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Communication Dans Un Congrès Année : 2022

Profit, First-Mover Advantage or Relational Rent? The Strategies of French Professional Esports Clubs

Résumé

The esports industry is currently experiencing a very strong development, and its economic sustainability requires an evolution of business logic (Nyström et al., 2022). Indeed, the 2021 League of Legends World Championships attracted 30.6 million of spectators (+32,8% in 1 year). This is accompanied by new economics issues for this sector. Clubs are raising more and more funds (for example, Vitality raised 85 million in 3 years from the society Rewired.GG). Moreover, investors with various profiles are involved in the fundings of the clubs, such as gaming personalities, traditional sports clubs or endemic societies. These fundings lead to an increase of the principal sources of expenses of the clubs: the talents, and material or immaterial investments (such as gaming houses or league franchises). These funding archetypes, seemingly based on extern investments, echoes two models. First, the model of the startups, which are loss-makings companies that are betting on their future profitability. Then, the model of the European traditional sports clubs, historically in deficits since they are engaged in an arm race (Carin & Terrien, 2021) and a win maximization strategy (Sloane, 2015). Thus, the interest of investors to finance an industry that does not seem (yet) profitable brings the following research question: what are the economic strategies of the French esports clubs Esports Research Network Conference 2022 and their investors? Considering that the esports industry is currently not profitable (an underlying conjecture that remains to be proven in this research), two hypotheses are posed, based on the resource theory (Prévot et al., 2010). Firstly, the attractivity of this industry could come from research of profits in the long run. This profitability would be allowed by a first-mover strategy (Lieberman et Montgomery, 1998). Indeed, a pioneering position would allow the acquisition of competitive advantages, such as the preemption of scarce resources and consumers advantages, which are strong advantages in the traditional sports industry (Maltèse & Véran, 2010). This strategy is also characteristic of high-tech startups (Hellman & Puri, 2000), and needs most of the time venture capital fundraising. Thus, in view of the repeated fundraising by esports clubs and their consequent investments in talents, some clubs might have such a strategy. Secondly, the attractivity of the esports industry could not be linked to its direct profitability, but by the search of synergies between the esports activity and the other business of the clubs’ owners, allowing to develop competitive advantages (Mauws et al., 2003). Thus, the hypothesis of a relational rent strategy is proposed, where the esports club would constitute a strategical resource for its owner (Dyer & Singh, 1998). Therefore, the purpose of this study is to determine the professional esports clubs’ strategies. To do so, a qualitative method has been used. Seven semi-structured interviews have been made with 5 professional French clubs and two international player agents. Annual accounting reports of clubs have been studied to complete the interviews. Thus, this study is based on a sample of seven professional French clubs (interviews + annual reports), of about 15 in total listed in France, leading to theoretical saturation. The results highlight the loss-making nature of professional esports clubs, thus confirming the initial conjecture of this research. The two strategies defined in the theoretical framework are also identified, but correspond to clubs with different profiles. First, the interviews conducted for this study confirmed the hypothesis of a first-mover strategy adopted by some French professional sports clubs. These clubs are aiming to reach the best European leagues as quickly as possible in order to get a pioneering position. They are using venture capital fundraising in order to cover the huge investments in an arm race and the purchase of closed leagues franchises. Therefore, they are using a win maximization strategy to achieve long-term profitability through their pioneering position. Then, the results of this research also support Esports Research Network Conference 2022 the hypothesis of a relational rent strategy for some clubs. The relationships between esports clubs and owners would constitute a strategic resource. These clubs are aiming for making good sporting results for marketing purposes. The expenses in talents and their utility maximization approach (Sloane, 1971) are covered by the external funding of a parent company. The latter is looking for the maximization of its own profit in the short run through the complementarity of resources: the sporting results of the esports clubs aim to maximizing the parent society profits. Finally, the presentation will discuss the managerial implications of this study. The sustainability of the two approaches will respectively depend on the long-term profitability of the industry (which is a risky bet) and the synergies developed by the club owners. Thus, the study of strategic content (the effectiveness of strategies, in the short or long-term depending on the strategy undertaken) constitutes an interesting extension of this research.
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Dates et versions

hal-03981638 , version 1 (09-02-2023)

Identifiants

  • HAL Id : hal-03981638 , version 1

Citer

William de Moor, Christophe Durand, Nicolas Besombes, Mickael Terrien. Profit, First-Mover Advantage or Relational Rent? The Strategies of French Professional Esports Clubs. Esports Research Network Conference (ERNC), Esports Research Network, Nov 2022, Jönköping, Sweden. ⟨hal-03981638⟩
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