Nowadays video game industry is considered to be a mainstream rather like movie or music industry. While the epic blockbusters such as Call of Duty series contribute to the developers within direct sales of game copies and franchising, free competitive online games attract more and more players. The evolution of electronic sports in the last decade has altered the industry. The online tournaments have become massive global events. We will consider the contribution of competitive game industry to economy in terms of one of the most popular multiplayer online games Dota 2.
THE CONCEPT OF DOTA 2
Dota 2 is a 5-vs-5 online competitive game with elements of strategy and role-play. Dota 2 is a restart of Defense of the Ancients (DotA) game, developed by Valve Corporation (Valve) in 2011. The game was released in Steam as free-to-play. For the three years of existence the game has become one of the most played over the world with over 900 thousand active players daily and over 9 million of unique accounts in total (Steam). The success of Dota 2 can be determined by several key points:
- Tactical sophistication: the game is perfectly balanced so that there are countless ways to win;
- The win requires the use of high skills: both motor and intellectual;
- Cooperative orientation: interaction with teammates is critical for the victory;
- Short-length: the average match lasts for 30-45 minutes.
Unfortunately, the player has to spend much time in the game to stay competitive, as the game community and the game itself are constantly evolving. Besides the game requires extremely high skills and fast reaction that can be lost without practice. Professional players from China spend up to 70 hours weekly playing Dota 2.
THE SUCCESS OF IN-GAME PURCHASE SYSTEM
Being a free-to-play game, Dota is still Valve’s most profitable business project. One of the main revenue generating centers is microtransaction mechanics. Microtransactions stand for in-game purchases that improve game experience. The existing Dota 2 Store enables players to buy cosmetic items like costumes for heroes that change their look or loading screen backgrounds. Valve has earned around $80 million on in-game purchases in 2013 and was ranked 13th in terms of generated funds through sale of virtual products (Grubb). Successful in-game sales are explained by efficient corporative policy: the microtransactions don’t provide any game advantage and are not imposed to the player. Besides, players that don’t buy items with real money can trade with other players inside the game which leads to extended monetization.
According to Edery (41) the success of the game is strongly dependant on the community created: the players can make both new mods and solve technical issues of the game. In case of Dota Valve has altered this statement: the players can make the cosmetic items themselves and receive 25 percent from each microtransaction. The community has received over 200 designers that earned over $15 million in 2013. The average annual revenue of each creator has reached up to $7,500 (Grubb). As result, the community is extensively growing involving new content creators and designers to the game.
Of course, it is not comparable to annual sales of Grand Theft Auto V which are estimated at $2 billion level (Thier). However, the Dota 2 business model allows both the developer and the gamers benefit from the game. In other words, the game community sets up additional workplaces for creative minds and simply for game enthusiasts.
THE CONTRIBUTION OF GLOBAL TOURNAMENTS
The esports has greatly evolved in the last decade mostly due to the development of internet technologies. The multiplayer online battle arena League of Legends, which is similar to Dota 2, will be introduced on Summer Olympics in 2016. This proves how massive the competitive tournaments have become. Dota 2 is not yet included in the Olympics. However, Valve has initiated an annual tournament called the International. The first International was held in 2011. This tournament was designed as a marketing move to introduce beta version of Dota 2 to the public. The best teams around the world were invited to the tournament to compete for the prize pool of $1.6 million. The event had a great success and was made an annual event.
The Valve revenue from Compendium sale has reached almost $33 million. The main stage of the tournament was watched online by more than 20 million of people and by 11 thousand of spectators in Seattle Key Arena where the International 2014 was held. The event was widely streamed all over the world and attracted attention of big media networks such as ESPN and New York Times.
The success of the International has encouraged the community greatly. It showed that one can earn money by playing a computer game. The Dota 2 players have earned more than any other gamers: around $23.5 million beginning from the game release in 2011. Secondly, the community is encouraged to create more tournaments. The tickets are sold through Dota 2 Store and Valve receives 75 percent of the revenue. Nowadays there are over 10 popular tournaments with prize funds in the range of $100,000-500,000 thousand.
Becoming a well-known brand in cyber sports, the community faces a range of problems. The revenues are distributed disproportionally to the players. While the winner team of the International 2014 received over $5 million or 46 percent of the prize pool, the last places received nothing. This trend is common for most Dota 2 tournaments when strong teams collect 90 percent of the prize funds, leaving the weaker teams almost unrewarded. From time to time teams decline the offer to participate in the tournaments due to the lack of financing. The silver lining is that potentially the team does not require significant financing to win matches; only skill and experience matters.
The unfair distribution of revenue also refers to Valve’s 75 percent share in every microtransaction. For small tournaments 25/75 split is too unreasonable to even start the initiative. The developer should optimize the revenue distribution policy to make equal conditions for all members of the community.
