Andreas Thorstensson on the future potential of esports
January saw people in the tech community converge on Munich for DLD. EQT Ventures’ Andreas Thorstensson joined a panel on esports, titled ‘League of New Legends’. Here, Andreas, a former world champion in the game, Counter Strike, gives us his views on the future of esports.
Q: You were recently on a panel at DLD which focused on esports and its future potential. How did you get into esports?
I was quite the sports geek when I was young, and I’ve always been obsessed about competition. When I got older and realised I wouldn’t become the best basketball player in the world, I shifted my full-time focus to technology and coding.
Towards the end of the 90’s, I worked at one of largest web agencies in the Nordics, called Spray. During our Friday after-works my boss (Sebastian Knutsson, now well known as being a founder of King, the games company and makers of Candy Crush Saga) wanted me to play this game called Half-Life.
He and the other people at work were constantly beating me and I got quite frustrated. So I started practising — a lot — and eventually managed to beat him and the others. It was my sort of ‘a-ha moment’, in realising that competitive gaming has a lot of similarities to traditional sports. That summer, Counter-Strike was released and I saw the full potential.
Five years later and SK Gaming (the team that I founded) was the largest and most successful esports team in history, with a website and social network that attracted millions of users every month.
Q: You first got into esports 20 years ago. Why do you think it’s taken this long for esports to become more mainstream and attract the attention of larger, more ‘mainstream’ companies?
Esports has always been very underground. It’s a true subculture that was born out of the non- mainstream (possibly even the anti-mainstream). Nearly every esports player back in the days did it just for the fun, for the passion, and didn’t see (or didn’t want to see) the business potential. On the other hand, you had businesses and savvy people out there who wanted to capitalise on this fast-growing market, but sadly, without really understanding anything about the phenomenon. This created very mixed incentives.
Fast forward a few years, and we at SK (and other teams) managed to break out of the subculture and sign non-endemic brands like Adidas. From there, the market grew very fast for the next five years.
Q: You’ve talked before about a ‘first wave’ of esports dying out. Why did that happen?
At the end of 2000, esports hit a wall and many opportunistic investors and businesses failed. One example was NewsCorp’s million dollar attempt with the Championship Gaming Series to run esports the ‘right’ way. Instead of listening to the people in the industry, the initiative tried to force a new format onto the scene using non-esports gaming titles.
During this phase, the true esports companies, such as ESL, still managed to grow nicely. Game studios and publishers, such as Riot Games, who totally understood the esports market managed to rise and take substantial market share from publishers like Valve and Blizzard, who had seemed to dominate before in terms of esports titles, but who had lost a bit of direction in this area at the time.
Q: What do you think is causing the new renaissance and interest in esports? Why is it so attractive again now?
Esports is clearly here to stay, which the people who have been heavily in the scene all this time knew from day one. The biggest drivers of growth in the last five years have been a combination of social media, streaming and game publishers realising the full potential of the industry.
Famous esports players have more followers on Twitter than traditional sports stars and they are very actively engaging with their fan base. They can also share their practice sessions and games live on services including Twitch.
Last but not least, the game publishers have pulled off a very smart move. Instead of pumping millions into traditional marketing, many have started hosting and sponsoring esports events with substantial prize money, which drives the best players and with them, the full long tail of amateur players and fans.
Q: What’s in store for the esports industry in the next 5 years? What peripheral businesses will emerge from the latest interest in esports?
What will, and must, happen in the upcoming years is business models that actually make sense. For a 250M monthly active users (MAU) sport, the revenues are still tiny, and a couple of companies have the majority of the market share. Back in the day, we had a subscription based service at SK Gaming which generated over 50% of our revenue, and that figure would still beat many teams today.
I think in general the esports companies need to be much more tech-driven. There is a huge opportunity out there and a few companies will seize that. If you are one of those companies, please reach out to me at EQT Ventures :) !
Q: What were some of the most interesting topics that came out of the panel at DLD? Was there anything your fellow panelists brought up that surprised you?
I was impressed by FC Schalke 04 and how as a traditional sports organisation they are going full-throttle into esports. It’s a brilliant move by them. They are buying big properties with a huge following cheaply because the revenue is not there yet. It’s a nice exit for team owners that have been doing this for 10+ years. On the other hand, my opinion is that they might be selling way too early. We’re just in the early days of esports revenue growth and I see those teams potentially growing larger than many traditional sport teams in the future.