Opportunities and barriers for non-endemic brands in eSports-sponsoring

In the last years, sponsorship investments in eSports have strongly increased, leading to sponsorship being the highest contributing revenue stream today. However, especially for non-endemic brands, firsthand information on specific opportunities, barriers or challenges, and key success factors in comparison to traditional sport sponsorship are limited. Therefore, this paper includes numerous case studies from non-endemic brands explaining their strategic goals and approaches, executions, and key learnings, as well as an overall comparison to identify their similarities and differences.

Autor:
Danielle Spielmann

When looking at eSports, the origin of gaming and eSports lies several years back. According to ISPO Munich (the largest fair of the sport business), the first video games emerged in the 1950s which introduced the game of competition on PCs and consoles to our society. Currently, in 2020, the eSports industry is predicted to reach a global revenue of 1.1 billion U.S dollars, with China being the largest market by revenues (Newzoo, 2020, p. 5, 11). For 2022, the industry is projected to reach 1.79 billion U.S. dollars in 2022 (Gough, 2020a). This shows that the eSports market is one of the fastest growing industries with huge growth potential.
The total eSports revenue is financed through different revenue streams such as publisher fees and franchising, media rights, merchandise & tickets, advertising, sponsorship, streaming platforms, consumer contribution, and digital (Gough, 2020b; Fahey, 2020). When looking at the different revenue streams in the eSports market, the largest revenue stream is sponsorship (Gough, 2020b) (Fahey, 2020). Sponsorship investments in eSports have already grown steadily in the past years and are expected to continue to grow; therefore, many researchers consider eSports sponsorship a commercial investment with great potential as an analysis from Deloitte Corporate Finance LLC and eSports observer confirms (Colaco, Christoefl, Murray, Ashton, Seck, 2019, p. 2). This indicates the attractiveness of eSports-sponsoring for both endemic and non-endemic brands. Some of the biggest non-endemic brands in eSports-sponsoring are names such as Adidas as partner of eSports team Vitality, Red Bull as a beverage partner of multiple eSports teams and events, BMW as official sponsor of the eSports team Cloud9, McDonalds in partnership with ESL, or Vodafone as official partner of the ESL World Championship (Jahns, 2019).

What makes it attractive and relevant?
Consumers in the European countries, Switzerland, Germany, and Austria spend a total of 11 hours per week on eSports and gaming, which results in approx. 1.5 hours per day. In comparison, on average, people spend 1.25h per day on social media in Switzerland. (Hüttermann, 2019, p. 24). Further, in an era where customer experience and emotionality become very important for successful marketing measures, eSports offers access to an audience who strives on their passion for the sport, shows high engagement and involvement (Hamari & Sjöblom, 2017, p. 216), and seeks entertainment and excitement (Ströh, 2017, p. 57) which makes them an interesting audience for marketing activations. Additionally, consumers today strive for physical experience and live experience which is an explanation for the high attractiveness of the major eSports events and their high number of live spectators (Heina, 2019a). eSports games include an element of drama to enhance the experience, are considered means of escape from daily lives, and can include social interactions (Hamari and Sjöblom, 2017, p. 216-217). Next, eSports-sponsoring can be integrated in a company’s overall sport sponsoring strategy and combined with the traditional, offline sponsoring measures, as it is stated in the study from PwC (2018). The advertisement measures in eSports have a high level of individualization which adds to the benefit of sponsors. Lastly, after this year’s pandemic times, the potential of eSports has grown even more. While traditional sport was not allowed to be performed and events could not be hosted over several months, eSports was one of the only industries not heavily affected by those restrictions. As a result, Niklas Timmermann, Vice President of eSports-Federation Germany, predicts that eSports will become the second largest sport in Europe, behind football (Sebek, 2020).
In order to dig one level deeper, this thesis aimed to answer the following questions: What are the major advantages or eSports-sponsoring for non-endemic brands? Which eSports-sponsoring opportunities are out there? Which challenges or disadvantages do non-endemic brands face? What are some key learnings and key success factors for non-endemic brands? In the context of her master’s thesis, Danielle Spielmann addressed these questions. From the qualitative research, which consisted of interviews with selected sponsoring experts from different non-endemic brands, the following knowledge emerged:

1. Advantages of eSports
As many companies stated during the interviews, eSports is an attractive market to gain access to the younger generation. Overall, there is common consent that eSports is momentarily one of the only access routes to this specific young target group which is becoming increasingly relevant for many brands. Secondly, eSports is strongly tied to social media, digital communication, and live streaming. One can say that eSports is an enabler and facilitator of digital brand presence, communication, and activation which becomes more and more important in today’s world.

