Setting Up an eSports Team: How to Avoid the Pitfalls and Win Big

Companies across the technology, media and telecommunications (TMT) industries are increasingly focused on the world of eSports - with good reason. eSports presents a way to interact and engage with audience and customer segments that are becoming increasingly hard to reach via conventional avenues.

The growing popularity of eSports and its fans’ inclination to spend on their favoured pastime is mirrored in the computer gaming industry’s meteoric rise. In 2018, video game revenues surpassed global box office revenues.

Establishing a dedicated eSports team has emerged as an efficient way for companies across the TMT space to make their mark in eSports. It is a way to generate positive buzz and genuine interest amongst fans about your brand.

BDO has a global focus on eSports and assisting companies with engaging with entities in the space. At BDO Spain, we have consulted for broad a range of companies on endeavours such as sponsoring eSports players, teams or leagues, as well as creating their own eSports teams. Furthermore, BDO Spain plays a pivotal part in AEeS, Spain’s leading eSports association.

Here we want to present advice and lessons learned that form part of the foundation of our efforts in the space. We have tried to structure it around some of the main questions that most company decision-makers will ask themselves when looking at the eSports space.

What are different ways to get involved with eSports?

This question should be your strategic starting point for evaluating the pros and cons of investing directly or indirectly into eSports or the surrounding ecosystem. Each approach has its own associated merits, possible positive effects and challenges.

A SWOT analysis is an excellent first step, augmented by consulting with industry experts. Such an initial exploration should help clarify your company’s situation regarding the eSports space and the potential benefits that could arise from various approaches.

The three main ways of getting involved would be:

  • Sponsorship: Sponsoring individual teams, or players, events, or using game-specific elements in your marketing strategy.
  • Advertising: Advertising at events, on online eSports platforms like Twitch or YouTube Gaming, during eSports broadcasts or in games.
  • Franchising/Team creation: Creating or buying your own eSports franchise or team.

The approaches are by no means exclusive, and there are plenty of possibilities for starting with an explorative effort - for example, through sponsoring a team or event and learning more about the space. Lessons learned from such efforts can be used in a potential transition towards a more substantial presence, for example, through building up an eSports team.

Why should I consider creating an eSports team?

For one thing, it may be the best way to engage an audience that is increasingly difficult to reach through traditional channels – and may be described as core customers of the future. Studies show that eSports is especially popular amongst younger generations. Finding authentic ways to engage with these potential customers is a challenge that setting up your own eSports team can help overcome.

Secondly, the eSports space is growing rapidly. It will see revenues reach $2.4 billion in 2020. Revenue growth is driven by prize money, rising franchise valuations and the size of media broadcast deals. In other words, setting up an eSports team can lead to direct revenue generation, even without including the net positives from marketing and engaging potential customers.

Thirdly, fans of eSports tend to be economically better off than their peers and are prepared to spend a good part of their free capital on their passion. That includes products and services associated with the teams, players and games they like.

Finally, brands across the board are increasing their presence in the space. Getting into a space before competitors is a valid strategic consideration in most advertising and marketing efforts – as it should be for eSports.

To summarise, companies in the TMT sphere should consider getting involved in eSports because it, among other things:

  • Provides access to younger customer segments that are hard to reach through traditional channels
  • May generate revenue streams that will likely to grow in coming years
  • Can improve the likelihood of eSports fans’ buying your services and products
  • Will give you a prime position to capitalise on an industry that looks set to undergo rapid growth

What are the first steps in setting up an eSports team?

Once you have decided to pursue creating an eSports team, your next step should be identifying the potential positives and synergies that engaging with eSports can lead to for your existing revenue streams. At the same time, it will be beneficial to outline a strategic business plan for your team, including KPIs, milestones, goals, how to measure your success, etc.

The answer to such areas will often depend on your industry. For technology companies, synergies include showcasing your solutions to prospective buyers. For other sectors, the synergies may initially seem fuzzier. In recent years, an increasing number of fast-food restaurants have signed eSports sponsorships, as have car manufacturers (AUDI) and insurance companies (GUICA).

On the surface, it may strike one as non-sensical, but there are many good reasons to pursue this approach. Telecoms may provide a good example. Many telecom firms see Esports as a way to engage younger clients and brand themselves as digital companies rather than merely providers of phone services. It also provides them with opportunities to test new products or branding strategies in limited rollouts. The technically advanced nature of eSports also provides a testing ground for new technologies and services. These are some of the reasons why companies like Vodafone, Telefonica, and Orange, are investing in eSports.

Should you build a team or buy an existing one?

With the strategy in place, you are ready to launch your eSports venture in earnest. You have two main options facing you at this juncture: creating a team from scratch or acquiring an existing team.

