MLG's Sundance DiGiovanni on the future of MLG.TV

This article was originally published on GameSpot's sister site onGamers.com, which was dedicated to esports coverage.

On November 19th, 2013, Major League Gaming added another element to its business when it launched the self described, "premium streaming platform for eSports," called MLG.TV.

MLG's CEO Sundance Giovanni explained in their press release, "We leveraged our experience as a top online broadcaster to create the ultimate environment for not only our own content, but other industry leaders as well. Based on years of research and first-hand experience with other streaming solutions, we built a platform from the ground up to deliver the viewing experiences that we and our partners create. The MLG.TV network and video player are architected to deliver the highest quality viewing experience possible, utilizing the most reliable streaming technology available."

onGamers had the opportunity to sit down with DiGiovanni and ask him his goals were for MLG.TV and how it was going to affect the way his company did business.

What is the goal of creating this platform to begin with? Why are you doing it?

We've been creating more and more content aimed at live delivery. Not just our events, but with original content as well. We had done this in the past, as you know, with the show that you were even involved in. The goal for some time has been to spin-up more and more content.

We've gotten really good at doing it for our live events, and now we've gotten really good at developing regular programming with pre-scheduled broadcasts five nights a week. The problem with the structure, previously, is that it was very difficult to create revenue scale. No matter how much audience we had, no matter we were controlling costs, a lot of it wasn't completely in our hands. From making sure users were seeing ads run, to how to deal with ad-block, and making sure the fill-rate was high enough. There wasn't enough control. To be honest, we couldn't just wait and hope that partners would fix that for us. We had to take a step and go back to our roots and which is kind of controlling everything end to end.

How do you see the company with this new project? Is this now going to be the main thing MLG focuses on?

Now we're in a position where instead of having to wait for these big events, once or twice a year, we have the ability to normalize the traffic and increase the amount of video consumed really every day of the week. Competitive gaming, the tournaments that we run, events we run, and our online competition engine, those are all the things that create tremendous amounts of value for us. Being able to create content around that allows us to create more surface area and more revenue.

All we're doing is really going back to where we were before we decided to partner with external folks, and adding a little bit of room for select partners. We're not in any way shape or form trying to create a mass market streaming platform where anyone can participate. We're trying to create something that supports what we do at a very high level, and allows other premium content producers to see the same upside we do when it comes to advertising revenue.

Along the way, have you seen that partnering with other people's content as easier than creation of your own content?

It's definitely cheaper. It's not necessarily easier. It's easier to get someone like OpTic Gaming or some of the other folks we'll be rolling out; it means we're not 100% responsible for the heavy lifting. But at our live events, the CPM's we get there are triple what we can get even against a lot of our premium programming. What we have to be able to do is go out and sell quarterly and year-long packages against that premium-level content. Without our big events, we're not able to get these advertising packages that we can then plug into our partner streams.

One of the things you get when there's a tremendous amount of volume and activity in the user-generated content world is downward price pressure. We can't have that. We have to have the opposite of that where there's some scarcity, some exclusivity. What you're getting is top-level content and top-level monetization against it. It's tricky for us because there aren't thousands of people that can fit that bill, there aren't thousands of people that can qualify from the advertiser standpoint which is really the determining point for us. We think stuff on Twitch is great. I think it's fantastic for user-generated content, it just was not a sufficient for us. Neither was uStream, neither was Streamworks, and neither was YouTube Live.

You can't have a mass-market, mass-content production that also serves premium without some separation. Unfortunately, their business is all mass and our business is premium, and that's where it comes down to for us.

Now that you've used all the services you just named, Twitch, YouTube Live, Streamworks and so on, have you seen that none of these services have been able to provide you with the necessary platform to make it work for premium content?

The problem is that they've got their business and we have ours. While there's some intersection and some overlap, the fact is that we need so much custom development done and need so much control. It's really hard for anybody to service that other than ourselves. We've done this so many different ways including everything listed above, with Octoshape and so on, and it's really hard to get what you need, to be able to scale it, and to be able to have it work for you in the long run unless you build it to spec.

Even if we're using other people's platforms, we need to have our custom ad player and our custom embeds. The technology that we're using for delivery was created and managed by us and the carriage is somebody else. It just makes sense for us. Unless there is somebody that's going to be doing a user-generated mass audience, mass content-creator focused platform with a high level of customization around it, which is what we require, it doesn't really work. It costs a lot of money for us because there's so much custom work and that doesn't make sense either. We were not capturing enough of the audience or enough of the revenue opportunities that were being created to continue. Since making that shift, we've seen tremendous revenue growth, and our own audience has grown since we are not sending viewers some place else and having them develop a habit of watching content elsewhere.

What are the main differences in what you've set up now that you were not able to in the past?

