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February 16, 2021
Hello! This week in Protocol Gaming, your weekly guide to the business of video games: EA's Todd Sitrin on its esports strategy, Steam's China loophole and vikings just won't stop coming.
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The Big Story
With esports, control isn't everything
In the world of esports, publishers have increasingly been trying to take control. Take Riot, which started moving its externally-run League of Legends leagues in-house; or Activision's franchised Call of Duty and Overwatch leagues.
At EA, Todd Sitrin's not so sure taking control is a good idea. As head of EA's Competitive Gaming Entertainment unit, he's trying to build a truly mass-market audience — and he thinks partnerships are the way to do it.
- "I think it is foolhardy to believe that something can truly become mainstream ... with one entity," Sitrin told Protocol, pointing to traditional sports as an example. The NFL and Premier League's popularity, he said, "did not come from a single entity creating something and pushing something."
- Instead of handling everything itself, EA licenses out its games for other leagues to run. "In FIFA ... between 25 and 30 football leagues run their own esports program," he explained. "I learned long ago that for this to be successful, there was absolutely no way one company — no matter who that company was — could drive everything ... It's just a fool's errand." EA's not the only company taking this approach: Valve does something similar with Counter-Strike.
- "If you're going to think big — and taking competitive entertainment mainstream is a big thought — then you're gonna want as many people in the crew boat as you possibly can," he said. (Sitrin, who used to run EA Sports' marketing, loves sports metaphors.)
But if you've got partners, you've got to keep them happy. "Many publishers seem to only think about themselves, and how much money they're going to make," Sitrin said. "That is a recipe for ultimate failure."
- If the ecosystem isn't financially viable for everyone involved — be that teams, league operators, sponsors or media partners — then some of those partners are going to bail, he said.
- "You have to create conditions where people have their own self-interest and they have an ability to make a business out of it," Sitrin argued.
And keeping partners happy ... isn't easy. Sitrin thinks you have to take it slow: "I think what ends up happening with, maybe, some others, is they've gone from 'We introduced a game' [to] 'boom, we have a franchise league.' That is a gigantic jump, and it's forgetting that you have to take the viewers, the fans, and you have to make them come along in the process."
- Sitrin wouldn't rule out EA launching its own franchise league, though — saying just that the conditions and product "have to be right."
In the near term, Sitrin thinks we might see a shakeout. "Esports is going through a normal cycle," he said, and we're at the point in the cycle where the hype has to face "the realities of the market." People who were in esports to flip their team in three years for a ton of money, he thinks, are now realizing that "this is a long-term investment."
- "I think that reality is going to shake out a lot of companies, a lot of people," he said. "What will be left will be something stronger."
We'll have more from Sitrin, and his plan for esports without sports, on Protocol later this week.
- "Harassment included, but was not limited to: calling Plaintiff 'beautiful,' telling Plaintiff that his wife was jealous of beautiful women, telling Plaintiff that she had an 'abusive tone' … staring at her in a sexual fashion when discussing his underwear … telling Plaintiff she should 'cum' over to his house while his wife was away." —Those are just some of the allegations made by Sharon O'Donnell, a former Riot employee, who accused CEO Nicolo Laurent of sexual harassment. Riot said it was investigating the claims.
- "Our biggest competitors are Google and Facebook. Facebook has announced that they may drop their Audience Network completely. We don't think they'll do that." —Unity CFO Kim Jabal said it, like Facebook, will take a hit from Apple's IDFA changes, but it thinks it's "well-positioned" for the change.
- "We're still a highly independent company who's not beholden to public markets in which we have to show ever-increasing profits ... Anything like a fight like this [with Apple and Google], which loses us money for a year or more, would never be tolerated. So we have the financial independence to do that." —Tim Sweeney said Epic can fight Apple because it's still a private company.
A MESSAGE FROM SLACK
You have to find the right solution that meets both your internal and external collaboration needs.
That's why competitive businesses today are turning to Slack, the channel-based messaging platform, to close communication gaps with partners and customers in the age of remote work.
- On Protocol | China: Steam launched its Chinese version, but the global store's still available in China. It's a gaping backdoor, but it remains open — for now.
- More earnings! Ubisoft posted a record quarter, while Zynga and Remedy both reported record years. Over at Supercell, revenue and profits fell, but Brawl Stars became the fifth mobile game to rack up $1 billion in revenue.
- Asmodee bought Board Game Arena, which has over 5 million members on its online board game platform. (Board game sales soared during the pandemic.)
- Tencent bought a minority stake in Bohemia Interactive. It didn't disclose deal terms.
- Non-fungible tokens are having a moment. Nine plots of land on Axie Infinity were sold for around $1.5 million, the most expensive NFT sale ever.
- Tilting Point invested $60 million in Match 3D. The deal follows Tilting Point's usual playbook, with the money being used to fund user acquisition for the game.
- TinyBuild went on an acquisition spree, buying We're Five Games, Hungry Couch and Moon Moose. It now owns seven studios.
- Peter Molyneux's 22cans laid off employees. It's unknown how many people were made redundant.
Look Out For
Vikings are everywhere
First it was God of War. Then it was Assassin's Creed. And now a new game, Valheim, has come from nowhere and shot straight up the Steam charts, selling 2 million copies in just 13 days. Vikings have conquered the gaming industry: As we speak, I bet Marvel is greenlighting a Thor game; Activision's talking about Call of Duty: Colder War; and Microsoft's putting horns on Master Chief's helmet. Can't wait.
Correction: Last week's newsletter was corrected to convey that GameSpot's calculation about how easy it would be for Microsoft to make acquisitions used Microsoft's overall profit, rather than its gaming profit.
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