Both approaches hold merit, and the optimal choice depends on a range of factors. The list includes what you are hoping to achieve through your investment, potential geographic or market segment limitations, your budget and the timeframe for your eSports venture. All of which will be tied to the strategic goals and KPIs that you set for your eSports initiative.

Creating an eSports team from the ground up will inevitably take more time than acquiring a team. However, it also tends to lend your efforts a degree of authenticity in the eyes of eSports fans. Secondly, creating a team allows you to stake out the segments that you wish to target (games, geographic regions, demographic segments). An organic approach also makes it easier to align and integrate your eSports team with your existing organisational setup and provides more time to find ways to bridge any potential cultural gaps between the two.

Acquiring an existing eSports team has two main advantages over all else: speed and access to existing fan bases. Those advantages can be tempered somewhat by the novel aspects of eSports due diligence. In other words, companies can, if they do not have the right partners, end up not knowing what they are paying for. On the positive side, existing teams not only benefit from lessons learned and knowing the eSports industry but also often have a network of fans and business contacts. Your brand will also get more immediate exposure to fans across the globe.

What should the back-end setup look like?

For running an eSports team, you need to fill several positions beyond just the players. Some of the roles and responsibilities can be in-housed. You may also decide that the optimal approach is to run the eSports team and surrounding infrastructure as a separate division or structure it like an independent start-up.

Some of the positions that you may want to consider filling include:

  • Founder/Owner/Director
  • Marketing Director
  • Social Media Manager
  • HR manager/Team organiser
  • Game(s) coaches

Staff and players will both be representatives of your brand. Contract negotiations should include covering behavioural standards, but it is important to understand the eSports scene as well. Too many limits and regulations will make your endeavour look inauthentic and alienate the fans you are looking to engage.

Internally, you will also be working with a budget, which should be set to cover at least:

  • Salaries (Players & Staff)
  • Gaming equipment and other gaming-related costs
  • Travelling expenses
  • Event-related expenses
  • Tournament entry fees
  • Travelling to and attending industry events
  • Media expenses

Your players and staff will likely represent the most significant expense. However, franchise rights for certain games are becoming increasingly expensive.

How do I make a return on my investment?

The answer will depend on what you decided in relation to setting up an eSports team or going with other forms of engagements. For both, the returns can be challenging to quantify. For instance, publicity generated through your eSports endeavours may lead to new business opportunities and increased sales, but causality will be challenging to determine.

For companies who set up their own eSports team, the math can, to some degree, be somewhat easier. Prize money, media earnings and advertising revenue can all contribute real earnings to your company and be used to accurately gauge your ROI. However, precisely evaluating your returns will oftentimes require input from external experts with a keen understanding of both audits, financial matters and eSports.

Most organizations can start earning revenue very early on through videos on their channel or partnering with streamers and influencers. You may also be in a situation where you can partner with other companies who are looking to sign sponsorship agreements.

One thing to take into consideration is that setting up your own eSports team requires a quite significant operational budget. Without investments of a certain level, you will likely struggle to amass the gravitas through players, tournament results and subsequent online following that will help you become a success.

Even the best business plan may fail due to a lack of funds or willingness to accept investment risks. In some cases, it may be advantageous to explore partnerships with other companies and enter into joint eSports ventures.

What about the gaming decisions?

While these are the first steps, there is still much work to be done. For example, in relation to deciding what players, games, and geographic regions to focus on. The following is a concise introduction to each of those fields:

  • Should I start locally or be looking at this globally?  The answer to some degree depends on whether you are looking at buying an existing franchise, which will almost invariably be tied to a specific city or region or starting organically. In either case, the recommendation would be to, at least in the beginning, focus on local markets and players. That will give you a foundation and cheaper opportunities for setting up logistical aspects of the team, including places to train. 
  • What eSport(s) should I focus on? No matter what your long-term plans, strategies and goals are, the recommendation is to start with just one game. Otherwise, you risk spreading yourself thinly and making logistics and organisation more difficult. Focusing on a single game and developing your team within that area is also an opportunity to learn invaluable lessons for future endeavours. It is a way to find out what works and what does not work that will stand you in good stead.  
  • How do I find players? The process is very similar to how professional sports teams find theirs. You can hold try-outs or qualifiers (a good way of generating free press), you can get the help and support of industry experts or set up a scouting system.
  • How should I market my team? Results on their own will probably not be enough to make your eSports team the talk of the town. Team branding is essential for success. Finding a tone and style for your communication is also very important. Getting it wrong would likely make your team seem less authentic. Striking a good balance between corporate messages and using the jargon and channels preferred by the eSports community is important.

The above is an introductory presentation of how your company may get involved in eSports. To learn more about the space, what you stand to gain from being involved and how to best structure an eSports venture, please contact us, or your local BDO office, for an initial, informal conversation.