ePlay Digital CEO: How Esports Companies Generate Revenue

According to a report from Newzoo, esports reached 380 million viewers worldwide in 2018 and is expected to grow to 557 million viewers by 2021.

Companies such as Enthusiast Gaming (TSXV:EGLX), Riot Games and Animoca Brands (ASX:AB1) are among a number of companies that are principally engaged in the esports industry. In addition, the ETF space has also begun to pay attention. In May, Evolve ETFs launched the first Canadian esports ETF, named the Evolve E-Gaming ETF (TSX:HERO).

Earlier this month, the Canadian Securities Exchange hosted its Epsorts and Capital Markets event at the Westin Bayshore in Vancouver to discuss the nascent market. Trevor Doerksen, CEO of ePlay Digital (CSE:EPY), was among the panelists discussing the industry.

ePlay Digital has built an esports app that is focused on the NBA basketball league. The company has also previously built games for the Los Angeles Lakers, ESPN, Intel (NASDAQ:INTC) and Time Warner Cable.

The Investing News Network (INN) spoke with Doerksen about real-time data in apps, volumetric scanning and how ePlay generates revenue. Read on to learn his thoughts. The interview has been edited for clarity and brevity.

INN: ePlay Digital is the esports company that has produced the Big Shot basketball game. Can you tell me more about how it applies real-time data to its app and other features that it offers?

TD: The best way to describe the real-time database is that, when LeBron (James) or (Kawhi) Leonard or (Stephen) Curry score (in real life), you score in the game. First, though, you have to find the NBA player. That’s part of the discovery of the Pokemon Go style of game. It’s a location-based mobile game.

You have to find the NBA player, you draft them, you build your team and then their real on-court performance contributes to how you do in the game. A core part of the game is based on real-time NBA data.

INN: You’ve built an app platform that has clients including ESPN, Sony (NYSE:SNE), Intel and Cineplex (TSX:CGX). Can you tell me more about these partnerships?

TD: Traditionally, until recently, we were a fee for service company. We built an app for ESPN named ESPN Sync. We built a game for the Lakers and Time Warner Cable. These games always had a sponsor and they always had a client.

So let’s say, Samsung (KRX:005930) came in and said, “This is what we want” and the client said, “This is what’s important to us,” and our job was typically to get people to watch TV more. So they said to themselves, “Okay. We got people for six minutes. Can we get them watching longer?” We got viewers to watch to nine minutes versus six minutes. That was a big success.

INN: Interesting. You mentioned that you were going on tour.

TD: We’re calling this the Big Shot Bash. Part of the marketing tour is a celebrity red carpet. There are esports games and tournaments being played. There’s real sports, I mean, basketball being played, right? We’re mixing sports and esports together in these events, the Celebrity Red Carpet.

Part of the technology showcase is something we call Fan Zone. It allows you to go in and get a 360 degree video. It’s called the volumetric scan. A series of cameras scan your whole body from all angles and it allows a resulting video avatar to be placed into the game. Now, that avatar can be placed with audio and with motion into the different scenes of the game.

INN: Interesting. I saw that you also partnered with Next Joy and that was a major partnership in addition to Big Shot Bob Horry and Lindsay McCormick. ePlay also reported that it is generating positive, active, average daily user revenue in addition to in-app revenue. How does that work?

TD: It’s probably the most important question. Everything else is really cool. The first thing you do, you got to get downloads. Celebrities are important. Partners are important. Next Joy has 100 million users on its platform. The parent company, Shanghai Media Group, is the NBA broadcast rights holder in China. If they choose to, they could promote a game like Big Shot for free because they own the rights. They have ad inventory. They could take up their own inventory either in a stadium that they own or on the broadcast that they own or on their other platforms that they own to talk about Big Shot.

INN: How are the celebrities integrated in the game?

TD: Lindsay McCormick is a 3D avatar. Players can get advice from Lindsay in the game. With Lindsay talking about Big Shot in the real world, it helps lead to downloads of the mobile (version) of Big Shot.

One of our partners, which we haven’t announced yet, has a clothing product line. She sells hoodies and sweaters. They have t-shirts and so on. She sells those physical, real-world versions of hoodies.

INN: Brick and mortar.

TD: Exactly. In Big Shot, she’ll sell the digital version of the same. The profits will be basically 100 percent. There are no shipping costs or manufacturing costs. There’s no commission. We share the revenue with these partners from the digital merch we sell on the game (and) skins in the game with our partners.

INN: It was the exposure, essentially, between the two.

TD: I think what most technology companies do is we focus first on getting users and then we figure out how to monetize. I don’t think we’re probably that unique, but what we’re basically saying is let’s just do that all at once, because if I have to pay a celebrity an endorsement fee, I have to pay them upfront.

Whereas, if we partnered, we can make money together on selling a brand new product, such as a digital version of something they already sell in brick and mortar stores or online.

INN: What are some ways games make money from esports?

A lot of people don’t realize this, but it’s at least a half million dollars every day in prize money available for casual games. (With) a lot of those games, you can challenge your friends, too, including cash prizes. We all play casual mobile games and there is over $500,000 prized every day. The developer of the game gets some of the revenue and then the winner of the moment gets part of the revenue. In Big Shot, there’s a part of the game, an advanced challenge that you can unlock that allows you to play cash games. If you’re under 18, you won’t even see that.

INN: I see.

TD: We’re going to start with some standalone games first, so we can better test it and we got feedback on the age of users, what they like and stuff. We are really directing this game at kids and their parents and we expect a lot of them to be under 18. Cash money gaming is an afterthought for sure.

Eighty-eight percent of Twitch views are not of professional esports events. They are just a person sitting, playing a game with (many) people watching them play that game. They’re not competing in an expensive venue.

As an app developer, how do we take advantage of that? What we’ve done is on the top left corner of Big Shot, there’s a picture in picture button. You hit the picture in picture button and then your front-facing camera comes up. I see the avatar on the map. I see the actual shoes I’m wearing. I could see all of that through the camera and I’m streaming out to Twitch. That is monetizable for Twitch and for other esports companies and for gaming because we can sell advertising against those views.

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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.