I think we had to go through all of the available options and kind of test everything out. Previously there was price pressure, and there was not as many back-end providers to work with. Delivery of video content was a little bit more expensive a few years ago where now it's really cheap for us. Everything kind of caught up.

The technology has gotten a little bit more prevalent, a little bit more available. Video on the web has made incredible advances in the last couple of years. It's just easier now. It's a question of engineering talent and we happen to have some really great engineers. The product is still in beta, but it's working for us really well. It's scaling nicely, and it'll be at a point pretty sure where version one is locked in. We were not going to be in a position where we were generating profit off our video unless we took it in-house. Since creating this player, our big-scale events are profitable for the first time ever because the revenue capture is there. Our daily programming is profitable. So now it's just a question of doing more, scale out, and stop when that starts to slow down, because we don't want to get to a point where it's not profitable.

Can you describe the technology behind the new player?

We have worked with four or five back-end partners to create the new player because we can, it's a commodity. They'll all tell you we play them off of each other to get the lowest price possible. A fraction of a penny difference for us can be hundreds of thousands of dollars over the course of a year or two. So these guys are being very aggressive on price and that's good for us. Very aggressive in terms of uptime, that gives us the ability where we're not having to roll out custom architecture and infrastructure, we can go globally to find tier one partners which can help us reach maximum efficiency essentially globally. Just based upon the fact that their backbones are built out and they're delivering it for us to the major networks that are already out there, and we're just plugging into that.

How are you justifying what is and what isn't premium content, and are the advertisers influencing this?

We're trying to keep a lot of it tied to our activity on our GameBattles, as well as the tournaments. We want to work with the teams, because these are stories we want to tell, and the more money they make the better for everybody. Then there's some personalities who we'll be announcing soon who are more gaming generalists and folks who have massive followings on YouTube, big followings on Twitter, et cetera, just to diversify a little bit, because some of the programming that some of our partners are looking for is a little bit more generalist gaming content. There's still a competitive narrative within a lot of it, just know most of it. Diversification is not a bad thing in our point of view.

What it really comes down to is there's a certain code of conduct. People are going to be held to this code of conduct -- anything that does not work within the construct that we've created will be dealt with really quickly and removed should it happen. It's a package deal so when we go out and talk to brands, we're lining up all of our partners in front of them and sharing the wealth there. Folks know that when we bring them in. We have a very long conversation on how they have to carry themselves and think about the content they're creating. I think there a lot of options for folks out there today, but that the top level, I think, is underserved. We're not signing anyone to exclusive deals. We're trying to create a scenario where folks can come in and do well. It's not a question of just getting hundreds of folks into our platform and then not being able to give them quality CPM and quality brand interaction.

For someone like Nadeshot, who streams without much production behind him, is his size of popularity enough to be considered for premium content, or does the production of the broadcast tie in?

He's got a huge YouTube following, a few hundred thousand twitter followers, he's going to stream from his house. Sometimes there will be produced content where there will be celebrities and athletes come into the OpTic house. There will be tie-in's with our partner in Relativity Media. For right now, it is those personalities. It's getting the guys who have brands and the ability to draw audience. Putting them underneath that premium umbrella. If there isn't separation you end up getting that downward price pressure that you see on user-generated content, which is the YouTube channels.

Do you see yourself competing with Twitch in terms of premium content?

Right now that's uncertain. Right now we're just capturing so much revenue from advertising against our content that I'm not sure. We have publishing partners who look at the advertising that's generated around content produced around their IP. We've seen what it looks like on Twitch and seen what it looks like on our platform, and they've asked us to do more of it on our platform. In some cases it's going to be out of our hands. Never say never.

We may find ourselves in a place where we need to have a proving ground where we can have people who are applying to our partner program tested in a programming schedule and structure, where having a place like Twitch, YouTube Live or Dailymotion would be a great place to test that out.

What makes the service for content creators better to use over Twitch?

It's harder to broadcast on right now, but they'll make more money. They'll make significantly more money. It's not one-button streaming, but it's not meant to be either. The key to it is: If you produce live content, have a meaningful audience, and want to make money off of advertising, our numbers are far stronger at the moment. Based on what we've seen on our content on both and what we've heard from partners.

In terms of it being better in any other way, I think the global reliability is really solid. I'm not going to say it's better because I can't speak to that. In terms of the image quality, I think it's great, but I'm not going to say it's better. In terms of chat, I think we have some work to do to figure out what we want to do there but right now. Twitter chat does a lot on the social side, but doesn't do a lot in terms of the real-time exchange that people are used to.

How are you able to provide higher financials to partners? Is this from the new ad sales force, the way you're showing the ads, or over saturation on other providers?

