MCAT CARS: Are Esports a Bubble, or Big Business?

Session 53

Everyone is excited about esports, or competitive video gaming. But do the metrics and the money match the hype?

Jack Westin joins us once again as we dig deep into another fun article. Also, check out The Premed Years Podcast as you go through this journey towards your medical school application.

Listen to this podcast episode with the player above, or keep reading for the highlights and takeaway points.

Link to article:

https://kotaku.com/as-esports-grows-experts-fear-its-a-bubble-ready-to-po-1834982843

The mainstream narrative of esports has been lovingly crafted by those who benefit from its success. There’s big money in esports, they say. You’ve heard the stories. Teenaged gamers flown overseas to sunny mansions with live-in chefs. The erection of $50 million arenas for Enders Game-esque sci-fi battles. League of Legends pros pulling down seven-figure salaries. Yet there’s a reason why these narratives are provocative enough to attract lip-licking headlines in business news and have accrued colossal amounts of venture capital. More and more, esports is looking like a bubble ready to pop.

“I feel like esports is almost running a Ponzi scheme at this point,” Frank Fields, Corsair’s sponsorship manager, told an audience at San Francisco’s Game Developers Conference last March. He smirked. The crowd laughed uncomfortably. The smile dropped from Fields’ face as he continued. “Everyone I talk to in this industry kind of acknowledges the fact that there is value in esports, but it is not nearly the value that is getting hyped these days.” Later, Fields would clarify that this value, and future value, “as of now, is optimistic at best and fraudulent at worst.”

Fields is not the only longtime esports veteran who is worried the industry is a bubble, or more accurately, an industry comprised of several bubbles. Seventeen other experts on the North American esports industry shared similar concerns with Kotaku, some describing it merely as “inflated” and others as “completely unsustainable.” Several spoke on the controversial topic because they love esports and want to see it succeed organically, in a sustainable way. There is, of course, a genuine love shared by thousands of people for playing games competitively. Right now, many who spoke to us for this story said, the stuff that makes the esports industry seem like a tantalizing investment rests on unsubstantiated claims—or blunt-force lies.

As investors pour hundreds of millions of dollars into the ballooning esports industry, many feel their way forward with statistics that indicate that paydirt is just around the corner. “League of Legends Gets More Viewers Than Super Bowl,” reads one 2019 headline from CNBC, glossing over the fact that they’re comparing apple viewership metrics to coconut viewership metrics. A 2017 Morgan Stanley report leaked to Kotaku claimed that, in its first year, the Overwatch League could conceivably generate $720 million in revenue, about the same as World Wrestling Entertainment. By 2022, says Goldman Sachs, viewership of pros playing competitive games like League of Legends, Dota 2, Overwatch or Counter-Strike: Global Offensive may be on par with the National Football League’s viewership today. But according to many people Kotaku spoke to with knowledge of the industry, a lot of these statistics are at best rosy-eyed and, at worst, inflated, unverified, or misleading.

For 12 years, Twitter never posted a profit, and until it went public, Uber lost $4.5 billion in one year. One quirk of the world of startups is that investors love investing in unprofitable companies or industries. Yet longtime esports professionals don’t want to see their beloved livelihood go the way of the dotcom bubble. The esports industry is held together with wax and string, which, sources say, hasn’t stopped it from flying too close to the sun.

[02:28] Paragraph 1, Sentence 1

The mainstream narrative of esports has been lovingly crafted by those who benefit from its success.

Jack says:

Esports are video game competitions. But if you don’t know what esports is, then just keep reading.

[04:44] Paragraph 1, Sentence 2

There’s big money in esports, they say.

Jack says:

So those benefiting from esports says there’s big money in it.

[04:55] Paragraph 1, Sentences 3-4

You’ve heard the stories.Teenaged gamers flown overseas to sunny mansions with live-in chefs.

Jack says:

They’re painting that picture of the big money in esports.

[05:26] Paragraph 1, Sentence 5

The erection of $50 million arenas for Enders Game-esque sci-fi battles.

Jack says:

What you need to take note of here is the lavishness.

[05:57] Paragraph 1, Sentence 6

League of Legends pros pulling down seven-figure salaries.

Jack says:

Here’s another example of more lavishness.

[06:05] Paragraph 1, Sentence 7

Yet there’s a reason why these narratives are provocative enough to attract lip-licking headlines in business news and have accrued colossal amounts of venture capital.

Jack says:

The word “yet” here is indicative that the author is setting us up here. There’s a reason these narratives are provocative. So it’s not all great here as there must be something going on.

[06:40] Paragraph 1, Sentence 8

More and more, esports is looking like a bubble ready to pop.

Jack says:

Think of a bubble, filled with air. And it’s usually a bad thing when the bubble pops. The fact that it’s getting big is the problem. It doesn’t matter if you don’t know what an economic bubble is. But the word “yet” can give you a clue to how this might be bad.

[07:40] Paragraph 2, Sentences 1-2

Fields is saying that esports is running a Ponzi scheme. You don’t have to know what a Ponzi is but you know that scheme is not a good thing.

[08:38] Paragraph 2, Sentences 3-4

He smirked. The crowd laughed uncomfortably.

Jack says:

The author is painting a picture of what it’s like to be in the audience.

[08:50] Paragraph 2, Sentence 5

The smile dropped from Fields’ face as he continued.

Jack says:

He wasn’t happy about this. If you’re not smiling, you’re not happy, or at least, it’s something bad.

