（原标题：200 Million Honor Of Kings Players Key To Saving Tencent s Mobile Game E-Sports Dream）
Tencent has already taken over 80% of the market share of mobile game e-sports market. And the Honor of Kings has acquired half of the mobile game e-sports market share, generating an income of ￥5.5 billion.
“How is that possible for a team that had seven consecutive wins in the King Pro League (KPL) spring season to lose control over the match and get a headcount ration of 7:0?” 26-year-old Fanfan said angrily.
Fanfan is a typical young fan of Tencent’s big mobile game hit Honor of Kings, who got the e-sports event ticket through the mini game of Honor of Kings.
On April 15th, professional game club XQ competed with GQhappy. The first round of the competition took 12 minutes and 28 seconds and ended with a 13:1. The rather large score gap disappointed the QGhappy’s supporters.
Luckily, the next two rounds were as “dramatic” as the first one. In the end, QGhappy turned the tide at 2:1 and achieved eight consecutive wins. To date, QGhappy has had 15 consecutive wins.
Tencent’s Honor of Kings has become a phenomenal game. In the game, players’ goal is to eliminate the crystals in the other team’s base. The game went popular for its fast-pace game play, diverse game characters and short game play per round (around 20 minutes), etc. It’s estimated that the game has accumulated 200 million players, or let’s say, fans, in China.
The fan economy is development is still in the early phase
At the competition venue where XQ was competing against QGhappy, Tencent’s staff interviewed Fanfan for a survey involving the acceptable price range of the regular seasons, playoffs, and finals of the KPL live event. According to Fanfan, the ticket price for regular seasons should be below ￥50, the playoffs should be around ￥50 - ￥100, and the finals should be around ￥100 - ￥300. “I would watch it if the regular season is around ￥50. It’s like watching a movie,” Fanfan told TMTPost.
However, he criticized that the commentators of Honor of Kings weren’t professional. “When you watch League of Legends Pro League, the commentators almost make zero mistake. But the commentators of the Honor of Kings make several mistakes during each match. It really affects the whole experience,” Fanfan said, commenting that the match he watched today only got a 3.0 score rating from him.
In other sports realms, basketball players for example, their fans would pay ￥300 to ￥1500 for their customized basketball shoes. But such phenomenon is not common in the e-sports sector. Fanfan told TMTPost that he wouldn’t buy the fan merchandise from the club or player he liked despite he admired them for being hardworking.
The 21-year-old audience Shasha expressed the same view: “I wouldn’t spend money on the fan merchandise. I am just not that into them.” It’s apparent that the fans haven’t become a business driver here. “It’s ￥50. Why not just use it to watch a game?” Shasha said.
She told TMTPost that she personally prefers Xiaozhu from sViper, Xiaoyu from eSta, and Chengui from ASxiange. TMTPost learned that these players shared a common feature: outstanding appearance. In fact, Shasha asked to take photos with a good looking player after the XQ VS QGhappy match.
When asked about if she supported any specific team, Shasha expressed that she had no preference and that she only liked some individual players instead of the whole team. But for the teams, winning the championship in the KPL is essential. And for individuals, the championship is an indicator of their performance as professional players. It’s like Kevin Durant having no choice but joined Golden State Warriors in pursuit of the championship.
So what are differences between professional e-sports players and traditional celebrities? Why do they take photos with their fans like that of celebrities and their fans?
They are a team, not celebrities, Shasha said. From her point of view, they are not considered as idols. “They are people who are really good at games,” 22-year-old Wenwen added.
It’s apparent that the connection between fans and professional players is still weak, which explains the weak fan economy here.
At present, e-sports clubs, live-stream platforms and e-sports event organizers are actively making strategies on representing professional players and the greater entertainment businesses, exploring consumption scenes and stimulating the consumption demand of the fans so as to boost the fan economy.
