When the world championship final of the wildly-popular video game League of Legends hits Paris later this year, it promises to be the biggest esports events of all time. Last year’s final in South Korea had a staggering 200m viewers, and excitement about gaming tournaments has only been growing.

This surge of popularity has led to a rush of venture capital money going into the esports sector. The trouble is that the event, much like all esports, is actually set to make surprisingly little money from its millions of fans. Why? Because most followers of esports stream matches for free on Twitch, Youtube, or Facebook.

This relative lack of profitability is what one of Europe’s largest early-stage esports investors, Jens Hilgers, is on a mission to solve. His current thesis? That the esports business will charge streamers to watch showdowns with their favourite gamers by creating “premium viewing” packages — much like boxing promoters charge hefty pay-per-view fees to watch big fights. Basic free streams would be preserved for fans not wanting to pay.


“There is just no paid content offering for Esports right now,” Hilgers tells Sifted. “There must be, and soon there will be, a premium Esports professional league offer, where you will buy the league pass and get a premium watching experience and some exclusive extra content.”

Visionary

In the world of esports, Hilgers is a powerful man. Some in the industry call him a “visionary”. Another called him a “power broker”. One person contacted by Sifted did not want to publicly criticise him, due to his position as a big fish in what is still a surprisingly small pond.

Hilgers started out in his student days as a gaming enthusiast in 1990s Berlin and became a serial entrepreneur, founding a prize-winning gaming team G2 Esports and the company Dojo Madness, which makes tools for training gamers.

He was also the co-founder of Electronic Sports League, one of the oldest and largest organisations that produces video game competitions worldwide.

Hilgers is now one of the most powerful investors in the sector. His Esports-only fund Bitkraft Esports Ventures raised $125m, according to an SEC filing last December.

Competitive gaming has gone from fringe obsession to booming business over Hilgers’ twenty-year career. There are now 380m people who occasionally or regularly view esports around the world — up 15 per cent from last year — according to a report from market intelligence company Newzoo.

The trouble is that the global average annual revenue per esports “enthusiast”, according to the same report, is around $5.49 a year. This is 9 times lower than the NFL’s yearly revenue-per-fan.

Charging fans more

Hilgers says that fans of traditional sports are used to shelling out for pay-per-view content and premium front-row passes where you can literally smell the blood.

“You probably spend $40, $50, maybe $60 dollars on an entire weekend Esports tournament right now, whereas your average soccer ticket probably costs you $100 for just three hours of match-time, right? Ultimately we will see that coming closer together.”

“There will be a premium Esports professional league offer, where you will buy the league pass and get a premium watching experience.” Jens Hilgers

The parallels with traditional sports seemed obvious to Hilgers when he first started out in competitive gaming twenty-five years ago:

“It just felt like a sport. We would come together as a group of people, practice together, prepare together for a big match, be excited about the results, and discuss if we should change players or what the other teams were doing. All of these things started to happen on a very small level, and there was very little prize money and very few spectators. But it all felt the same.”

Importantly, Hilgers believes that while premium “enhanced viewership” will begin to close the gap, it is not necessary to hide all content behind paywalls. “Free esports content is very important for our industry, offering a frictionless entry into great entertainment, and I don’t want to miss that.”

Some entrepreneurs are already edging in this direction. Erik Åkerfeldt, the cofounder of Stockholm-based Esports broadcaster Znipe.tv, is attempting to upgrade the viewing experience for subscribers with add-ons — namely the Znipe DreamHack Digital Pass is offered for €6.99 per month, and includes the ability for subscribers to switch between different point-of-view cameras which capture live game footage.

Will people pay?

Leading voices in the esports industry have doubts about whether such “premium” models will ever really take off. They argue that the similarities esports shares with traditional sports don’t run deep: importantly, its audience is largely millennial or younger, and the online entertainment ecosystem that birthed them gets by on free, instant content.

This means that old sports monetisation models don’t apply, says Sebastian Läger of TwogNation, an esports firm advising newcomers in the business. “Esports is an industry of secondary monetisation, and in the internet at large people expect everything for free, and that’s really hard to get out of their heads. A lot of consumers are also young, hence monetisation is low.

“[Premium content] will exist, but it will not move the needle on radar of what is actually shaping the industry,” Sebastian Läger, founder at TwogNation

“A lot of the time, we’re also talking about regions of the world where money doesn’t have the same value as it does to us. If you look at Southeast Asia, $5 is a whole week of living. [Premium streaming] simply doesn’t work at this time.”

Indeed, Newzoo’s recent demographic survey of Esports viewers shows that alongside the US, the biggest viewer-bases for esports exist in China, Brazil, India and Russia — countries whose populations have paid less for entertainment in the past.

An industry expert at one major European consultancy, who did not want to publicly disagree with Hilgers, says: “The esports audience is so used to getting things for free that there would have to be so much added value for a large percentage of people to pay a specific amount of money. It could only possibly be done with the very top stars — this is not a scalable thing.”

A premium model would also go against the grain of a donation-reliant industry. Without any paywall, competitive gamers on Twitch are cashing out by building loyal communities of viewers who choose to donate money to their favourite content creators.

“Millennial audiences are more sceptical, and they’re used to trying things out before they buy. You wouldn’t donate to a streamer the first time you watch them. But if you really like something, you can pay for it — and to me that feels more organic,” said the same consultant.

Läger agrees, saying that “the fraction of the industry that will be around this premium content type is going to be very, very marginal — it will exist but it will not move the needle on radar of what is actually shaping the industry.”

Instead, Läger considers media licensing deals a more promising revenue stream. You can see why: reportedly, Twitch is paying $45m each year to host The Overwatch League. The future looks bright, with Newzoo estimating that Esports media rights deals generated $100m in 2018, and predicting that number will grow to almost $400 million by 2021.

While Jens Hilgers believes that premium streams are the next frontier for Esports, the majority of his investments are actually pouring money into startups that add “incremental value” to the fan experience.

The reality? A diverse range of esports startups worldwide, with most of his European investments focused in Germany.

Berlin-based startup Runtime is the world’s first esports nutrition provider. Its ‘Next Level Meal’ is from basically huel for gamers – a powdered meal replacement made for pro-gamers which supports “endurance”.

Lofelt is another German startup funded by Bitkraft. It’s working on immersing players in the game with vibrating headsets that allow players feel every jolt of in-game action.