Why Esports is at an Inflection Point and Announcing our Investment in Maestro: the Engagement and Analytics Platform for Enterprise Live Streamers
Esports is a bizarre thing. How can competitive gaming be so popular? This question continues to perplex many and the majority continue to be in denial over the meteoric rise of esports as a global phenomenon. What many may not realize yet is that we are at an inflection point in esports that will catapult it to be the next great form of entertainment and sports leagues. But in order for esports to truly become the next great form of entertainment, a few remaining fundamental problems need to be addressed in order to ensure long term success and sustainability.
One of the key issues facing the esports industry is underdeveloped infrastructure. There are a few key pieces at play here. The most critical pieces were the streaming sites like Twitch, Azubu and Hitbox, which laid the groundwork for the industry. They enabled the proliferation of content into all corners of the globe and connected streamers with viewers and other players on a scale much grander than LAN parties ever could. The more recent entry of Facebook and YouTube Gaming into streaming and esports only increased the reach and discoverability further.
The second layer of key infrastructure is the organizing, managing and matching of tournaments and players. Companies like FaceIt, Battlefy, Smash.gg, Electronic Gaming Federation and a couple of others are on the ground helping tournament organizers and brands to organize and manage the thousands of tournaments happening on both the grassroots and championship levels. Without these companies, the logistics of managing and keeping track of tournaments and players would be a huge headache. These platforms are essential in the smooth organizing and operation of tournaments and also help help everyday players find tournaments, again helping to grow the ecosystem. Great progress has been made here, but the road ahead is still bumpy and long.
The third layer of the infrastructure being laid out is more physical in nature. This layer is aimed at esports teams and leagues in their attempt to professionalize and regionalize the various teams to specific geographic locations. While this is not something I particularly agree with, (as I wrote about in here) it is yet another piece of the puzzle. Creating a network of regionalized teams and physical events around certain circuits and leagues can help to bring new fans into the industry and create more excitement. With these investments, the management of leagues and teams also becomes more professionalized as seasoned executives from traditional sports and media join their ranks. Perhaps, another unintended consequence of this will be the continued strengthening of the publishers’ hold on the value chain as they seek to exert more control over their titles to capture more value.
As you can see from above, the first three levels of infrastructure are addressing the needs of the endemic actors in the ecosystem: the players, teams, fans, tournament organizers and leagues. These tools have made it easier to find, watch, follow and participate in this phenomenon regardless of physical location. These first three levels have begun to solve the basic problems of the industry and have received significant investment to date with one or two companies emerging to dominate each of the levels.
Yet, the fourth layer, which I call the business layer, is lacking. The exploding interest in the space and resulting attention and money entering the industry provide perhaps the greatest investment opportunity to build the next generation of the live streaming business layer. Yet, the majority of the investments in the space has gone towards consumer facing platforms and applications, teams or individual streamers. The needs of enterprise streamers and their business partners have been largely ignored. Building software and tools for publishers, brands, teams, enterprise streamers, leagues etc will help to strengthen the young industry and ensure long term sustainability. And that is why we invested in Maestro.
We are extremely excited to announce our investment into Maestro’s $3M Series A financing alongside Hersh Interactive Group and Stanford-StartX. Maestro is a B2B SaaS platform enabling analytics, engagement and monetization focusing first on esports but with clients and applications in many adjacent verticals including music, news, sports, fashion, etc. We are delighted to be partnering with Ari and the team as they continue to build a company that is addressing a fundamental problem in the rapidly growing industry.
We invested in Maestro because: 1) esports is at an inflection point, 2) changing video consumption patterns and 3) shortcomings of existing infrastructure.
1) Esports is a Massive Opportunity at an Inflection Point
- Exploding Viewership – Plenty of consultants, banks and research groups writing about viewership and being bigger than traditional sports finals, so I won’t.
- Coveted Demographic – Highly educated, engaged, technologically savvy demographic with high disposable income. Brands and agencies are finally realizing that esports fans are very valuable and much much bigger in number than they expected, however they are difficult to reach through traditional advertising means. This demographic is very tech savvy and a high proportion of them use ad blocking software.
