IQ News: Not Just Playing Around

As sites and players gain sponsors, online gaming gets serious. By Bernhard Warner
Meet Dennis Fong, professional gamer. The 21-year-old Berkeley, Calif. resident has an agent, endorsements from Microsoft and modem maker Diamond Multimedia, and a book deal. He owns a Ferrari, the spoils of a recent tournament win. He moonlights as a columnist for PC Gamer and he estimates his net income for 1998 at “just a hair under a hundred grand.”
Fong, also known as “Thresh” (short for “Threshold for Pain”), has found a way to turn lightning reflexes and a computer mouse into a healthy income. And he can thank Internet gaming tournaments, and the sponsors they’ve attracted, for his lucrative career.
“I think potentially computer gaming will actually be bigger than all the other sports, except maybe soccer,” says Fong, sounding eerily like a young Muhammad Ali.
Few people have the time or patience to make a killing, so to speak, at playing shoot-’em-ups such as Doom and Quake. However, with the online gaming community expanding faster than cyberbabe Lara Croft’s bustline, it’s become evident that advertisers are starting to take notice of video game mongers. And for the Dennis Fongs of the world, game developers, and the growing batch of online tourney organizers, it’s time to cash in.
“It took the mainstream [sports] leagues decades, decades, to create the critical mass their top players needed to secure endorsement deals,” reasons Fong’s agent, 24-year-old Peter Kim. “Soon there will be more corporate interest for players like Dennis and the leagues as well.”
Presently, the corporate interest comes primarily from the high-tech companies looking to position their brands in front of the technically astute crowd–or in schoolyard parlance, the geeks. But advertisers shouldn’t underestimate the appeal of the “geek” demographic.
“We’ve done a lot of research,” says Erik Lundberg, director of sales and interactive marketing at Total Entertainment Network, the San Francisco-based organizers of the Professional Gamers League, a multiplayer Internet gaming site. “The people who go to the PGL Web site are technology industry influencers and tech adopters The research shows they’ll tell six others about the products.”
One such advertiser is InterAct Accessories Inc., of Lake Mary, Fla. The company, which markets Advent computer speakers, even went as far as adding the PGL logo to speaker packages last month. “Hardcore gamers are the people driving sales for upgraded speakers,” explains Gary Moritz, senior vice president of marketing. “Our market research shows the killer app for audio on the PC is the killer game.”
The PGL, which comprises registered Net gamers playing one another in games such as Quake and Command & Conquer: Red Alert, launched in November with what may be the largest upfront online sponsorship commitment ever: a cool $2 million. Just like the National Football League, the PGL sells sponsorships, typically 12 months at a pop, in one of three forms: by advertising category, event or title classification. And just like the NFL, a sponsor fee includes promotion across a variety of media including television, courtesy of CNET’s TV.com, in 287 Best Buy consumer electronics stores and gamer mags. The result is that a raft of tech-minded sponsors such as Logitech, 3Com, and title sponsor Advanced Micro Devices, the Sunnyvale, Calif.-based chip maker, have signed on. The deals put the 3-year-old TEN on the brink of profitability, says Lundberg.
However, the question remains as to whether mainstream advertisers will become as enthused with sponsoring gaming sites as are tech marketers.
According to the Internet Advertising Bureau, the growth rate of Internet sponsorship deals has been fairly flat recently, although they accounted for 40 percent of the $351.3 million spent on online advertising during the first quarter of 1998.
But for online gaming sites there are encouraging signs they can buck the slow growth trend.
M&M’s, Intel and CNN/SI each cut sponsorship deals recently with MPlayer. So far, MPlayer’s sponsorship revenue has increased four-fold over last year, accounting for 40 percent of overall ad revenue during the first six months of 1998, says Kristin Asleson, vice president of strategic marketing at the Mountain View, Calif., company. The Station Sony.com, a division of Sony Online Ventures, New York, has been the most successful, signing on the likes of Sprint, Pontiac and The Gap to sponsor College Jeopardy! Online tournaments. Fueled by Jeopardy!, Sony last year amassed approximately $1 million in revenue.
Analysts project sponsorship activity in online gamer sites to grow, especially once these sites eclipse the one million monthly visitors mark. Only Sony’s The Station has reached this plateau, says Seema Williams, an analyst at Forrester Research, Cambridge, Mass. “The seven digit customer audience category is what it’s going to take,” Williams says, adding that this is probably one year away for most sites. Until then, “there are plenty of advertisers out there to pick up the slack.”
Even Electronic Arts, a newcomer to the ad sales game, has designs on making money in the online gaming arena. The San Mateo, Calif.-based developer of top-selling video game titles such as the Madden NFL and NBA Live series, figures it has an ace up its sleeve with its latest licensing coup, pro golfer Tiger Woods. Some time after the early fall launch of its PC title, Tiger Woods ’99, the company plans on conducting monthly online tournaments pitting game owners against one another for cash prizes. The company has been talking to potential sponsors, says Chip Lange, director of sports marketing, to make it a completely ad-supported tournament model. Neither the sponsors nor the tournament specifics have been determined; still, Lange believes the allure of big cash purses and the cult-like popularity of online multiplayer gaming “is the future of the brand.” And, perhaps the future of gaming. “You’re going to be able to fill out your tax form to say ‘professional gamer,'” Lange jokes.
But industry observers caution EA has a tough road to hoe. Through its decade-long dealings with every major sports league, the company has already buttoned up the legalese, securing officially sanctioned status from the PGA for the online Tiger tourney. But the software company will remain hyper-scrutinized by the league and its advertisers to ensure that EA’s online tournaments do not trample on the real thing. For example, the company likely would have to steer clear of inking a telecommunications sponsor for the AT&T Pebble Beach National Pro-Am should it choose that virtual PGA tour spot in its online tournament.
Like any burgeoning professional sports industry, online gaming has numerous obstacles to clear. For one, narrow bandwidth still dogs the multiplayer gaming experience. Second, the overwhelming majority of online gamers are opting for parlor games such as spades and hearts, which despite general interest from advertisers, still tend to be considered a ratings snooze in the eyes of potential big ticket sponsors.
And then there’s the gamer’s unmistakable identity crisis with advertisers. “The first thing we need is we have to break the stereotype that every gamer is a nerd,” says Fong, adding that until then he likely won’t be able to attract soft drink or snack food endorsements.