It’s a complicated time for the $187 billion video game business. The pandemic lockdown sent countless millions of people, many of them novices or occasional players, to their keyboards and console controllers for hours of online respite. Investment capital rushed in, and the future of games looked promising.
Then the lockdown ended, everyone started going out again, and engagement and investment skidded downward. The industry’s revenues have actually dropped nearly 3% since their 2021 peak of $190 billion.
As analyst and investor Matthew Ball put it in his seminal essay The Tremendous Yet Troubled State of Gaming in 2024, “For those who worked in gaming, last year was brutal.”
Revenue stagnated while costs rose substantially. Layoffs, cancelled projects and closed studios hit just about everywhere. Perhaps nowhere was the industry hit harder than in esports, the thin layer of high-end competitive leagues featuring the world’s best game players. Brands pulled back, and so did investors financing some of the highest-flying teams and leagues.
It’s been a time of assessment and recalibration, of review and refocusing. All of which makes this weekend’s Apex Legends Split 1 tournament from publisher Electronic Arts in Los Angeles a useful opportunity to look at one company’s approach to building a sustainable esports ecosystem amid rampant consolidation.
“I think (consolidation is) a good way to put it, maybe right-sizing is another way to think about it,” said Monica Dinsmore, the EA senior director of esports brand and marketing, about the sector’s shifting fortunes. “There was a lot of (venture-capital) investment that was maybe under-informed and kind of flooded into immature business models, I would say.”
EA in this era is taking a different approach, Dinsmore said. Basically, esports for EA aren’t soccer’s next World Cup or the NFL’s Super Bowl, though EA has esports components for its games built around each of those massively popular sports. Esports are a way for EA to pull its fans ever more closely to their games, rather than letting them drift off to other entertainment options, in the game industry and far beyond.
“EA is in a great position, because we didn’t succumb to that over-investment,” Dinsmore said. “We were always a little bit like ‘slow and steady wins the race,’ in terms of the way that we think about our esports programs. We think about them much more as marketing vehicles than we do as standalone businesses. So our programs are decidedly part of our marketing teams, and so we work really closely with our franchise partners, and try to align what’s happening in our esports programs really closely with what’s happening on the game. That’s a differentiator in terms of why we’re able to experience pretty significant growth, when a lot of the industry is struggling.”
“Expanded player acquisition and retention” is a key focus of EA coming out of its January earnings call, according to MoffettNathanson analyst Clay Griffin in a Jan. 31 report.
It’s one of four ‘pillars’ the company is focused on as it tries to demonstrate to Wall Street that it can drive sustainable profit growth, he wrote. As Griffin also noted, though, Apex faces a brutally competitive first-person shooter sector where “going ex. growth in this type of game is a challenge.”
That makes connecting with esports players, aspiring players and fans a vital initiative, a way to capture the game’s most ardent supporters, Dinsmore suggested.
“We know through research that people who view or participate in eSports programs are what we call the white hot center of our gaming population,” she said. “These are people who are motivated by getting better at the game. They watch to learn from the best. And they tend to be the ones who spend the most time with the brand. They’re the most loyal, they spend the most money, and that’s why we want to keep them engaged.”
Ball suggested many reasons for the industry’s overall financial pullback, beginning with a decline in gaming engagement. One problem is the post-lockdown result of inverting Metcalfe’s Law on the compounding value of a growing network. When, instead, fewer people are playing games because they’re out doing something else, in turn fewer other people want to play and spend time with them there.
Esports gives a small number of players a chance to actually make money (the winning Split 1 team this weekend will take home $300,000 in cash), and fuels aspirations for others to join them. The publisher behind an esports operation can make some money along the way (the Split 1 playoffs will be held in the 10,000-seat Galen Center on the University of Southern California campus; tickets were largely sold out to watch 40 teams play through Sunday).
Esports are also a chance for a game’s fans to watch the tactics and talents of really good players, share about it endlessly online, and connect in person with fellow attendees. In that regard, esports is similar to traditional sports, convening culture around a contest and connecting fans ever more deeply into the game itself.
And that’s where someone like Dinsmore comes in. Dinsmore, a veteran of Tencent-backed game giant Riot Games (League of Legends, Valorant), runs brand and marketing strategy for all three of EA’s titles with esports ecosystems: Madden NFL, EA Sport FC Pro (formerly FIFA), and Apex Legends.
Apex Legends is five years old, but a relative baby compared to competing heavyweights such as Activision’s Call of Duty and Overwatch, PUBG, and Counter-Strike: Global Offensive. In that time, it’s built an audience of 100 million players.
The company estimates that total Apex-related tournament viewership jumped 22 percent in year three , for a total watch time of 48 million hours. That should continue to grow with expansion into China and other new regions coming in the coming year.
The Apex Legends championships feature league tournaments with teams from more than 80 countries. And around the corner are the first Olympics Games to feature esports competitions, which the industry expects will further fuel global interest in the sector.
“I think now, we’re in a place where we can mature together as an industry,” Dinsmore said. “And we’re right-sizing now, so that we can grow in a smarter way.”
“Smarter” includes integrating more than just the game competition, Dinsmore said. With Madden NFL, the championships are played the week of the Super Bowl, in the Big Game’s host city (at the House of Blues in Las Vegas this year). Madden also crowned its first player to win more than $1 million in total prizes at Vegas. And the tournament itself featured not just the online players, but an entire collection of culture connections tied to the game, both virtual and physical.
“We had a huge concert headlined by Green Day (that) featured a bunch of different types of music genres,” Dinsmore said . “We had celebrities and sports figures and esports celebrities and fans. When we think about the way that our esports are headed, we have this opportunity to leverage our games and sports and the culture and the music that we use within our games. And we want to keep doing more of that. It was really fun.”
So what’s a win look like in this new era? Dinsmore has an idea:
“It’s not just about viewership numbers and growth,” she said. “It’s about what that growth means. That growth means that we’re engaging the people who care the most about these games, and ultimately, we’re growing the player base of the games that they love. So that, to me, is the ultimate win. It’s what every marketer wants, and that is to get everyone back in the game.”
As a side note, on Monday I’ll be moderating a keynote conversation with Peter Levin, managing director of Santa Monica-based Griffin Gaming Partners at the LA Games Conference’s Law and Finance Summit. The conference will be held at Palisades Ballroom on the UCLA campus on Monday. Levin is former CEO of Nerdist Industries and head of gaming and interactive at Lionsgate. He heads one of the leading venture capital firms focused solely on game-related investments, with more than $1 billion under management.