- Social Acceptance – Gaming is no longer on the fringes of society and doesn’t have the same stigma as it did 20 years ago. Gaming is now socially acceptable with gamers in certain markets, particularly in Asia, reaching celebrity status. Increased media coverage (including ESPN, which three years ago didn’t think it was a sport and later launched full coverage) and sponsorships are further driving acceptance. The emergence of college leagues and teams will further drive professionalization and the next generation of fans.
- Inherently Global – No other sport or form of entertainment has such a global reach. Competitive gaming has been and will be inherently global. Between the various titles, leagues and teams, the scale and connectivity of this opportunity is amazing.
- Professionalizing the Industry – Traditional sports and media teams and investment firms are entering the industry through various forms of partnership and investments. This lends credibility and capital of course, but more importantly, it brings experience, scale and connections. Examples include NBC’s partnership with Rocket League, NBA and 2K and more recent announcements by Madden and Formula 1.
- Bridges Online and Offline – Esports started as and will continue to be a digital first phenomenon, but the industry has been incredibly successful at creating stunning offline experiences through the various tournaments, which are electric. With more tech and experience behind them, this platform is only in the beginning stages of having a huge impact on the industry in a way that more of the population is accustomed to experiencing competitions.
- Innovative Monetization – A digital native phenomenon cannot be monetized in traditional linear models of banner ads, sponsorships, logos on jerseys, etc. Nonetheless, over the next couple of years that is what teams, brands and marketers will continue to try to do. However, this digital forum with an incredibly engaged base will be able to monetize in innovative ways through interactivity and microtransactions that in the long term will increase not only revenues, but also engagement and relationships.
- Publishers are ready – Game publishers have seen the tremendous interest and value around competitive gaming and they are realizing that they are missing out on something big. As they continue to invest into esports as Riot and Blizzard have, publishers’ influence over the ecosystem and value chain will continue to increase as they seek to capture more of the value. With this, they will have not only greater control but will also have greater resources to invest into esports and the necessary promotion.
2) Changing Video Consumption Patterns
- Video is Exploding – OTT, Peak TV, streaming sites etc. The amount of video that we are consuming is staggering. As the TV medium format returns to people’s good graces, we will continue to be overwhelmed with new shows and series. Cisco predicts 82% of all IP traffic will be video by 2021. This explosion of content will continue to add to the difficulties of discovering online content and monetizing it.
- Breakout of Live Streaming – Live streaming has been prevalent in gaming for a while now, but new use cases have emerged in Asia that have been extremely popular. Individuals and brands in China and Korea have been able to build huge followings by livestreaming their daily lives and raw content, monetizing them through micro transactions, micro subscriptions and donations. This hasn’t quite taken off in the US in the first wave (Periscope, Meerkat, Facebook Live) because the monetization element was missing and the wider population wasn’t conditioned for this new form of entertainment. There is a huge opportunity for celebrities, teams, brands, etc to embrace this in longer form content than Instagram or Snapchat.
- Unbundling of Video – With distribution controlled by a few large incumbents and more noise than ever in new entertainment options, content producers are seeking new ways to reach the viewers through direct-to-consumer experiences, as Disney has recently announced. The question will be if consumers will be willing to purchase multiple skinny bundles. My early thoughts are that they will probably not purchase too many bundles and in order to take advantage of this unbundling, creators will need to become more creative in the way they monetize.
- Direct Viewer Relationship – Owning the relationship and experience with the customer can fundamentally change the way we think about and pay for entertainment. For the first time, creators will have control over distribution and relationships and will be able to personalize the entire viewing journey based on the data they have direct access to. This will be extremely important and beneficial for both sides.
- Monetization – People expect content to be free or available through one of their subscriptions. Yet, there are opportunities to change this behavior with innovative monetization efforts that can spawn a whole new class of creators.