For us, we've got some people who are incredibly well-connected and have been in the industry for years who came in and said "What you have is great. You're under-monetizing heavily, and here's how to fix it. Shift off of these heavy sponsorships, looks more at the media deals. Unlock sponsorships at certain thresholds, and you'll see an incredible increase," and that's what it's been.

This year has really been about using our new sales team since June to educate the market. Now we have a sales team that's in-house, that's out telling the story every day - and it's a really compelling story. Now we're seeing a shift to our revenue generation on the advertising side is about 65% of our overall revenue.

When you say sell the story, you mean esports in general and why it's important, or is there something more specific to MLG?

The story for us is that it's esports. It's competitive gaming and that it's a point of passion. We've been doing this for quite a while and our brand has legs. We're in a position now where a lot of these folks we're talking to have kids who are fans of MLG. It's been interesting to see that.

On top of the sales team, jumping to MLG.tv and our own platform increased our ad rates by 40%. The combination of the story hitting home with folks and buyers becoming familiar with the brand, seeing the press and personalities we work with.

Has it still been difficult to sell esports? What is different now than it was in 2011 or 2012?

Esports became a buzzword in 2013. The work that folks like Valve, Riot, and Blizzard have done to create some consistency and predictability around some key titles is good, and it helps. But we sell a little bit differently. The way that we sell is a little broader.

Esports is what we do at the top, and then the competitive gaming section is far broader. I think the biggest things for us to be frank, is the launch of the new consoles. New hardware coming out on the console side coinciding with the explosion of the free to play PC side of things, and esports becoming such a buzzword, has opened a lot of doors for us.

We've been knocking on these doors for a number of years. There are new folks in position of power, and there's been a shift in what's effective for people. More and more money has also been shifted towards online video which is our strength. It's the natural maturing process around esports and around the scene in general. At least for us, it's been fantastic.

What are the current CPM rates that content providers should be expecting to see?

Here are the ranges. Typical programming is a $25 CPM. Championship stuff is $45-50. Full-length trailer stuff is $80-90, and we've seen things top at $100. Our rate card typically has three or four CPM levels in it, but never for video below $25. It doesn't mean we'll never have video below $25 because the direct sold is never going to be 0 all the time, but that's what we're tracking towards.

Will these premium content providers be making that $25 CPM?

With the premium content providers we do have to take costs out, and there is a split of course. We've got folks who have been on other platforms and they're not complaining about what they're getting.

Will different broadcasters have different rates and deals?

Some broadcasters will be of scale where advertisers will ask to work with them, but we're doing it a little differently than I think people have seen it done in the past. Commit to doing X amount of hours per week and see how you do, see how you like it. We'll give you pointers on how to be attractive to brands and how to get included in sales pitches directly, but the idea is to have an open platform where we don't have to cut different deals and have guarantees. If our CPM's are strong enough, our fill rate is strong enough, and we pay people quickly -- which we do on purpose -- people won't have a lot to complain about.

The deals will be the same across the board, with the exception of some partners that will be coming in that have brands attached to them already, or teams that have brands attached to them already. We're going to give them an opportunity to have their brands advertising into their stream, but we'd like to not have different tiers of talent.

How fast are you paying people and what is the fill rate currently?

Our fill rate has been 99% plus since we've went to our new platform on MLG.tv. These aren't people filling ads, these are ad-delivery systems pulling in and filling regionally. That number is correct. That number is done live on the fly based on whether or not we have stuff sold in what region the viewers are in. I got an email asking how is that possible that you have that fill rate when you're also serving content into Asia. We have an ad network partnership that fills low CPM there, but it's there.

Are there major differences between the players, teams, or another major league production like Gfinity?

Well in terms of leagues, one of the things we're doing is starting to look at actually partnering with folks for example in the fighting game community. Saying, "Hey, why don't we help you with your live event venue fees. We'll pay for it up front with you and earn that back out of the ad-split for our stream. Potential for also adding to prize money. We're trying to be supportive of grass-roots events as well because we know what it's like. We know how difficult it can be. With a big deal like with someone like Gfinity, or our partnership that will be coming out of Brazil soon, you'll see different things happening with those partners. What we're trying to do is partner with folks and try to create some stability and predictability for them, especially on the event side.

How important is partnering with the big events as opposed to the players, teams, and personalities?

Events are great, but events don't stream fifty weeks out of the year. I'd love to talk to Robert at DreamHack and see if we could get some of his stream. If I could work with Riot to work on League of Legends stuff since they broadcast on everything right now. I can now go to Valve and talk about being a distribution source for The International 4 and I can talk folks about their leagues and events that they have. I'm going to have regular scheduled content from our two big events and eight smaller events, teams and personalities we have, but I'm happy to have these conversations.

