The peril of the third-party

In the eerie quiet of late Spring 2020, the trees are green, the flowers bloom and COVID-19 controls our lives. People go for walks after hours at their computers. Basketball is cancelled, alongside J.K Rowling and Shane Dawson. Kids are playing video games, and viewership on Twitch is up 40%. In this moment, Riot Games releases a video game called Valorant, their latest blockbuster hit, to an army of famished gamers fiending for raw virtual conquest.

All those factors may have caused the stars to align for a little-known company called Conference One (CF1), which hosts and broadcasts a semester-long collegiate Valorant tournament. Student teams can sign up for the tournament without entry fees, and potentially walk away with scholarship money in their pockets if they emerge victorious.

In the increasingly crowded online ecosystem, CF1’s launch had to be strategic. CEO Kiernan Ensor needed to find a way to set his league apart from all the companies diving into college esports. Making a new platform for established games like Rocket League was a surefire way to get lost in the shuffle, but Valorant was new - a potential digital Wild West.

"It's going to be a free-for-all." - Kiernan Ensor

“Valorant was really appealing in that way, so I said, hey, listen, it's going to be a free-for-all. It's going to be an open market. No, one's going to know where they're going to want to play, and as long as we do it right, do it better, and make ourselves unique, we can really make this work,” Ensor said.

The big challenge facing companies trying to start their own esports leagues is that they’re fully reliant upon, and subject to, publishers like Riot Games, Activision-Blizzard and Psyonix. That’s because esports aren’t like football or basketball. No-one really “owns” those sports, but Riot Games owns every aspect of League of Legends from the character models down to the servers themselves. They have patents and copyrights on key elements.

“When publishers are building games that are being played as esports, they are essentially building a market around their intellectual property, said Will Partin, a media scholar who’s written about the power game publishers have over their own markets and economies. “They are happy to let people come in and act and do things in that market, and you can use their IP to build tournaments, but you're always going to have to do it on the terms of the publisher.”

Think of it like real-estate, a third-party or company running a League of Legends esports league is like someone subletting their apartment. They may make some money “renting” out their place (or in this case, their services), but ultimately the owner of the building (the intellectual property or IP in this case), Riot Games, determines how their product is used. The company can change the rules and use agreements at any time and they kick people out when they want to. That’s a treacherous foundation for any other business to be based on.

Treacherous or not, the collegiate esports landscape is going through a kind of “Cambrian Explosion” of tournament and league services created by both established esports companies like FaceIT and UGC, as well as new scholastic-oriented companies like PlayVS and AVGL. Similar companies are appearing in every genre, from First Person Shooters (FPS) to Multiplayer Online Battle Arenas (MOBAs) to virtual card games, and Ensor thinks the market will continue to grow over the next year or so… until it inevitably contracts.

“It's just not sustainable that there are 20, 30 leagues out there, and it's not sustainable when people are doing things that don't generate any money for themselves,” said Ensor.

Most leagues don’t require an entry fee to participate in their programs, or if so, the burden is generally on the students, according to Ensor. In comparison with traditional collegiate sports where schools generally pay hefty conference fees, and the TV deals are lucrative, collegiate esports’ revenue streams are minimal. More consistency, though, in regards to match and streaming schedules for these leagues could lead to greater revenue opportunities.

“And that's the goal for every league and team, to get these media rights that will help basically pay for everything. And once college gets to be more consistent... I think you can really look at different revenue streams in there,” said Hung Tran, Collegiate StarLeague’s Director of Marketing.

A visual guide of publishers, the games they own, and the leagues they operate, like Activision-Blizzard's Overwatch Collegiate Championship, or 3rd parties they're partnered with.

Another problem for non-publishers hoping to cash in on esports is that game publishers are also actively entering the field with leagues and tournaments of their own. Activision-Blizzard recently launched their proprietary Overwatch Collegiate Championship program, and Riot’s Collegiate League of Legends (CLoL) program has seen success since 2018. Game publishers are also investing in partnerships with some of the bigger third-party entities. Psyonix, the publisher of Rocket League, partnered with PlayVS last year to deliver Eastern and Western regional seasons, and Riot is working with the same company on their high school League of Legends program.

