Feature: Nintendo Switch and eSports - Targeting A Lucrative but Tricky Market

You don't have to look far to get a sense of the incredible growth in eSports; with bigger crowds and online stream audiences have come more money and mainstream attention. There are some that argue that eSports should be recognised more fully, with appeals for a potential Olympics role in the future. That's probably a long way off, but the eSports industry is nevertheless continuing to expand, and remains a key area of focus for major publishers and businesses aiming to boost profitability and interest in their games.

It was notable, then, that the final concept scenario in the Nintendo Switch preview trailer made a direct pitch for the eSports space, and did so with an IP that's only been used in occasional Nintendo-led expo competitions to date - Splatoon. It was a neat idea that was shown - teams practising backstage, before simply heading into the arena and slotting their systems into available docks to play. There would be hurdles to get around to do this in real life (being fully confident no-one has cheats running on their system, everyone having the same available content in their copies, quickly and seamlessly connecting in a local network) but it's definitely possible. Nintendo has been adopting a similar method to run local network multiplayer demos at expos with Wii U systems, so converting that approach to suit the Switch and dock makes sense.

Nintendo, of course, has been trying to make inroads into eSports throughout this generation of hardware. This has particularly been the case in North America, with Nintendo backing the Super Smash Bros. and Pokkén Tournament categories at a range of major events. Indications are that this Nintendo backing hasn't equated to heavy monetary investment, but through some awareness-building and logistical support (hardware, controllers and so on). As our 2015 feature highlighted, being a competitive Smash player isn't particularly lucrative; the issue is that if it's not an enticing potential career, it'll struggle to match other games that generate substantial eSports revenues, such as Call of Duty and League of Legends.

So, can Switch help Nintendo boost its eSports presence, with the concept and investment making the big N's games lucrative enough to attract skilled teams and arena-sized crowds? We had the opportunity to ask Andrew Paradise, the CEO and Founder of Skillz.

What is Skillz?

Earlier this year TechCrunch described Skillz as "the biggest eSports company gamers have never heard of", which certainly seems to be the case. The company, which had its approach compared to media services like Netflix, puts its focus on expanding eSports for mobile games. That may seem strange considering the games typically associated with the eSports industry, but it's proven lucrative. Skillz helps mobile publishers of various sizes to organise competitions and events (in-app driven or location-based) for its players, claiming in the process to improve retention rates for those titles while also making competitive gaming accessible to a lot more gamers.

Ultimately, it's seen as a little-known but substantial part of the market. Paradise told us the following about the company's progress in this surprising area - competitive mobile gaming.

Skillz connects people through competition. We're building the future of eSports by providing fair, fun competition that's accessible to everyone. We allow game developers to seamlessly integrate eSports competitions into any mobile game, powering the competitions that players love and giving developers the chance to turn their game into the next great electronic sport.

We started the company because we saw a need that wasn't being met in the industry: we wanted to enable every video game to have competitions, just like every sport has competitions. We're also mobile gaming fans, and realized that there had to be a better way for game developers to make money than ads or in-app purchases.

Many people think that only the professional gamers who travel to big, televised competitions for those titles can be considered eSports athletes. In reality, that's only the top 1% of eSports players.

When you think about the offline sports world, there are 450 people in the NBA, but 450 million people who play basketball worldwide. All of these people are basketball players, and it should be no different for electronic sports. Skillz is eSports for the 99%. We're making competitive gaming accessible to players at all levels.

Having recently passed $50 million in total prize money awarded since 2012, it's clear that Skillz has successfully formed a lucrative business through competitive play in games that are played and enjoyed by large - in some cases 'casual' - audiences on mobile. With his company helping to add competitive elements to games of various sizes, Paradise makes bold proclamations about the scale and relevance of mobile eSports.

The eSports industry as a whole is growing at a rapid pace and is projected to exceed $4 billion by 2018, surpassing the $3.7 billion in annual revenue generated by the National Hockey League (NHL).

We believe that Skillz is truly bringing eSports to the mass market by expanding the industry's player base and enabling eSports for mobile games. Skillz has accounted for over 30 percent of all eSports prizes thus far in 2016, compared to 21 percent in 2015 and just 8.4 percent in 2014. We're comprising an increasingly significant portion of the eSports market, but awareness of both mobile eSports and Skillz in particular is still catching up with our rapid growth as a company.

Our success is fueled by the growing number of players competing in Skillz tournaments (currently more than 10 million) and the millions more watching our eSports broadcasts on platforms like Twitch.

Additionally, we're on pace to host more than 70 million tournaments (3x YoY increase) and stream more than 40 million minutes of competitive mobile gameplay (4.5x YoY increase).

We see a huge opportunity for continued growth in accessible eSports on mobile and what would be considered more casual games. The mobile gaming market alone has 2.1 billion players, and is growing to encompass a more diverse group of "gamers" than any platform in history. For example, the Skillz user base is 49% female – this directly contrasts with the typical stereotype of an eSports player.

Where Does the Nintendo Switch Fit Into This?

Speaking to Andrew Paradise and learning about Skillz, our perspective on eSports shifted a little to consider two distinct areas that are fundamentally different in how they operate.