The game industry growth rate surpasses the U.S. economy growth rate by more than 4 times (Taylor). This has a strong influence on the related industries such as software and hardware producers. According to Wesley (19), “leading edge innovations in processor design, computer graphics, and artificial intelligence are all being driven by the video game industry”. Enhanced graphics and high requirements lead to improvements of processors and graphic adapters. Massive demand for hardware and software solutions eventually causes the reduction of prices on new technologies and their expansion in other industries.
Surely, the sales of hardware and software increase with the rising popularity of video game industry. Such producers of Alienware, Razer and Steelseeries are constant sponsors of different Dota 2 events and teams. Dota 2 has become a platform for marketing campaigns. Moreover, small businesses related to esports are getting noticed by industry leaders. For example, the videostreaming social platform for gamers Twitch was purchased by Amazon for $970 million (Wingfield).
Dota 2 is one of the most promising directions in esports. This game gathers one of the largest audiences in the industry and continues to grow. Dota 2 has become the brand that people not related to the video game industry are aware of. The enthusiasm of the game community and enormous efforts of Valve has made Dota 2 the top-paying game in the history of cyber sports. Besides, not only professional players can earn money, but also game designers, event managers and other Dota 2 enthusiasts due to the system of microtransactions and huge support from Valve. However, the distribution of revenue in the community remains unbalanced. From one side, Valve receives 75 percent of revenue generated by in-game item creators and tournament managers. From the other side, top 5 professional teams can hold up to 90 percent of all prize pools. In perspective, this can break the rules of competition in competitive gaming.
Dota 2 benefits to the economy by adding to domestic product, creating new workplaces and stimulating the growth of supporting industries such as hardware producers. Nevertheless, this industry is strictly entertaining and satisfies only secondary human needs. It neither adds to real product nor significantly improves the living standard. Besides, the gamers who spent too much time playing Dota 2 become addicted and face only in-game situations that are remote from real life.
Edery, David, and Ethan Mollick. "An Introdcution to Games, and Why They Matter." Changing the Game: How Video Games Are Transforming the Future of Business. Upper Saddle River, N.J.: FT, 2009. 240. Print.
Wesley, David T. A., and Gloria Barczak. "Intoduction." Innovation and Marketing in the Video Game Industry Avoiding the Performance Trap. Farnham [Surrey, England]: Gower, 2010. 280. Print.
"Steam: Game and Player Statistics." Steam: Game and Player Statistics. Web. 30 Nov. 2014. <http://store.steampowered.com/stats/>.
Grubb, Jeff. "Analyst: Dota 2 Made around $80 Million in Microtransaction Revenues In 2013." VentureBeat. 22 Jan. 2014. Web. 30 Nov. 2014. <http://venturebeat.com/2014/01/22/doat-2-made-around-80-million-in-microtransaction-revenues-in-2013-according-to-analyst-firm/>.
Grubb, Jeff. "Dota 2 and Team Fortress 2 Item Creators Get $10.2 Million Payout from Valve In 2013." VentureBeat. 17 Jan. 2014. Web. 30 Nov. 2014. <http://venturebeat.com/2014/01/17/dota-2-and-team-fortress-2-item-creators-get-10-2-million-payout-from-valve-in-2013/>.
Thier, Dave. "'Grand Theft Auto 5' Has Sold Nearly $2 Billion." Forbes. Forbes Magazine, 13 May 2014. Web. 1 Dec. 2014. <http://www.forbes.com/sites/davidthier/2014/05/13/grand-theft-auto-5-has-sold-nearly-2-billion-at-retail/>.
"BALLnROLL - By The Numbers: The Economics Of The NBA Finals." BALLnROLL. 6 June 2014. Web. 1 Dec. 2014. <http://ballnroll.com/PowerMoney?post=1195>.
"Top 50 Games Awarding Prize Money." :: E-Sports Earnings. Web. 1 Dec. 2014. <http://www.esportsearnings.com/games>.
Taylor, Rich. "Video Game Industry Adds Billions to US Economy." The Huffington Post. TheHuffingtonPost.com, 13 Nov. 2014. Web. 1 Dec. 2014. <http://www.huffingtonpost.com/rich-taylor/the-billion-dollar-video-game-industry_b_6148684.html>.
Wingfield, Nick. "In E-Sports, Video Gamers Draw Real Crowds and Big Money." The New York Times. The New York Times, 30 Aug. 2014. Web. 1 Dec. 2014. <http://www.nytimes.com/2014/08/31/technology/esports-explosion-brings-opportunity-riches-for-video-gamers.html?_r=0>.