The Dota 2 International 9 tournament attracted over 66 million viewers and generated 55 million hours watched.
On Sunday (August 25), the prize pool for the Dota 2 The International 9 (TI9) tournament became the world’s largest esports reward in history, with US$34.3 million in winnings.
The TI9 winning team, OG, emerged as the champion for the second year in a row, earning US$15.6 million from the prize pool. With this win, OG became the first ever repeat winner of a TI. The team defeated Team Liquid three games to one on Sunday; Team Liquid won US$4.4 million as the runner up of the event. The prize pool outpaced the US$30 million awarded at the Tencent-owned (OTC Pink:TCEHY) Fortnite World Cup in July.
Putting these prize earnings into perspective, the singles winners for the Wimbledon tournament this year received US$2.9 million. Similarly, Tiger Woods made US$2.1 million at this year’s Masters Tournament. Each member of OG’s five person squad will take home roughly US$3.1 million.
In a spectacular event, TI9 took place in Shanghai between August 20 and 25, attracting over 66 million viewers and generating 55 million hours watched. Viewership hours were 51 percent higher than the TI8 Grand Finals, according to GitHyp. Amazon’s (NASDAQ:AMZN) esports streaming service, Twitch, pulled in 1.1 million viewers for the event.
Viewership numbers are a hallmark valuation metric in esports.
“It’s a really important metric in the industry, because it really gives a validation of the viewers and the hours watched, and this is how they’re going to attract the sponsorship dollars,” Nick Mersch, associate portfolio manager at Purpose Investments, told the Investing News Network.
Within the esports ecosystem, Dota 2 has a unique history, Mersch added. The game, which is owned by privately held Valve, does not operate as a franchise system like the majority of other major esports leagues, such as those for League of Legends and Call of Duty.
Secondly, the prize pool is crowdfunded by the Dota 2 community. Each year, Valve contributes a US$1.6 million seed to the prize pool, and the rest is made up of 25 percent of sales of special in-game content such as the Battle Pass. The Battle Pass is a tournament pass that users can also level up through playing or spending money to earn rewards that include cosmetics and new in-game features.
“You can see how Valve, just as a distribution system, is making a lot of money off of this. But it’s also an interesting funding mechanism for this massive prize pool,” said Mersch. “Whereas if you look at the Fortnite World Cup, that US$30 million was funded directly by Epic, who is a publisher rather than a quasi-crowdfunded pool.”
Dota 2 emerged onto the esports scene in 2013. Through its network of devoted and niche players, the game flourished and evolved into its own league under its open-source community.
“These games grew pretty much from the ground up being supported by the community that plays the game,” said Mersch.
Interestingly, viewership numbers for TI9 also outpaced those for Fortnite, a more well-known league. In addition, its costs were lower than those of the Overwatch League. This is because TI is a single event, whereas the Overwatch League takes place over 28 games, added Mersch.
From an investor’s perspective, a significant amount of value is found within the individual esports teams, Mersch said. He added that brand value is built as fans buy merchandise and follow the star teams in the league.
Esports leagues in general are largely distinguished by being franchise or non-franchise leagues. Dota 2 is the latter, setting itself apart in an industry that is largely dominated by franchise leagues.
“I think that there is a lot of validity in terms of this franchise structure because it is keeping people engaged, it is keeping them being watched,” Mersch said. “It is aggregating more reliable and consistent content so that advertisers can spread out their fees over this extended season.” In addition, franchise leagues pay players in revenue-share agreements.
One example of a franchise league is Overwatch. The Activision Blizzard-owned (NASDAQ:ATVI) league emerged almost in contrast to Dota 2. In 2016, the Overwatch game was losing steam. In response, Activision decided to build a league to bolster the game.
“It started off as this early incubation idea from Activision, and (the company) said, ‘We’ll go out and sell all these franchise fees and then we’ll test the waters,’” Mersch said. The league ended up becoming incredibly successful, emerging as the most watched esports league in the world.
Mersch added that many in the industry question if non-franchise leagues will last due to the dominance of the existing franchise leagues. TI9 presents a case to test the strength of these league models.
“It will be very interesting to see if … those non-franchise and franchise leagues (can coexist),” he said.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.