A quick google for “DOTA dead game” yields TONS of results.

It’s an observation people have been making about DOTA for 15 years. However, its unique development over those 15 years is why it will continue to survive, and due to a coming fundamental shift in the esports profit model, will actually thrive.

The sports industry is beginning to take a real interest in esports – marking a fundamental change in its future trajectory. This hasn’t always been clear to me, but since its birth, esports has exclusively been an extension of the gaming industry. In retrospect this is obvious and intuitive, but the name, “esports”, has always made me think of the phenomenon in terms of the sports industry – one based on ticket sales, viewership, and sponsorship.

A recent conversation I had with a friends in the esports industry shed some light on my thinking and really evolved my perspective. I had always believed that there was a demand for esports tournaments, and those putting them on were hoping to make money. However, I learned that the majority of esports tournaments are simply not profitable – and in fact were never meant to be. For the most part, esports are only put on to grow the respective game. They are viewed by the gaming industry more as marketing for the game, less as entertainment for the viewer.

The gaming industry’s profits come from players. The more, the better. Players not only purchase the game, but can be relied upon to buy additional content in the game (micro-transactions). Some games are even free to play. Game developers are so confident that the incremental micro-transactions more than make up for the free admission. Thus, game developers created esports tournaments to attract additional players, and the money to put fund them really comes out of their marketing and advertising budget.

This creates a funny situation where 3rd party tournaments, put on by true fans of the game (or naive profit seekers), serve as free marketing for the game developers. They don’t even have to take the financial hit of putting on the tournament themselves. The fact that the Overwatch League is getting $20M buy-ins from sport industry organizations is just icing on the cake for Blizzard. They get paid upfront AND get tons of free marketing from the franchised teams, yielding new players and new profit. Team owners of the experimental Overwatch League may find profit if the league is a success, but there is no doubt that Blizzard is the real winner.

Still, the rapid growth in the popularity of esports signals a major shift. If it continues, esports will become more than just an extension of the gaming industry, but a sports and entertainment platform – where success and profit is based on viewership, not playership. All of sudden, games that were built to attract players may not have the same advantage they once did over games that organically developed to be competitive, difficult, and entertaining.

Newzoo predicts 303M “occasional viewers” by 2020 – that’s a lot. This surge in popularity is important because the sports industry now sees esports as a viable entertainment platform with enough viewers to generate profit on that viewership.

Unlike the gaming industry, the sports industry’s value prop lies in entertainment. People like to watch competition and will pay to see it. It leverages human’s inherent tribalism and respect for greatness. Even for those that don’t know the intricacies of a sport, there is still a joy in seeing YOUR team win and YOUR idol succeed. In the end, the NFL doesn’t necessarily care if more people play football – they care more that more people watch football. Their profits are largely earned from broadcast rights, sponsorships, and ticket sales which scale based on viewership.

The viewer based profit model and player based profit model are not necessarily mutually exclusive, but don’t exactly complement each other. The gaming industry views esports as way to earn players, and the sports industry views esports as a way to earn viewers. However, the medium of esports (the games themselves) are built by the gaming industry, and they have their player based profit model in mind during development. But as the viewer based profit model gains viability the approach of game development may have to change.

In addition to rising viewership numbers, this year signaled a major milestone in the viability of the viewership based model inherent to the sports industry. Until now, esports tournaments have largely been sponsored by endemic brands. That is, products you use while gaming: computer hardware, computer accessories, and to an extent, energy drinks. These brands knew that they could reach a demo of gamers that would be influenced by the sponsorship and eventually buy their product. The number of these brands is also fairly limited. Tournament organizers would LOVE to expand the pool of potential sponsors and ultimately drive much more revenue.

In 2017, a non-endemic brand entered esports in a big way. Mercedes-Benz sponsored DOTA2’s ESL One. They managed to integrate into the tournament with creative activations and push their product to an esports audience. The success of this sponsorship is a major victory for the viewer based profit model. Mercedes-Benz has set a precedent for non-endemic brands to enter the space, creating a major revenue opportunity for tournament organizers.

So, it took me a long time to get here – but here’s the point. Based on this shift towards the viewership model, are there games out there that become more viable as esports than others? Will game developers shift their philosophies when building new games?

For example, one of the tenants of gaining the players that are crucial to the player based profit model is a low barrier to entry. Games need to be accessible if they hope to grow. League of Legends has become the most played game in the world by taking DOTA’s model and making it easy to learn. Riot has spent resources on successfully onboarding new players and in general removed many of the complicated and punishing mechanics of DOTA2.

On the other hand, DOTA2’s developer, Valve, is often criticized for not spending enough time on making the game accessible. DOTA2 has a very high “skill cap” – that, plus an often toxic community and culture that discourages new players has certainly been a detriment to the game’s growth.

Still, DOTA may have unwittingly set itself up for long term success as esports goes mainstream, and the player based profit model of game developers shifts towards the viewer based profit model of sports and entertainment.

In sports, accessibility to actually playing doesn’t have the same weight on profit. America’s most popular sport, football, has a high barrier to entry. To play the official version of football, you need a minimum of 22 players with a full set of pads. It’s percentage of viewers that actually play (even just pickup touch football) is likely very low.

DOTA was organically built without a profit model in mind, like most traditional sports. It was developed on another game’s platform (Warcraft III) that didn’t allow for a profit model to exist. It wasn’t until after nearly a decade of development that a player based profit model was actually introduced (Valve, DOTA2). Because of this unique development, DOTA2 may be the best positioned game to take advantage of shifting weight towards the viewer based profit model.

It is not an easy game to get into, but that doesn’t matter because people watch it. In the past few years, the peak for concurrent players of DOTA2 was about 1.2M. The peak concurrent viewers of TI7 was around 5M though! Similar to football, people don’t have to play it to enjoy watching it. And while this is a weakness in terms of the player based profit model, it is a strength for the viewer based profit model that we seem to be moving towards. And while Valve may not see the profits, 3rd party organizers like those that put on ESL One and a personal favorite of mine, Midas Mode, will.

Through its years of directionless development, by growing the DOTA scene, building a competitive platform and tournament that appeals to a larger crowd, DOTA2 event organizers will see earnings from ticket sales, broadcast deals (Twitch, ESPN), and ultimately sponsorships (Mercedes-Benz, NASA) that outweigh those of micro transactions.

Assuming that esports continues to grow, and its profit model shifts weight towards the sports industry’s viewership based one, DOTA doesn’t necessarily have to be an accessible game to be successful. In fact it’s origin as a competitive game first, with little to no attention paid to actual profit, less of an emphasis on attracting new players, and more of an emphasis on “skill-cap” may make for longer term success as the viewer based profit model of the sports industry takes hold.