When HT&E announced it was closing fledgeling esports venture GFinity in its half-year results last week, company chairman Hamish McLennan issued the following statement.
“While the business has achieved some significant and world-leading results, the economics of esports in the Australian market are yet to deliver sustainable, positive earnings,” McLennan said.
HT&E revealed GFinity, the company which hoped to transform Hoyts cinemas into esports arenas, posted a $5.3m loss as of 30 June, after only launching the venture in 2017.
Perhaps more telling were comments made by GFinity CEO Dom Remond following the news, telling the AFR “brands and agencies still don’t understand esports to the level they possibly should”.
Although HT&E pointed out the decision to close GFinity was part of its current audio-first strategy – which also saw it sell off Adshel to oOh!media last year – the financial woes of the esports venture raises some questions.
PwC recently predicted the size of the local gaming industry, inclusive of esports, will double from $3.45bn in 2018 to $7.12bn in 2023.
There is no doubt that there is huge money available in esports – look no further than the $30m prize pool up for grabs in the recent Fortnite World Cup – but does the GFinity closure suggest the Australian market is struggling to commercialise this opportunity?
Speaking with B&T, Monash University lecturer in communications and media studies Dr Robbie Fordyce said Australia has been blinded by the potential upside of esports.
“esports remains an emerging industry in Australia; the prospect of large returns appeals to a lot of players and to a lot of teams, as well to stakeholders such as advertisers and promoters,” he said.
“This mutual enthusiasm leads to a bit of blindness with regards to some of the more excessively optimistic industry reports.”
Fordyce put much of the blame on Australia’s “sub-par national infrastructure”, particularly the NBN, which is preventing “any real competitive international play”.
GFinity’s Remond also suggested there were problems around extrapolating data from popular live streaming service Twitch.
Publicis Sport & Entertainment director Ashley O’Rourke said Twitch is providing data, it’s just in a different language.
“The common problem that brands new to the space are facing is communicating the value of esports in the language that a lot of clients are used to hearing; CPMs (cost per thousand),” he told B&T.
“On paper, CPMs are higher in this space but, so too is the engagement of the audience compared to traditional broadcast or radio channels, for example.
“Twitch knows this, and are working collaboratively with agencies to help communicate this to clients.”
He did point to a current divide between local and global figures on esports platforms, which make it difficult for local brands to get on board.
“For a lot of Australian brands entering the space, they do not necessarily care about global reach and instead, want to understand the localised reach across channels such as Twitch,” he said.
“The fear is that by sharing those focussed, localised numbers it will undermine the opportunity and turn prospective sponsors off, when in fact brands are craving transparency and honesty above all else.
“My advice is; be honest, open and transparent, and bring sponsors/clients along on the ride because esports and gaming isn’t going anywhere, it’s merely finding its feet.”
Speaking on the closure of GFinity, O’Rourke explained it is not indicative of a wider industry problem.
“Believe it or not; the sky is in fact, not falling in and the feedback we’re hearing centres around excitement and positivity in the esports space,” he said.