There's the eSports we all know about, with fighting games, real-time strategy, shooters and sports titles. They could be considered the professional areas of competitive gaming, an area Nintendo has dabbled with, even if its leading IP in this area (Smash Bros.) is still lagging well behind the biggest players in terms of prize money and revenues. That's the area that gets the media attention, too, in the same way professional sports do. Then there's the mobile eSports arena which, evidently, makes companies like Skillz and some mobile publishers a decent amount of money - rarely covered in mainstream media, this sector attracts a lot of players but over a significant and broad range of more 'casual' games, making the previous Netflix comparison rather apt. Profit through variety and volume, rather than selling out stadiums for half a dozen big-name titles.

Paradise says that eSports on a general level is still at an "early adoption stage" for the majority of the population, expanding on the NBA / basketball analogy made earlier. He says that breaking it down "at a fundamental level, an eSport is comprised of three key elements: competition, organized tournaments and spectatorship." So these are the areas Nintendo would need to master if the Splatoon segment of its Switch preview trailer is to ever come close to reality.

For Skillz, its business is in Mobile, but its interest in Switch is due to the system's hybrid nature, its blend of home console gaming with on-the-go flexibility and functionality. Always focused on accessibility, Paradise found the trailer "engaging", and was pleased to see Nintendo games and content "on a more accessible console". With the now infamous 'millennial' cast and eSports segment, he felt that Nintendo's messaging wasn't unrealistic in its goals.

One item that stood out was how the trailer focused on adults. There weren't any children that I could see, which tells me a lot about how much they are concentrating on a more mature market that naturally segues into eSports and competitive gameplay.

The eSports section at the end was my favorite part. It demonstrated the camaraderie that occurs in eSports while also showing how popular they've become. If you look at that stadium, it's not exactly a stretch from the present day. We're seeing League of Legends and Dota 2 competitions filling stadiums like that on a regular basis.

Focusing on the positives of the Switch potential with eSports, first of all, the core concept is at the heart of how it can work. As the trailer aimed to demonstrate, players can easily work on strategies and tactics wherever they are, and then immediately jump into competition.

From a hardware standpoint, I think that the design provides a lot of options. The Switch will permit players to find the best way to customize their gameplay. eSports competitors in particular are really inventive, and I think that we're going to start seeing a lot of players find creative ways to use these split "Joy-Con" controllers.

I see the portability as a huge asset. That trailer showed a fantastic example of teams being able to collaborate, plan and play together, which is key.

Though Paradise thinks the existing competitive usage of the likes of Smash Bros. is "great", deciphering how Switch can seriously target eSports is more complicated. With Nintendo citing positive third-party support, and the concept likely supporting a mix of gaming genres from 'hardcore' to 'casual', Paradise argues that it "won't be surprising to see Nintendo dipping their toes into both mobile and console with this new product. There's a good chance that the Switch could become a console/handheld jack-of-all-trades."

Being a 'jack-of-all-trades' doesn't always play well if trying to break into the widely publicised professional eSports industry, however. In fact, Paradise argues that "games like Mario Kart and Super Smash Bros. are wildly popular, but largely considered party games. I think they're fantastically developed, but they're missing some of the core eSports elements that you see in titles such as CS:GO or Dota 2." We suspect many competitive Smash Bros. players would strongly disagree with the Skillz CEO in this case, but nevertheless the Smash scene does need more support and exposure to compete more aggressively with the pro eSports big-hitters. Splatoon, as the Switch preview trailer suggests, could also be a candidate to break into more conventional eSports territory if the necessary in-game modes, promotional activities and gaming community bring everything together.

As for areas in which the mobile-focused Skillz would like to work with Nintendo?

I think that the ability to collaborate or add tournament-based multiplayer to their upcoming Super Mario Run game would be a lot of fun. In an ideal world, we would collaborate on a competition-based Pokémon game (which should be a conversation with the Pokémon company, not Nintendo, I know) or work on a mobile version of Star Fox.

Ultimately, it could be quite some time before we see how serious Nintendo is about utilising competitive gaming to grow its audience and - at the same time - revenues. In the competitive arena we've seen some efforts to support the Smash Bros. community in particular, but there's a sense that far more could be done. Nintendo could perhaps learn lessons from The Pokémon Company, too, which has gradually developed a hugely successful annual series of tournaments and events for its competitive Video Game and Trading Card Game Championships.

As for the accessible non-professional side of the eSports market, which is spoken about relatively little but seems to generate significant revenues, Nintendo is yet to get involved in any serious way. Thy key question is always the same - how will a glitzy concept shown in a preview trailer convert into real-world initiatives from Nintendo? How much does the company really want to break into eSports, and how much resource is it willing to commit to that goal?

Only Nintendo knows that right now, but the presence of that Splatoon segment in the Switch reveal does, at the very least, show that it's being considered as a potential area for growth.

We'll close, then, with the Skillz CEO's final thoughts. We asked whether he thinks the Nintendo Switch can become a 'major player' in the eSports space, as broad and varied as it is. Overall, he seems optimistic.

I do. I think that we still haven't seen enough to get the full picture quite yet, but I think that this could be a big step forward in the world of eSports. It seems like the Switch will help bridge mobile and console, which is exciting for the growth of the industry.

We'd like to thank Andrew Paradise for his time, and Neil Davies for arranging the interview.