For personalities and leagues that have conflicting sponsors to MLG, will that be an issue to becoming a partner?

There's no more conflicts, we don't have any exclusivity. We're not reliant on these big, unwieldy sponsorship deals anymore. There's no channel conflict.

You'll see us working with folks who have different partners across the board in category after category, and that's fine. If you watch an NFL game you have a team that's partnered with Reebok, a quarterback who's signed to Adidas, a runnerback who's signed to Nike. The reality is that in order for there to be scale, you have to get out of the channel conflict world, and into the open market place.

Should we expect there to be more focus on games that are already features on MLG's circuit events and GameBattles, such as Call of Duty, Dota 2, and the possibility of Smash?

You're going to see Call of Duty, Dota 2, Smash, League of Legends, some fighting game stuff potentially. With Counter-Strike and what's happened the last couple of events there, maybe we can support that a little bit. We've got teams that we're talking to that have multiple games.

A lot of the initial partners have been Call of Duty teams. Why this community? What makes the CoD community stand out or be different?

With the launch of MLG.TV, our current partner roster is definitely Call of Duty heavy. The community is very active and has grown exponentially over the last few years making it easy to work with and identify partners that make sense for the MLG network. There is a large appetite from both a streaming and viewing perspective for Call of Duty content and the community is extremely passionate. As included in the COD Championship Series announcement today, we are also partnered with Activision and all COD Championship broadcasts will air exclusively on MLG.TV and Xbox Live.

We are continuing to add premium content creators from a variety of titles and are currently talking with teams, players and organizations across a variety of games. I think eSports fans across the board are going to be very pleased to see the caliber and range of streaming partners that enter the MLG network in 2014.

Will channels have their own subscription fee potential?

I think we have to talk to the teams and personalities to figure out the best model. I think subscription is really good for some of the personalities we see because I think there are certain folks who can draw and get that, but I don't think it scales. It's in our development queue as some of our bigger partners have asked for it, and we'll roll it out once it makes sense.

Our engineering team is not quite as big as it needs to be, but we're hiring and have seven open spots right now. We're going to be supporting the desires of our partners. Our product road map will be influenced by a lot of them.

The next four months there's a lot that's being worked on from the mobile app to the Xbox apps for One and 360, and there will be a lot more out there at the end of Q1 then what's out there currently. I don't officially know when they're going to take the beta name off of it, but I'm hoping it's sometime this quarter.

One of the main concerns from a viewer experience is always the issue of being able to actually watch the content and the latency involved. Will MLG be able to handle the load, especially in Europe where there's been notably more issues than the US?

Our Dota event in Columbus, we had folks set up and monitoring the distribution points, and we were rock solid into Europe and Eastern Europe. Our Columbus event was architected to deal with up to a million concurrent users. I'm not going to say everyone had a perfect experience, but we had live communication with folks in some key countries where we've seen issues with other streaming platforms and had very limited complaints. The biggest complaints were around ad-blocking, but not around image quality or latency issues.

Talk to us about ad block and what you've done?

The challenge is that this stuff is expensive. I mean I'll be honest with you, I use ad-block, and I use tools to protect my identity on a large part of the Internet. But there's sites that I go to for entertainment like ESPN or onGamers, where I will turn it off. I whitelist that domain because I understand that the economics of it are tricky in this day and age. if 70 or 80% of your audience is coming in with ad-block on, that's a tough position to be in. I understand why people use ad-block, but it's too impactful to not do something about ti.

Many people think, "Oh I'm just one guy. How bad can ad-block really be for the site that I'm going to?" Could you put in perspective what this does to MLG?

I've seen a premium producer of content lose just shy of 80% of their audience and income due to ad-block. This is someone who does content creation in the esports world, and hosts incredibly popular streams. Someone who's seen the erosion of the ability of monetize through advertising. If 80% of his audience was subscribing or donating that would be one thing, but they're not. For us, we've seen at times 65% or 70%. It's up there. Some games are worse than other.

It's understandable people don't want their privacy invaded and don't want to be tracked, and that it's really easy to forget about. But until we have some middle ground, it's either all or nothing. It's either everything is being blocked or nothing is, and we have to try and figure that out.

Is Major League Gaming currently profitable? What does revenue look like going into 2014.

Since launching MLG.TV, MLG has been EBITA positive and expects to stay EBITA positive on a quarterly basis in 2014.

Has MLG been approached for a buyout?

MLG is getting approached more and more now. It's fun running a company generating revenue the way we are and growing the way we are, it's a new experience for me and I'm not in a hurry to get out. But there have been folks knocking and asking, and if the right offer came along I would entertain it. For right now, we're enjoying what we have going on into 2014.

Image Credit: MLG.TV, Red Bull