Third, the advantage to connect eSports sponsorship to their on-going traditional sports sponsorship was mentioned by almost every company. eSports is often approached as an extension to traditional sports and an opportunity to broaden a sport beyond its physical events. Fourth, many brands see eSports as an opportunity to gain more national and international reach. eSports has the advantage of a season-long live stream and digital broadcasting. The digital focus, number of views and digital engagement in eSports is much larger compared to the total reach in traditional sport sponsorship. Lastly, eSports follows the economical and societal trend and demand for innovation. All interview insights lead to the confirmation that eSports follows the growing societal demand for increased digitalization and innovation. A sponsor’s image can benefit from these associations through the spill-over effect.

2. Specific sponsorship opportunities in eSports
The most common sponsorship opportunity and return on a sponsor’s financial investment is the granted logo presence. In eSports, logo presence can occur in physical form (e.g. on-site branding at live events), material branding (logo on pro-gamer’s shirt), branding incorporated in the game, or digital branding (website, streaming platform, etc.). A second opportunity is the possibility for naming rights which mainly occur for main exclusive sponsors, not secondary sponsors. Third, results show that brands like to engage in the sponsorship of an eSports team. Another sponsorship opportunity is the sponsorship of an eSports leagues or tournament series. eSports-sponsoring also includes the opportunity for live events, live activation, and on-site. These activation possibilities are very similar to traditional sport sponsorship.

3. Challenges of eSports-sponsoring
The challenge mentioned most often by various companies is the societal conflict towards the eSports industry and gaming. Tendentially, the negative associations and risks for negative image reputations are connected to shooter games only. There is a strong preference towards the sponsorship of sport-animated games over shooter games, resulting in exclusive selection of such sportanimated games for most eSports-sponsoring engagements. Second, the low-developed eSports market and simplicity to get lost in eSports-sponsoring as a non-endemic brand is another critical incident. eSports is a growing market, but the youth of this industry results in a level of uncertainty in regard to future development. Lastly, the eSports market has a male-dominated target audience. Meaning, for many brands, eSports does not cover the entire youth target audience, only mainly the male section. As a sponsor, this needs to be taken into consideration, when assessing the fit of eSports to the brand’s target audience.

4. Key success factors for industry entry
Every brand has its own sponsorship strategy. Some share similar approaches and others show major differentiations. The different research results confirm that there are multiple key success factors in eSports-sponsoring. One of the most important key success factors is the strategic fit or brand fit and clear answer to the why-question. Overall, every interviewed company mentioned the importance of a good strategic fit and a strong “why” as a must have for any brand who aims to be successful in any sponsorship engagement, within and outside of eSports. Second is brand relevance. A sponsorship engagement as well as the brand itself must be relevant for a brand’s target group. Meaning, eSport-sponsoring must be relevant for the audience wanting to be reached through eSports. Further, many companies believe that the use of expert knowledge around the subject of eSports is key (even though for Ochsner Sport it is only a “nice-to-have”). Industry experts, statistical analysis, and market evaluation can be outsourced or completed in-house, depending on a brand’s internal resources. But despite the importance of expertise, many companies also believe in the term “learning by doing”, especially in eSports-sponsoring. Meaning, not everything can be learned. Last but not least, according to CAA, the most successful eSports-sponsoring engagements demonstrate a cross-over between eSports and traditional sports. Meaning, there is no clear separation between each industry anymore (eliminating the strong segmentation); instead, lines become blurry and industries get inter-connected. This explains why many interviewed companies use eSports-sponsoring as an extension to their existing traditional sport sponsorships and confirms its rightness.