Publishers do gain from a thriving esports scene around their game, and esports themselves are generally regarded as marketing tools for publishers, rather than standalone economies. According to Partin, “Universities tend to be extremely strong brands, so in that sense, working with universities is a great opportunity to basically do marketing for your game.”

Jake Astin, the director of Activision-Blizzard’s Collegiate Overwatch product, said the hope is that Blizzard’s investment into college esports could help fuel continued interest in their intellectual property or IP (ie. their games). “It just comes down to developing talent and also making sure that there are more reasons to play our games beyond the way that people love them,” Astin said. “People are super passionate about our worlds and our games, and the best way of investing in esports is making sure that we have an ecosystem where the player can continue to get better across all levels of competition.”

College esports administrators are also keen on working with publishers, citing the benefits of an officially recognized program rather than an unrecognized third-party organizer.

“First party leagues are always a priority,” said Jim Huntley, a professor at USC’s Games School and the advisor of their esports program. “So, if there's anything that overlaps with them, we always default to the first party because that's the official one, and that's where your standings and rankings are determined. It's where you can kind of beat your chest upon and say like, ‘I'm the number one player in collegiate League of Legends,'” he said.

The bottom line is publishers want people to play their games,

of course, and small tournaments help the game flourish at the community level. To do this, and still maintain control, they issue a tiered set of guidelines that serve to protect their IP while allowing for controlled third-party competition. This means that the publisher giveth, and the publisher also taketh away. A publisher can shut down a community tournament if it violates their set of rules by exceeding a prize pool limit or if it spans across countries, but publishers can also elevate a tournament’s status by bumping it up to a higher tier.

Huntley understands the publishers’ rationale behind the tier system, and how it protects their IP. “What they just don't want to have is like, God forbid, there's some inappropriate content that these students are doing with their game and it's public, and now there's articles being written and [the publishers] had nothing to do with it,” he said.

The limitations essentially provide a single path forward for the likes of CF1 and other third-party companies, and that’s to gain favor in the eyes of publishers.

“It's about having open communication, creating a dialogue, letting them know exactly what you're doing, taking the meetings, taking suggestions, listening to their feedback and what they're asking you to do,” said CF1’s Ensor. “It's pivotal, it's important and there's nothing else you can really do about,” Ensor added.

This tier list marks the restrictions placed on third-party leagues like Conference One, limiting them to the Small Tournaments level until they get permission from Riot itself to host anything more ambitious.

He’s hoping that with this communication, CF1 can elevate their status from Tier 3 - the non-affiliated, community tier - into a Tier 2 or a Tier 1 license, where prize pools can be bigger, and publishers are often more involved with events.

“If you build something, and you build it right, the best thing you can have going for you is Riot saying, ‘Hey, listen, you guys are doing this right. You know, it's really working well for us,’” said Ensor.

That is the position currently held by companies like PlayVS and Collegiate StarLeague (CSL), two of the bigger names in third-party league and tournament platforms. Both companies operate on the Tier 1 to Tier 2 tournament level and offer publishers a way to get involved with the college scene without having to create their own gaming infrastructure.

CSL has scholarships and other scholastic programs already in place for their collegiate users, according to Tran, CSL’s Director of Marketing, making it easy for a publisher to invest in a collegiate program. “CSL really believes in supporting students and helping them find their career path in gaming, and that's why we're starting these initiatives, like the ambassador program… a new internship program,” said Hung. “We're finding partners in gaming that want to help cultivate the next generation of industry folk.”

PlayVS has similar programs and appears to base its success on being a third-party company, while pursuing relationships with the publishers to offer the closest thing to first-party infrastructure available for high schools and colleges.