Happy Share Café’s owner Fengcheng told TMTPost that they played the live show of Honor of Kings in his café because he personally liked playing the game and that his customers also tended to be interested in the game. But he hasn’t had any further business ideas concerning this.
We have Stephen Curry in basketball, Lionel Messi in football, Ruofeng and MISS in League of Legends, but we still don’t have a representing figure in Honor of Kings. It’s known to all that mobile games have rather short life cycle despite having been enhanced from the 12 months in the past. Mobile games target audiences aged between 10 to 40, which is considered as a healthy structure. Tencent, the Chinese Internet giant that wants to build up an e-sports industry single-handed, still has to figure out ways to alter fans’ perception within the mobile game life cycle, build up player IP, and forge a complete fan economy chain. This is no doubt an incredibly hard obstacle for Tencent to tackle.
The recent Global E-sports Market Report from market research company Newzoo forecasts that the global e-sports industry would have a year-on-year growth of 41.3% and reach a scale of $696 million, with income from independent brand operations (sponsorship, advertisement, and broadcast rights), event ticketing, fan merchandise, and investment from game publishers. Brand expense is estimated at around $517 million, among which $155 million would be advertisement, $266 million would be sponsorship, and $95 million would be media copyrights. Investments from brands will be doubled, driving the total volume of the market to $1.5 billion. The report also predicts that consumers would spend a total amount of $63 million on event tickets and fan merchandise.
The other $116 million would be the total investment from game publishers in the e-sports market. This suggests that for most game publishers, the e-sports business is not a profit generator.
However, their market education strategy is logical in some way considered the positive impact on income from games and the development potential of e-sports. Tencent’s move confirms this idea as the company started to treat Honor of Kings as an independent e-sports product last year.
In the traditional sports industry, the income contributed by each fan is the key indicator of the level of fan economy. The assessment covers the source of income, media rights, sponsorships, and expense. According to Newzoo’s forecast, each fan is expected to contribute $3.64 on average the industry. As the e-sports industry continues to mature, the number of local events and seasons increases, and the number of media right deals keeps on rising, each fan is expected to contribute $5.20 by 2020. However, that’s still lagging behind popular sports like basketball.
It’s easy to tell that even though KPL is running under the operation system similar to NBA and the FA Premier League, it still fails to dig up enough value from the consumer side, especially on fans’ direct consumptions. It’s essential to nurture a group of professional and attractive players before Honor of King becomes top in normal distribution for KPL to further develop its e-sports business.
Taking a step back, letting industrial chain players into the arena
As most people have already known, the seasoned player Faker of League of Legends is now valued at ￥20 million to ￥30 million. In 2016, it was common for commentators to get a contract of over ten million yuan. In February last year for instance, MISS was signed by livestream platform Huya at ￥100 million, bringing up a stir among industry insiders, media and players. It appears that there is a huge bubble in the industry.
So many might wonder: will players from Honor of Kings, seen by many as the mobile version of League of Legends, emerge to be as that expensive as well? The e-sports event organizer’s structure is similar to that of overseas mature sports league like the FA Premier League and NBA, and therefore within the contract expire date, the club members’ change of club is seen as a transfer. Industry insiders revealed to TMTPost that an average member’s transfer would cost around ￥200,000.
According to previous open reports, in February this year e-sports club QG’s CatGod set the transfer record at one million yuan in the Honor of Kings realm. This signifies that professional players of League of Legends are still 20 to 30 times more expensive than pros of Honor of Kings.
“When inviting us to play in Honor of Kings, Tencent promised us that the salary cap would be at on million, and that it would allocate the rest of the money and sponsoring fund (previously owned by Tencent) to the club and the event organizer,” QGhappy’s club manager Linko told TMTPost.
CatGod, who was involved in the deal, revealed that the transfer was between clubs and that he didn’t participate in the negotiation and the discussion on the details. He said that he only became aware of the deal after it was already signed. CatGod also said that he couldn’t reveal details of his transfer cost and how much he had got.
