230M in ad revenues in 2018, and as of the middle of 2019, Twitch was on track to deliver about $300M in ad revenues for the full year 2019.

Three Chinese Tencent-backed live-streaming platforms add further context to the potential of ad revenues in gaming and esports. All three companies are in the early stages of monetizing their platforms. Huya reported advertising and other revenues increased by 91.4% to ¥221M RMB ($32.1M) for the fiscal year 2018. DouYu reported advertising and other revenues increased by 68.5% to ¥196M ($27.5M) in the third quarter of 2019. Bilibili reported advertising revenues of ¥247M ($34.6M) for Q3 2019, representing an increase of 80% from the same period of 2018.

Other platforms are still in the very beginnings of utilizing ad revenues; Microsoft-owned Twitch competitor Mixer started adding ads to its streams in September 2019. Just like linear TV stations, the main income sources of all of those platforms are ad revenues and subscription fees. The executive summary of streaming platforms’ business plans is the constant acquisition of new viewers and paying subscribers as well as the retention of existing customers. One of the key resources being the content on a platform, it is in their interest to buy exclusive media rights to popular esports formats as they help drive fans to their sites. Looking at sports once more, one 2016 estimate had Disney’s ESPN paying out $7.3B annually for sports rights. 

A massive advantage that online video and streaming platforms have over linear TV is their superior ability to custom tailor ads to viewers’ personal interest profiles, which allows them to create better value and return on ad spend for advertisers making it more attractive than TV advertisement deals. According to an Ipsos Connect research paper, a 62% majority of all YouTube mobile advertising receives viewers’ attention compared to only 45% of TV advertising. Furthermore, paid YouTube mobile advertising is 84% more likely to receive attention than TV advertising is.

Notwithstanding the fact that this is neither an exhaustive nor a complete consideration of all the aspects of media rights in esports, YouTube’s latest ad revenues number can help businesses understand that a solid content distribution infrastructure and value chain is already in place that has the potential to generate sufficient cash flow to build a sustainable esports ecosystem. Moreover, the numbers looked at in this article are a hint to the probability of esports stripping away brand value communication channels from traditional sports within the current decade.