Mike Stubbs . Business . Saturday 19th November 2016 . 19:00
The eSports Championship Series from FACEIT and Twitch is one of the biggest Counter-Strike: Global Offensive leagues in the world. Despite only kicking off earlier this year the competition offers large prize money, regular competition and impressive production values. But for some reason it is often overlooked as a top competition, with others such as ESL One, ELEAGUE and the ESL Pro League getting the limelight.
One of the stumbling blocks for ECS has been transparency. Even since the league has started they have never really spoken openly about money, and even when they have wording has been less than clear. A couple of times I even fell into the mistake of listing the season one prize pool as $1.5 million, when it was in fact half that, because they failed to make it clear exactly what was at stake until very late in the day.
Another area that they have never really spoken about is the co ownership aspect of the league. All participating teams get some kind of financial stake in the ECS, but that’s about all we have ever known. That is until now.
“The idea of co ownership was born when we were talking with the teams and the players and trying to understand how to create a more sustainable and robust framework,” says Michele Attisani, co-founder and COO of FACEIT. “We were keen to get them as equity partners in the league, as we feel that obviously the teams and the players are a key component of the success of the league itself, therefore they deserve to have not just the short term rewards of prize money but to be able to participate in the long term benefits of building an asset like ECS.”
This message of giving the teams long term benefits is something that came up multiple times during my interview with Attisani. Whereas other competitions, especially those that force teams to qualify for every event or gain a direct invitation, give organisations a chance at a big chunk of cash for a relatively short time commitment, ECS gives them a long term income, that will continue to bring money in at a somewhat stable rate for years to come.
“The idea is give teams some long term sustainability and support them, because today revenue streams for teams are very volatile,” explains Attisani. “They have sponsorship deals that usually don’t have a very long duration, and are usually based on their performance. This means that revenue streams can come and go very quickly for the teams and that isn’t good for long term stability. As you can imagine, if a team doesn’t have sustainable long term revenue streams it will be very hard for them to guarantee significant salaries for the players. There’s a waterfall effect that has an impact on almost everyone.”
But just what are these sustainable revenue streams that FACEIT keeps mentioning? All that we know for sure is that successful teams in the league get a share of the prize pool and somehow other income from the league is split between the teams. I posed the question of what teams actually get out of the co-ownership portion of the league to FACEIT, expecting to get no answer, but they broke it down and detailed exactly what teams get.
“When a team gets into ECS they become a shareholder and they are entitled to a number of benefits,” says Attisani. “Financially these benefits include a share of the revenues generated by the league in terms of sponsorship, distribution deals on digital platforms and TV, merchandise sales, ticket sales and so on. We have two types of revenue share payments for the teams. One is our standard payment, so it is equal for every team, and the second one is based on certain KPI’s. One of the KPI’s, for example, is performance, but it’s not the only one. We have other KPI’s that are related to the viewership that each team brings to the stream and others that are mostly related to the brand value and how much value is brought to the league.”
With this system in place teams are not only given a stable income but also given an incentive to advertise the competition to their fans in order to try and bring in more viewers and drive sales, as the better they do in that department the more money they will receive from the revenue share percentage. While this may sound like a way of giving more money to the biggest teams we were assured that each team gets the same base payment, which is already a significant chunk of cash, before the KPI based payment is assessed.
On top of these payments there is of course the third payment that teams can receive and that is the more standard prize pool distribution. For the two seasons in 2016 there was a combined $1.5 million prize pool, with each season getting $750,000. Like pretty much every other major event this is distributed based on placement in the competition, with the winners of season one, G2 Esports, grabbing $250,000 and the runners up, Luminosity Gaming taking $125,000. The same prize pool distribution is expected to be used for the upcoming season two LAN finals.
Three different types of payments, incentives for teams to grow their followings and a sizable standard prize pool makes ECS sound like one of the most financially lucrative events outside of the majors. However there is one small issue that springs to mind, and that is relegation. A poor performance in the online stage of a season can result in a team being forced to play relegation matches against the best teams from the developmental league. If they lose these matches they are out of the main league until they manage to win their way back in, but does getting relegated mean that they lose their co ownership stake and the payments that come with it?
“So there is a period of time where the teams don’t lose the benefits after they have been relegated, but then they have to requalify within a specific time frame in order to retain these benefits,” explains Attisani. “Obviously if they get relegated and they fail to re-qualify for a long time at that point they will lose the benefits.”
This was the one area that Attisani sounded a little cautious about, which is understandable as after only one and a half seasons they haven’t been put in a position where a team has failed to qualify for a while. It will certainly be interesting to see how this aspect of the league plays out.
What he was certain about however, was that this new revenue share system is something they are incredibly pleased with. It gets the teams more invested in the league and gives them an edge over other competitions at a time when many teams are dropping out of events due to the sheer amount of them. It remains to be seen how financially successful this model will be for all the parties involved, but early signs are good and that should hopefully mean that the ECS is around for years to come.