The Challenge of Marketing an Online Game

Published by MBA Skool Team, Published on January 01, 2018

In 2014, Valve corporation, a name synonymous with the world of gaming, released a documentary film ‘Free to Play’. The film focused on the lives of three professional players before and after they participated in ‘The International (2011)’, an eSports tournament of their newly launched game ‘Defense of the Ancients’ popularly known as DOTA 2. The documentary was well received and highly praised by the critics. The reason why the documentary did exceptionally well was that it introduced people with the gaming segment of multiplayer online battle arena(MOBA).

Further it created a hype around the game itself as the prize money offered in the tournament was a whopping $1 million, which was highest for any eSports tournament at that time. To put things in perspective, the 2017 iteration of The International had a prize pool of $23 million which is far more than what is offered by some of the traditional sports tournament such as Tour De France, Indian Premier League and The Open or even the most popular eSport, League of Legends. The event took place in Key Arena, Seattle with hordes of fans queuing outside, a shining trophy standing upon a pedestal inside, suited pundits and commentators, and teams forming pre-match huddle patiently waiting for the game to commence. This was not Super Bowl or Champion’s league final. This was an eSports tournament. Also, as the name of the documentary suggested, the game is free to download and play even today.

Image: pixabay

So how did this game survive for nearly 6 years and reach this position? How was Valve successfully able to gain a significant market share in this segment? It did not even have a first movers advantage while competing with another game ‘League of Legends’ which was launched 2 years earlier than ‘DOTA2’ and controls a staggering 66.3% market share by revenue. To understand this situation, we look at the genesis of this segment. A Modder created custom maps of Warcraft III, a highly popular game developed by industry giant Blizzard Entertainment. In these custom maps called ‘Defense of the Ancients’, a team of players controlled hero characters and attempted to destroy enemy team’s base. These types of maps became so popular that entirely new games were based on this concept, thus giving rise to a new segment of games. The first games to enter the market were ‘League of Legends’ created by Riot Games followed by ‘Heroes of Newerth’ created by S2 Games. Still, League of Legends sat unchallenged at the top of this segment and Heroes of Newerth was unable to unseat this leader.

Valve corporation, popular for games such as Counter-strike, Half-Life and Portal, decided to foray in this segment as well realizing its future potential. Valve started working on this project in 2009 hiring lead designers from the original DOTA map. Like McDonalds, the abbreviation ‘DOTA’ had been firmly established in the minds of the consumers and Valve acquired rights to use this trademark name from its developers after a legal battle with Blizzard Entertainment. The game while still in development phase and was opened for Beta testing to few select players. Just a few weeks later in 2011, the first official DOTA2 tournament, ‘The International’ was held at GamesCom in Cologne, Germany which is an annual trade fair for video games. While League of Legends was introducing new content at the GamesCom, it was The International which stole the show as the winners walked away with $1 million. The team that won the event had only received their beta invitations few weeks before the tournament started. The first and second iteration of The International were completely funded by Valve but in 2012 the tournament moved to Seattle produced at a much larger scale with broadcast talent being also brought in.

Finally, in 2013, the Beta testing of the game ended and it was offered on the market for free. The idea behind offering the game for free was using a freemium model. All the characters and mechanics of the game are freely available to all the players. The main revenue stream of the company is through in-game cosmetic items for the characters. These cosmetic items give their characters completely new appearances. While the concept of these cosmetic items might sound weird to a person who has not played the game before and they may even question why would anyone pay for such things, these items are hugely popular as it gives the players a uniqueness for their characters in-game. Further, the game also has a community workshop where independent creators or teams submit their designs of these items and sell them to the players through the in-game store. These creators are not paid a flat rate but receive a royalty for the sale of each item. As the third iteration of The International approached, Valve decided to financing the prize money partly via crowdfunding as well. For this purpose, the game offered a digital ticket known as ‘Battle Pass’ which allows the buyer access to pre-tournament content and other in-game items. The 25% of the total prize pool is contributed to the tournament prize pool. This idea of crowdfunding has proven successful and has been used in all the tournaments afterwards. While DOTA has used crowdfunding for the prize pool, League of Legends still relies on self-financing which is the reason why the prize pool for it has remained consistent at $2million.

The game is differentiated from its competitor in terms of more appealing visual graphics and complexity which drives millions of players and fans worldwide to play and spectate the game. But offering more complexity to the game poses another problem. The game itself requires considerable amount of time to learn the mechanics and abilities of the heroes that even after playing the game for more than 5000 hours, one cannot call themselves a master at the game. Further, frequent updates in the game ensure constant evolution of the gameplay making the learning curve steeper which means that professional players have to devote their time completely to the game. Thus, earning a living while playing the game full-time is really difficult for these players. Their sources of revenue include the winnings from various tournaments other than The International which are hosted by third party organizers, sponsorship deals and live streaming but the revenue stream is not continuous making it a high risk and reward scenario. To address this issue and keep the players engaged, Valve decided to grow the competitive ecosystem through an organic approach. The company introduced a system of four tournaments at a smaller scale over the year leading up to The International to shape the competitive landscape. This concept had been successful to some extent in improving the production quality of the various tournaments for spectating. But the system received some criticism for being less transparent. The issue was further complicated for third-party organizers to schedule their tournaments as the Valve events were usually announced at last moments and thus teams would drop out of events entirely in order to train or be present.

The 2017 iteration of The International ended with a blast with the winning team taking home a prize money of $10 million. With the end of The International, Valve has announced a two-tier tournament system in which they will directly coordinate with third party organizers and ensure transparency in its system. Though, this announcement comes pretty close in solving one of the most important grievance of its community, further research is required to assess the success of this concept after its implementation. While the number of people playing, watching, and working with this eSport continue to grow propelled by various initiatives by the company, a question arises, What’s next? DOTA 2 continues to be a huge moneymaker for Valve earning about $216 million annually. While the game might not be able to take over ‘League of Legends’ as the market leader, it certainly has brought eSports to limelight, making it a viable spectator sport. Millions of fans worldwide watch and cheer for their favorite teams competing in the amazing game of DOTA 2.

This article has been authored by Atul Chaudhary from IIM Kozhikode.







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