In an article regarding PlayVS’ 2020 partnership with Riot Games, Matt Birris, who led Riot’s North American college and high school esports programs, noted there was a proliferation of third-party leagues who were essentially running things without the publisher's approval. “Things that started off as community experiences are now slowly evolving into commercial entities,” he said.

PlayVS’s CEO, Delane Parnell compared the phenomenon to the music industry and said, “It’s no different than why record labels don’t want anyone putting the songs of one of their artists anywhere online… if people were able to go out and create experiences and charge for them without any say from the publisher, that affects the long-term health of their company.”

It’s the publishers’ guidelines on how their game can be played that made 2020’s first ever Pac-U event so unusual.

Pac-U was a joint endeavour from Pac-12 schools to create a series of matches that tapped into the storied narratives and rivalries in place from years and years of history in traditional sports. They hosted matches of Rocket League, Overwatch and League of Legends, but avoided words like ‘season’, ‘tournament’ or ‘playoffs’ in the hopes of avoiding legal turmoil. Instead, they offered a series of exhibition matches, and a pseudo playoff tournament called a ‘spotlight-series’.

Pac-U’s goal is a partnership with the publishers, but first have to prove that they can work within the confines of publishers’ community guidelines.

“We can get to the point of having something stable that's monetized, and then have that link to the following season or semester's official efforts with the publisher,” said Huntley, who is also part of the Pac-U governance. “We knew that we wanted to stay within compliance of the publishers’ tournament guidelines and rules,” he added.

If Pac-U’s hopes are fulfilled, they’ll join the ranks of other traditional conferences like Mountain West and Big Sky who’ve taken to esports. Some of them have connections to Riot’s CLoL league, and operate as satellite conferences to Riot’s main Spring event. Schools who do well in their conferences get spots in the CLoL playoffs, and are awarded prize money from Riot itself.

Not all publishers have established relationships like these with independent conferences, however. Some opt for a more direct, proprietary approach, like Activision-Blizzard’s acquisition of Tespa.

Collegiate Overwatch used to live primarily through Tespa, a company that began as the “Texas Esports Association” back in 2012. It rose to prominence with a series of successful tournaments for Starcraft and League of Legends, and caught the attention of Blizzard, who formed a partnership with them in 2013.

Together, they hosted massive tournaments, like a $450,000 Heroes of the Dorm tournament to promote their latest title, Heroes of the Storm, and later the Overwatch Fiesta Bowl tournament.

According to Blizzard’s Astin, Tespa was its own incorporated company, but its employees worked out of Blizzard’s offices. Eventually Activision-Blizzard saw it fit to fully integrate Tespa into its brand.

“We realized that there was a big separator and challenge for using the Tespa name and visual identity for a lot of our different programs, which made it harder to promote or get a lot of attention on,” Astin said.

Some of it had to do with Covid’s effect on Blizzard’s live events, which required them to focus their efforts on the online tournament sector.

“We felt like the best way of doing that was by engaging students’ true tournaments for our games where they have something to do on a weekly basis with their friends… The big reason why a lot of these students got invested in these programs is because they had a love for our games, our worlds, and our IP,” said Astin.

The acquisition led to the creation of the Overwatch Collegiate Championships (OWCC), the biggest competition for collegiate Overwatch across the country, run entirely by Blizzard itself. OWCC is first party, and like Huntley mentioned earlier, holds the most clout by default, giving Blizzard more influence over the collegiate esports ecosystem as a whole.

OWCC, in its first year, has already seen some controversy. College esports is still in its infancy, and many schools have yet to invest in esports programs. Club teams became the majority of the participants who competed in the OWCC. Teams with 7-3 records and above in the regular season automatically qualified for playoffs, but Blizzard offered varsity teams, teams with university backing, who didn’t make the cut an extra tournament for a chance for a playoff spot. Club teams were not allowed.

The decision sparked a discussion among the students in their OWCC Discord server, many of whom thought it unfair that club teams weren’t offered the same chances as their varsity counterparts.