[09:40] Paragraph 2, Sentence 6

“Everyone I talk to in this industry kind of acknowledges the fact that there is value in esports, but it is not nearly the value that is getting hyped these days.”

Jack says:

Field is again quoted here that esports is valuable but not as what it’s hyped up to be. You’re losing value. It’s not as valuable as much as you invest into it.

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The person who ends up succeeding in the MCAT is a person who just doesn’t give up – figuratively and literally.

It can be hard but just stick to it and it will pay off. If you keep at it and focus on the principles and important skills, you’re going to get better.

It’s possible. Just don’t give up.

[11:52] Paragraph 2, Sentence 7

Later, Fields would clarify that this value, and future value, “as of now, is optimistic at best and fraudulent at worst.”

Jack says:

The value is either good or bad.

[12:16] Paragraph 3, Sentence 1

Fields is not the only longtime esports veteran who is worried the industry is a bubble, or more accurately, an industry comprised of several bubbles.

Jack says:

There are several bubbles and not just a bubble.

[12:48] Paragraph 3, Sentence 2

Seventeen other experts on the North American esports industry shared similar concerns with Kotaku, some describing it merely as “inflated” and others as “completely unsustainable.”

Jack says:

They’re describing the bubble here and that it’s going to pop. And it’s backed by other experts.

[13:20] Paragraph 3, Sentence 3

Several spoke on the controversial topic because they love esports and want to see it succeed organically, in a sustainable way.

Jack says:

They’re talking about why there are these people talking about this.

[13:35] Paragraph 3, Sentence 4

There is, of course, a genuine love shared by thousands of people for playing games competitively.

Jack says:

The author is talking about esports in general.

[13:45] Paragraph 3, Sentence 5

Right now, many who spoke to us for this story said, the stuff that makes the esports industry seem like a tantalizing investment rests on unsubstantiated claims—or blunt-force lies.

Jack says:

We’re now going to more than one side of the “value” Fields was talking about before. And a lot of these are built on these unsubstantiated claims or lies.

It’s still a great competition. But the way they’re investing is financially not sustainable. It’s not good.

[15:10] Paragraph 4, Sentence 1

As investors pour hundreds of millions of dollars into the ballooning esports industry, many feel their way forward with statistics that indicate that paydirt is just around the corner.

Jack says:

The author is discussing the investment side of things and not just a bunch of kids playing video games. There’s lots of money coming in hoping to make money.

[15:38] Paragraph 4, Sentence 2

“League of Legends Gets More Viewers Than Super Bowl,” reads one 2019 headline from CNBC, glossing over the fact that they’re comparing apple viewership metrics to coconut viewership metrics.

Jack says:

The author is saying there’s this title but you can’t compare the two. The people are excited about esports. So it’s like a warning. Don’t be so invested in esports, or at least financially invested. They’re hyping it up. People are essentially oblivious to this problem.

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[17:40] Paragraph 4, Sentence 3

A 2017 Morgan Stanley report leaked to Kotaku claimed that, in its first year, the Overwatch League could conceivably generate $720 million in revenue, about the same as World Wrestling Entertainment.

Jack says:

This paragraph is saying it’s just different. You can’t compare apples and oranges. You can’t compare one to the other – so much so, apples and coconuts. Just realize that their investment dollars do not make sense. It’s not equating.

[18:51] Paragraph 4, Sentence 4

By 2022, says Goldman Sachs, viewership of pros playing competitive games like League of Legends, Dota 2, Overwatch or Counter-Strike: Global Offensive may be on par with the National Football League’s viewership today.

Jack says:

It’s a pretty bold estimate on viewership in the future which is basically a lot.

[19:20] Paragraph 4, Sentence 5

But according to many people Kotaku spoke to with knowledge of the industry, a lot of these statistics are at best rosy-eyed and, at worst, inflated, unverified, or misleading.

Jack says:

The author is saying that the numbers are good but they could be a lie.

[19:59] Paragraph 5, Sentence 1

For 12 years, Twitter never posted a profit, and until it went public, Uber lost $4.5 billion in one year.

Jack says:

The author is highlighting big companies that don’t make money. It’s comparing to this saying that you might be investing in this but it’s not making any money, just like esports.

[20:45] Paragraph 5, Sentence 2

One quirk of the world of startups is that investors love investing in unprofitable companies or industries.

Jack says:

Investors love unprofitable companies. We don’t know why but it’s their opinion. Maybe they’re thinking they’re going to be profitable one day. And this is the norm.

[21:27] Paragraph 5, Sentence 3

Yet longtime esports professionals don’t want to see their beloved livelihood go the way of the dotcom bubble.

Jack says:

The people playing esports don’t want things to go away just because of the investors.

[21:45] Paragraph 5, Sentence 4

The esports industry is held together with wax and string, which, sources say, hasn’t stopped it from flying too close to the sun.

Jack says:

The esports industry is this bubble that’s flying high but isn’t held together very strongly described by “wax and string.” So it’s probably a bad thing.

It’s interesting how they’re bringing up two populations – the investors and the actual esports enthusiasts that love the sport. It seems like the author is painting a positive picture of the actual esports individuals. But not so much into the idea of investing too much into it.

[23:17] Final Thoughts

Every passage always has this picture. It’s really a painting. You have to figure out what tones the author is using. What kind of colors are they using or what they use to paint? You have to really understand that painting. Delve into it and see where the emotion is coming from.

Every sentence should help you understand this painting more and more. Don’t be afraid to just puzzle through it. Fish it out. Try to figure it out. But don’t inject your own opinions. Don’t bring in things you don’t understand.

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