Harvard Case - Choosing the Right Esports Business Model
"Choosing the Right Esports Business Model" Harvard business case study is written by David J. Collis, Alexander J. MacKay. It deals with the challenges in the field of Strategy. The case study is 23 page(s) long and it was first published on : Mar 11, 2019
At Fern Fort University, we recommend that Team Liquid pursue a hybrid business model that leverages its existing strengths in competitive gaming while diversifying into content creation, media, and technology. This approach will allow Team Liquid to capitalize on the rapidly growing esports market and achieve sustainable competitive advantage through a combination of product differentiation, cost leadership, and strategic alliances.
2. Background
This case study focuses on Team Liquid, a leading esports organization facing a critical juncture in its growth. The company has achieved success in competitive gaming, but the esports landscape is evolving rapidly, demanding new strategies for sustained success. The case explores the challenges and opportunities of different business models, including focusing solely on competitive gaming, expanding into content creation and media, or integrating technology and analytics.
The main protagonists are Steve Arhancet, the CEO of Team Liquid, and the company's leadership team. They must decide on a strategic direction that will ensure the organization's long-term viability and growth in a highly competitive and dynamic market.
3. Analysis of the Case Study
To analyze Team Liquid's situation, we can utilize several frameworks:
a) Porter's Five Forces:
- Threat of new entrants: High - The esports industry is attracting new entrants due to its high growth potential, making it challenging for established organizations to maintain market share.
- Bargaining power of buyers: Moderate - Fans have multiple options for esports content and entertainment, but loyal fanbases can create significant value for teams.
- Bargaining power of suppliers: Low - Esports teams rely on various suppliers, including game developers, hardware manufacturers, and streaming platforms, but they have limited bargaining power due to the fragmented nature of the industry.
- Threat of substitute products: Moderate - Traditional sports and other forms of entertainment can compete with esports for audience attention, but esports offers unique experiences and demographics.
- Competitive rivalry: High - The esports industry is highly competitive, with numerous teams vying for sponsorships, viewership, and talent.
b) SWOT Analysis:
Strengths:
- Strong brand recognition and established fanbase
- Experienced management team and successful track record
- Competitive success in multiple games
- Strong partnerships with sponsors and brands
Weaknesses:
- Limited revenue streams beyond sponsorships
- Dependence on a few key players and sponsors
- Lack of diversified content and media offerings
- Limited technological expertise and data analytics capabilities
Opportunities:
- Rapid growth of the esports market and expanding audience
- Increasing demand for esports content and media
- Growth of technology and analytics in esports
- Potential for new revenue streams through merchandise, events, and licensing
Threats:
- Increased competition from new entrants and established organizations
- Volatility of the esports market and potential for economic downturns
- Dependence on game developers and platform providers
- Regulatory uncertainty and potential for negative publicity
c) Value Chain Analysis:
Team Liquid's value chain can be broken down into primary and support activities:
- Primary Activities:
- Inbound Logistics: Sourcing and managing players, equipment, and other resources.
- Operations: Training, coaching, and managing competitive teams.
- Outbound Logistics: Distributing content and merchandise to fans.
- Marketing and Sales: Attracting sponsors, fans, and viewers.
- Service: Providing support to players, fans, and sponsors.
- Support Activities:
- Infrastructure: Maintaining facilities, equipment, and IT systems.
- Human Resource Management: Recruiting, training, and retaining talent.
- Technology Development: Investing in technology and analytics to improve performance and engagement.
d) Resource-Based View:
Team Liquid possesses valuable resources that contribute to its competitive advantage:
- Brand equity: Strong brand recognition and established fanbase.
- Human capital: Experienced management team and skilled players.
- Relationships: Partnerships with sponsors, brands, and other organizations.
- Knowledge and experience: Expertise in competitive gaming and esports operations.
e) Dynamic Capabilities:
Team Liquid needs to develop dynamic capabilities to adapt to the changing esports landscape:
- Innovation: Developing new content, technologies, and business models.