In 2017, the club’s contract with the players has been changed to a three-party agreement involving Tencent. The agreement was drafted by Tencent-led KPL, aiming to supervise and ensure the rights of all parties. However, clubs and the league have a confidential agreement, and therefore detailed statistics are not available yet. QGhappy’s manager Linko told TMTPost that part of the profit would be allocated without compromising players’ rights. “KPL players are not that expensive as most people believe to be,” Linko said.
KPL’s profit allocation system gives clubs hope of profiting. In some way, the system resolves the clubs, event organizers, network providers and livestream platforms’ concerns on whether the mobile game e-sports sector lags behind the client-based e-sports in viewing experience, competition, and fairness.
Chenhai Capital’s Chen Yue told TMTPost that the wide gap in competitiveness, viewing experience and mass communication exists in all sports fields. Only when a balance is achieved, can we have a better sports event, and it’s the same for e-sports, Chen said. Tencent’s business model definitely needs more consumers to participate in the event.
Looking at these amazing numbers, it’s easy to tell that Tencent has made a great fortune. It’s a great comforting assurance for upstream partners like e-sports clubs, livestream platforms and event organizers to enter the mobile game e-sports field.
Currently, e-sports clubs rely on sponsorships and the fan economy to profit. QG’s sponsors include MayN, AutoFull, and Panda TV. In contrast to sponsors on the League of Legends event, the difference here is that Tencent will divide some of the money from sponsorships to the club. As for the fan economy here, it operates like that of Internet celebrities.
“The profit from content reward by users is very little.The club can’t even use it to buy some fruits. We mainly attract sponsors with our views.” Linko told TMPost.
That said, currently e-sports clubs are relying heavily on enterprise users in the mobile game e-sports sector while ordinary users can only provide very little income. But even if the same model was applied in 2016, e-sports clubs wouldn’t be able to make money either. The turning point was when Tencent started to give up part of the profits to the clubs. By taking a step back, Tencent pumps in stimulus into the industrial chain, which will bring greater profit to Tencent in the long run.
Tencent has monopolized the mobile game e-sports market, while Honor of Kings accounts half of the market
According to the Industry Report of China’s E-Sports Industry (January to March 2017) jointly published by CNG and China Music and Digital Association Game Committee, the e-sports market in China cashed in ￥18.29 billion in Q1 this year, a year-on-year growth of 42.6%.
It’s worth noting that in Q1 2017, the mobile game e-sports sector started to act as an income driver for the e-sports market, and surpassing the client-based games in e-sports for the very first time. However, Tencent has already taken over 80% of the market share of mobile game e-sports market. Honor of Kings has acquired half of the mobile game e-sports market share, generating an income of ￥5.5 billion.
As the copyright owner, Tencent is gradually opening up its mobile game e-sports operation. In the past, e-sports events are only a supplement activity of Tencent in the gaming market. For instance, the Cross Fie Pro League was a marketing campaign of Cross Fire. Tencent also had DNF Pro League for DNF. They all served the games themselves. But starting from last year, Tencent began to run e-sports events independently and set to build up an open system, making e-sports an independent product.
E-sports event organizer VSPN had been a direct beneficiary in Tencent’s opening-up strategy. It had agreed on a contract with Tencent on attracting investments for KPL, exclusive cooperation and agency on advertisements, as well as the right to organize events.
“After opening up, the market campaign has been having an tremendous increase in sponsorships and capital. We are hoping that the investments from both Tencent and the sponsors can push the development of the whole industry chain forward, bringing more income to the clubs and professional players and generating healthy income,” VSPN’s CEO Teng Linji told TMTPost.
In 2016, VSPN’s revenue had already hit over one hundred million and a 200%-300% growth is expected in 2017, VSPN revealed. All business lines will also have major changes in revenue ratio. For instance, the income from advertisements might take up 30% of the total income, while lines like player agency, shows, and others will account for around 20%.