“Grassroots efforts on campus are still major efforts, and people arguing that varsity is better than club because of ‘proper funding’ is an argument in bad faith,” said Ian Thompson, a former tools developer at Tespa.

But according to Astin, the decision was made in the hopes of incentivizing schools to invest in esports. “It’s important for us to continue to celebrate and highlight the schools that provide direct support and investment into building varsity programming,” said Astin. “We design our programs and content to reward and incentivize schools for that commitment.”

The situation reflected Partin’s thoughts on the duality of publishers’ bigger stake in college leagues. “If the buck stops with the publisher, the responsibility starts there too,” Partin said. “The publisher is in a unique position to do the work of seeding interest into these ecosystems, and getting buy-in.”

Riot may be one of the longest standing publishers to subscribe to this model, taking heavy interest in the collegiate ecosystem.

They’re deeply involved with individual schools, and work closely with the Riot Scholastic Association of America (RSAA), a governing body made up of administrators, coaches and organizers across the collegiate landscape. It’s omnipresent across all of college League of Legends, and their headline tournament is arguably considered the apex of college esports. They call it the Collegiate Championship, and the finals are streamed and hosted by Riot Games themselves. The 2019 championship saw upwards of 40,000 concurrent viewers on Twitch.

Most other esports titles in the college scene are never streamed at all.

AJ Dimack is on the board of directors for RSAA and is the director of esports at the University of Utah. His position sits directly in the middle of the publisher and the program. He sees the relationship between the advisory board and Riot as mutually beneficial.

“They are the ultimate decision maker for all things that are in the interest of their IP, but they show themselves to always be a very willing partner to listen and try to help and provide tools and resources to help both gaming communities and institutionally support these esports programs,” Dimack said.

Dimack also notes that the current state of collegiate esports is still largely a direct relationship between the publisher and the student, without the administrative middleman. Students mostly sign up for tournaments on their own, without the guidance and structure of a conference like the Pac-12 to organize and legitimize a college team. Riot’s CLoL program changes the game, so to speak, introducing the college administrator and conference structure to an otherwise disparate landscape.

Leagues like CLoL provide structure, organization, and a direct pipeline to the publisher in a way that’s simply impossible for third-party leagues to provide.

“Those third-party tournament organizers, they’re a dime a dozen. A lot of them are really good and really cool and provide really good experiences for students, but they’re never going to get an investment out of schools,” said Dimack. “We're going to go straight to the source of the publisher and see if there's a common interest in growing collegiate esports.”

In this sense, the contraction CF1 CEO Kiernan Ensor worried about may already be happening and not just for companies. Game titles themselves can determine if an esport gets adopted, and in the era of publishers taking bigger roles in their esports programs, colleges may not want to invest in titles that don’t have publisher support.

“With their game title, if they [publishers] don't want to help you and treat you as a partner for those things, then obviously that's a disincentive from wanting to adopt their title as one of your championship collegiate esports programs,” said Dimack.

But not all is lost for the smaller, third-party leagues.

Riot and Activision-Blizzard’s major championships happen during the spring, alongside PlayVS’s partnered Rocket League series, which leaves a lot of off-season time for third-party leagues to catch the attention of students looking for competitive play.

“The third-party ones usually end up filling the gap between the official leagues,” said USC Professor Jim Huntley.

In the case of Valorant, Riot Games has yet to establish anything first party, and CSL and other bigger leagues have just begun to set up their programs. College esports, especially Valorant, are still nascent, and companies like CF1 see a bright future even under the purview of publishers.

“It's always going to come down to who's making the money. And you can pay a royalty or a fee to Riot, there's no reason for them to step in and try and take it over,” said Ensor.

CF1’s 40-plus teams continue competing for scholarships and time on streaming, but Ensor’s hope, which is the same as many who want to build something of their own in the wake of a successful video game, is that he can ultimately emerge with Riot’s blessing and some stability for his company’s business.