- Strategic agility: Responding quickly to market changes and competitor moves.
- Learning and adaptation: Continuously improving operations and performance.
4. Recommendations
Based on the analysis, we recommend that Team Liquid pursue a hybrid business model that combines its core strength in competitive gaming with diversification into content creation, media, and technology:
a) Competitive Gaming:
- Maintain existing competitive success: Continue to invest in top players and coaches, and expand into new games and regions.
- Develop a strong player development program: Identify and nurture young talent to build a pipeline of future stars.
- Enhance fan engagement: Create interactive experiences and content to build a loyal fanbase.
b) Content Creation and Media:
- Expand content offerings: Produce high-quality videos, podcasts, and other media to attract a wider audience.
- Develop a strong social media presence: Engage with fans on various platforms and build a strong community.
- Explore opportunities in streaming and broadcasting: Partner with platforms like Twitch and YouTube to reach a larger audience.
c) Technology and Analytics:
- Invest in data analytics capabilities: Use data to optimize player performance, fan engagement, and business operations.
- Develop innovative technologies: Explore the use of AI, machine learning, and other technologies to enhance the esports experience.
- Partner with technology companies: Collaborate with tech companies to develop new products and services.
d) Strategic Alliances:
- Form partnerships with other esports organizations: Collaborate on events, content, and technology development.
- Partner with brands and sponsors: Develop creative marketing campaigns and activations to reach a wider audience.
- Explore potential mergers and acquisitions: Consider acquiring smaller organizations or technology companies to expand capabilities.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies: Leveraging Team Liquid's existing strength in competitive gaming while expanding into complementary areas.
- External customers and internal clients: Meeting the needs of fans, sponsors, and players while creating a sustainable business model.
- Competitors: Staying ahead of the competition by embracing innovation, diversification, and strategic partnerships.
- Attractiveness: Creating a diversified revenue stream and achieving long-term growth potential.
- Assumptions: The esports market will continue to grow, technology will play an increasingly important role, and fan engagement is crucial for success.
6. Conclusion
By adopting a hybrid business model that combines competitive gaming with content creation, media, and technology, Team Liquid can position itself for sustainable growth in the dynamic esports market. This approach will enable the organization to leverage its existing strengths, diversify revenue streams, and adapt to the evolving industry landscape.
7. Discussion
Other alternatives not selected include:
- Focusing solely on competitive gaming: This approach could limit growth potential and make Team Liquid vulnerable to market changes.
- Expanding into traditional media: This could be challenging given the different audience and business models.
- Acquiring a technology company: This could be costly and risky, and may not be the best use of resources.
Key risks and assumptions:
- Market volatility: The esports market could experience downturns or slow growth, impacting revenue and profitability.
- Technological disruption: New technologies could emerge that disrupt the esports industry, requiring Team Liquid to adapt quickly.
- Competition: New entrants and established organizations could pose significant challenges, requiring Team Liquid to maintain a competitive edge.
8. Next Steps
To implement these recommendations, Team Liquid should take the following steps:
- Develop a detailed strategic plan: Outline specific goals, objectives, and timelines for each area of focus.
- Allocate resources and budget: Invest in talent, technology, and marketing to support the new business model.
- Build a strong team: Recruit individuals with expertise in content creation, media, and technology.
- Monitor progress and make adjustments: Continuously evaluate performance and adapt to market changes.
By taking these steps, Team Liquid can position itself for long-term success in the rapidly evolving esports industry.
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Case Description
Two esports entrepreneurs must choose on which business model to focus their time and money. After successfully launching an online esports coaching platform, a number of new opportunities emerge in the rapidly growing esports space which now has close to 1 billion gamers and an online audience that is greater than the Superbowl. Should they focus on a B2C business, a B2B business? Develop an analytics capability to support "sabremetrics" for esports or a content creation capability? How can they best exploit ownership of the world's top team in the "Hearthstone" league. The choice will depend on the future industry structure and how the two can most effectively "follow the money".
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