NEOTV (first e-sports company to be listed on the New OTC Market, considered as the first e-sports share), the first traditional industry player that set foot in the mobile game e-sports sector, is facing a similar situation. NEOTV’s CEO Lin Yuxin told TMTPost that the company’s advertisement income took up quite a large percentage in the total income last year. “In the future, the income ratio of event organizing will gradually drop. It doesn’t mean we are having less projects, but shows the fact that other businesses are generating more profits. Income from the advertisement business is expected to account for 30% to 50%,” Lin said.
Upstream clubs and event organizers are all eyeing advertisement clients’ pockets. But can downstream broadcasting channels and technology providers in the e-sports industry rely on fans’ consumption to survive?
At present, livestream platforms like Huya, Chushou and Douyu etc. have purchased the livestream broadcast right of KPL 2017 at a price around ten million yuan. An insider from Douyu told TMTPost that the income generated by a certain project is not the focus. “What really matters for the platform is the diversification of the platform’s content and the increase of data flow,” the insider said. “When the platform’s data flow is increased, we can cash in better as a platform.”
As a direct beneficiary, accelerator service provider YFCloud’s CEO Tong Yongyue said that to evade risks, livestream platforms tend to only work with the top ten providers in the industry. “These providers will make optimization on the graphic quality and beautify function, offering a complete set of solutions. But its’ up to the clients whether to choose a complete solution or just parts of it,” Tong explained.
It’s easy to tell that advertisement business remains the main source of income for companies from all parts of the e-sports industry chain. On April 28th, KPL 2017 was sponsored by Sprite, BMW, and vivo. Vivo Xplay 6 has become the official smartphone model for the 2017 KPL event. Last year the official model had been Honor V8 from Huawei.
According to open reports, Sprite has sponsored KPL with several tens of million yuan. VSPN’s CEO Teng Linji told TMTPost that Honor of Kings’ professional league is the leading e-sports event in the industry. Invited sponsors had sponsored an amount of several tens of million as well while sponsors of specific products generally make an investment of several million. From this perspective, Vivo has at least sponsored KPL with around several million of yuan.
Aside from Sprite and BMW, let’s examine the sponsoring smartphone makers here in the e-sports arena. Honor V8 was the official event smartphone of the last KPL. In general, the brand would have continued to appear in the new event since Honor of Kings is the dominating mobile game in China. But surprisingly, Honor V9, rolled out in the first quarter of 2017 claiming to be the best phone for mobile gaming, changed its partner to NetEase and is sponsoring Onmyoji.
If the Honor series gave up on Honor of Kings, the only phenomenal mobile game at present, for misjudgment, it would be devastated by now.
TMTPost had therefore contacted Honor for a comment, who replied: “Honor V9 hasn’t had any official cooperation with Honor of Kings. However, using Honor V9 to play Honor of Kings and Onmyoji will provide the users with an excellent experience.”
There are also other smartphone makers involved in the e-sports industry, including Meizu’s Noblue E2 that was the official training smartphone for club Xiange. However, when Meizu was promoting the phone model by introducing its “do not disturb” mode for gaming, Tencent’s Honor of Kings was included on the promotion poster. Apparently, Tencent wasn’t happy about it, and later Meizu apologized officially on Weibo for that. Before that, 360N5 had also cooperated with NetEase and became the official smartphone of the mobile game Land of glory.
Looking from the tendency of industrial consumer electronic products, this is a strategy that focuses on specific vertical sectors and catering to gamers who care about the specs a lot. The flocking in of car makers and phone makers, which are from major markets of trillions, proves that the e-sports industry is recognized by the market.
We have analyzed that the main sources of income of clubs, event organizers and livestream platforms have been the advertisement clients and sponsors, the business side clients. Although Tencent’s Honor of Kings has 200 million players, only a very small percentage of the ￥5.5 billion income was generated by the fans from the consumer side.
Utilizing the fans before Honor of Kings loses its popularity is the key to building a mobile game e-sports industry for Tencent.
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Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.