Panelists on ESports: Game On at IEBA include Sid Greenfieg, MGM Resorts, Las Vegas; Tobias Sherman, WME IMG eSports, and Brad Fry, AFKgg Gamer Lounge, San Jose, Calif. (VT Photo)

REPORTING FROM NASHVILLE — Arena managers are watching the birth of a major new sports booking in the esports phenomenon. And the coveted customer base, males age 18-34, is as likely to dictate arena rules as they are to follow them.

For instance, at a major esports booking from Major League Gaming at Nationwide Arena, Columbus, Ohio, fans insisted on in-and-out privileges before buying tickets. Some negotiations later, it was granted and, in the end, only three percent of the fans actually used the privilege. But no one knows how many would not have attended without the option.

Even merchandise is a different animal as fans seek in-event purchases that are basically digital.

Tobias Sherman, WME IMG eSports, tells of the time Dota 2 sold a $35 hoodie at an event, which came with codes attached. Kids bought the merchandise, ripped off the code and threw away the hoodie. Later, the hoodies were donated to the homeless. “The physical item has no value to them,” Sherman said. It’s all digital.

The logistics and subtleties of booking e-sports was the topic of a panel during the International Association of Entertainment Buyers conference here Oct. 9-11. Questions from the audience centered around identifying the major players, revenue streams and venue requirements for esports. Joining Sherman on the panel were Peter Melican, Major League Gaming; Bredan Buckley, Columbus Arenas Sports & Entertainment, and Brad Fry, AFKgg Gamer Lounge, San Jose, Calif. Sid Greenfeig, MGM Resorts International / Live Nation, Las Vegas, moderated.

Tobias Sherman, Brad Fry, Bredan Buckley, and Peter Melican on the IEBA panel. (VT Photo)

The sport has progressed from hotel bars to convention centers to arenas, panelists said.

Calling esports great competitive entertainment, Sherman said WME/IMG, which most recently launched a program on TBS and Twitch called ELeague, plans to expand esports on all fronts, from aspirational to professional and from representation to advocacy. “We are witnessing the birth of a sport. From the first time I watched, I was connected.”

Fry, whose 50,000-sq.-ft. restaurant bar in downtown San Jose uses video games to bolster sales and foster esports, said it’s all about a natural progression of competitiveness. “Not everyone can do professional sports, so we want to watch the best play.”

Buckley, whose Nationwide Arena hosted Counter-Strike: Global Offensive Major Championship in April, called it great content for venues and a way to access a demographic that otherwise isn’t necessarily paying attention to traditional media sources, advertising, and sponsorship or attending events live.

“It’s the same as watching NHL or NBA games. You are watching the best of the best. The difference in esports is it is multiple games, multiple audiences and multiple titles,” Melican said. League of Legends is the most recognizable title, because they were the first to utilize live events.

“They put a lot of resources behind it,” Sherman said. “It was a losing proposition on the event side, but they didn’t care because they were making it all back on microtransactions.” Among the most important games are Counterstrike, League of Legends, Dota, and Dota 2.

Dota 2 capitalized on lot of crowd funding and large scale events, which drives the community to participate in watching it and become more passionate because they are helping fund these players, Fry said. “It’s unique, something we haven’t seen in other sports.” Crowd funding drives advances like a $20-million prize pool.

Microtransactions, like a new “skin,” which Fry explained is a cosmetic, like a shirt or jersey for an individual character, are a major source of monetization for manufacturers.

Sherman once explained microtransactions to a client who wanted to get in this space by holding up a huntsman’s knife that sells for $50 and then telling him the digital, esthetic version of the knife in the game costs $180. “The virtual knife is more expensive than the physical knife. It’s fashion. Kids are spending billions on microtransactions. It doesn’t even effect game play or your character. It doesn’t give you an advantage. Kids aren’t interested in material; everything is digital.”

Buckley is lucky in that Major League Gaming’s Melican is headquartered in Columbus and produces over 180 events.  “When we went on sale [with Counterstrike], it sold out in a couple of weeks with zero dollars in traditional advertising. What we did hardly moved the needle at all. The challenge is figuring out how to have a conversation with fans and doing what we can to engage them when they are there in the venues. They are very reactive. If they don’t like something, they’ll tweet it.”

“We’ve never purchased traditional media,” Melican said. “Nationwide Arena offered us traditional media buys we didn’t need.”

General admission tickets are generally $50 and VIP tickets, $150. In Columbus, VIP tickets, 10 percent of the house, sold out in three hours.

“You are supporting their passion,” Melican pointed out. “These people have been pushed back. This justifies their passion.”

“Twitch has a higher aggregate in some cases; sometimes we get a higher aggregate on TBS,” Sherman said of marketing channels. “You have to speak to them in an authentic voice. Be reactive and you have a fan for life.”

When, Fry added in-and-out privileges at his gamer lounge, he experienced a huge increase in sales, validating being reactive. “When teams they didn’t want to watch were up, they could leave and do other things. They spend six hours in the building. They want options. We adjust what we do on a daily basis.” Fry charges aspirational gamers by the hour, $5 an hour, $13 for three hours and $25 for a weekend pass.

Sherman noted it’s important to recognize the difference between professional and aspirational. “Esports is without borders. It’s global because it’s streaming.”

IMG Academy features eight e-sports and will be adding a ninth. Aspiring gamers have to train, Sherman said. “You simply have to give them the space.”

Fry likes that gaming is now co-mingling with other sports leagues. He launched a recent promotion for his lounge that tied gaming to professional basketball at SAP Center in San Jose, inviting gamers to a post-preseason game party. “It was a great mix, esports after a sports game,” Fry said.

Monetizing esports involves three main buckets – sponsors, the event and merchandise, Sherman said. For game manufacturers, the major revenue is viewership.

Melican noted fans are usually onsite from four to six hours and do not hesitate to stand in long lines for merchandise. It is a point of pride in that community to be at the event and get the pin and code live, he said. Resale of pins can hit values of $600 or more after the event.

One traditional marketing ploy still works in esports – the meet and greet. Greenfieg said fans line up around the concourse for the meet and greets.

The sport has garnered some heavyweights in the team ownership realm and, in turn, professional players are seeking higher salaries. Fans are attached to players, Fry noted. Players have the power.

An event will draw from outside city limits, for sure. Melican said 17 percent of the audience for his Nationwide Arena event travelled from outside the state of Ohio. “You have gamers in your local market, I guarantee you,” Melican told venue managers in the audience. “ And you have a bigger audience than that. They will stay 10 kids deep in a hotel room to go to an event. The audience will come.”

Sherman sees esports as a “global explosion that will localize.” He does not see a touring product as viable. But he does envision a blend of music and e-sports that can tour.

Interviewed for this story: Tobias Sherman, (954) 240-4216; Bredan Buckley, (614) 688-8408; Brad Fry, (408) 761-8263; Sid Greenfeig, (702) 891-7059