3) Existing Infrastructure is Lacking and Holds the Industry Back
- Tournament Organizing – A ton of progress has been done over the past couple of years by companies like FaceIt, Battlefy and Smash.gg that are building platforms to organize and host tournaments. However, a lot of work still needs to be done in order to provide a truly seamless experience for organizers, teams, players, brands etc.
- Mostly Consumer Facing – With increased funding in the space, most of the VC investments have been going into consumers facing platforms and apps. A ton of money has gone into the likes of Kamcord, Mobcrush, Discord, Dojo Madness, etc in a “first get the user then figure out monetization later” mentality. This has neglected the needs of publishers, brands and other business entities that are necessary for the industry to grow and thrive.
- Lack of Unified Data – Data is paramount in today’s world. The lack of unified data sources and data integrity in the industry presents significant barriers to create historical records, provide real-time stats, keep track of teams and players and set bet lines. Most of the existing data is either short lived or lives in individual silos controlled by publishers or tournament organizers
- Outdated Tools – Current analytics and measurement tools have been built for Video 1.0 where eyeballs and concurrent viewership were the only metrics that used to matter. With today’s distracted and multitasking viewers, the quality of the viewers and their engagement matters more than just their eyeballs. Yet, this remains a technological and business problem. Brands and agencies are beginning to understand the space, but without these tools to analyze the data and metrics, they can’t deploy real money into esports.
- No Incentive to Share Data – Most of the major platforms either can’t or don’t want to share data. These large streaming platforms aren’t incentivized to provide streamers with direct access to granular fan data. If streamers want to reach their audiences, they should upload or stream more content. This, in turn, provides more ad inventory to fuel the main revenue driver for video platforms. This philosophy ends up driving product decisions and creating the typical audience middleman structure.
4) Why Maestro: Maestro is an enterprise platform addressing the underlying B2B problems in esports around infrastructure and data
- White Label SaaS Platform – Provides an easy to use platform to create interactive overlay content to engage viewers, analyze their viewing behavior and provides a possible monetization platform.
- Tools for Underserved Stakeholders – Creating tools for publishers and brands that have to date been largely ignored by the ecosystem, yet are critical to growing the industry.
- Platform Agnostic Streaming – Allowing streamers to host on their own sites or disseminate through other streaming websites with direct injection into the streams.
- Building a Data Platform – Solving the huge problem of building a detailed CRM and viewership analytic tools for the live streaming generation that are desperately needed by publishers, marketers, agencies, teams/players, etc. Huge opportunity to become the next gen Nielsen for cord cutting generation with incredible value in the data they capture.
- Enables Unbundling of Content – Provides unique benefits to both sides by allowing more stakeholders to host their own streaming: better discoverability and direct relationship with viewer. The resulting data can be used to provide better experiences for both the streamers and viewers and cut out the middle delivery man.
- Powers Monetization – Maestro enables the future of video content monetization through microtransactions, subscriptions, tipping and commerce all from one easy to use software platform. Imagine being able to sell skins, games, merchandise, limited edition items, etc through the stream directly to your fan base, regardless of which game or industry it is in.
- Broad Sector Applicability – Initial focus and success in esports but broad applications to sectors outside of esports: sports, news, music, fashion, cooking, enterprise etc.
- Stellar Customer Base – Great success and reviews from existing clients base which include Sony, Microsoft, EA, ELeague, ESL, Coachella, Grammy’s and Adobe amongst others.
- Strong Focus on Monetization – Focus on revenue generation from the start with SaaS platform with multiple additional revenue streams including data and commerce solutions.
- Proven Platform – Fully built platform capable of handling up to 1 million concurrent viewers with proven track record of live streaming to large audiences with Coachella and the Grammy Awards.
- Fantastic Team – Last but not least, Ari and the Maestro team are highly respected, honest, efficient and hardworking. We’re looking forward to building on this relationship.
As always if you: Agree? Disagree? Questions? Comments? Coffee? Lunch? Ping me.
If you’re a brand or interested in the space, shoot me a note. Be happy to connect.