Welcome back to “Let’s Talk eSports,” a column devoted to bringing clarity into the hazy realm of eSports financing. Given the recent hullabaloo surrounding the compendium for Genesis 3, I’m splitting next week’s post into two pieces and just talking about compendiums today. Next week will be a broader look at financing in esports more generally, and which models Smash can and can’t adopt moving forward.

Before getting into it, though, I need to address one criticism raised about my last post: Just because someone performs a difficult task doesn’t mean they inherently deserve to be paid for it. I am aware that I can not, e.g, write a blog post for MIOM and then say, “pay up, assholes.” I’m operating under the assumption that we want Smash to live on for years to come, and it can’t do that if we lose the people keeping it alive and growing. It’s almost impossible to avoid burnout when you’re essentially working two full-time jobs. Every one of our community leaders has faced that threat, and more than a few have fallen to it.

Waiting for a Hero

Once I’ve convinced someone that Smashers deserve to be paid fairly for the work they do, I’ll hear, “but where will the money come from? Shouldn’t you just work for free/cheap until Smash has more revenue?” This suggests that we should just continue with business as usual until some giant company sweeps in with tons of money, at which point we can all have “jobs” doing this stuff. It’s a weird argument to make, considering that no company will ever dump tons of capital into a scene that hasn’t proven itself to be profitable or at least self-sustainable.

I don’t think we want to go this route anyway. We value our grassroots identity, and any large company dumping capital into the Smash scene will expect a return on investment. If you think things are too “eSports” right now, wait and see what happens when a media conglomerate swoops in and picks up exclusive broadcasting rights to tournaments while Nintendo of Japan creates our rulesets. It won’t be Smashers deciding what kind of content they want, or how they want things to be run. It’ll be suits in a building, halfway around the world, working with focus groups of people who loosely meet our demographic. If we want smash to survive without losing its community-driven model, we need to embrace alternative revenue streams. Remember: if you didn’t pay for the product with money, then you are the product being bought and sold.

The Mix-up Game

Players already rely on mixed revenue streams: they combine sponsorships, tournament winnings, and stream subscribers/donations. Streamers combine subscribers with ad revenue and payment from TOs (Side note: Youtube ad revenue is significantly lower than most people seem to assume: 250,000 ad views only pulls in around $500). Beyond that, we’ve remained largely single-minded about how we can generate revenue, relying too heavily on crowdfunding or increasing venue fees.

Smash.gg provides an elegant answer, although I think using the word “donate” has done them more harm than good. Although they initially resemble a Kickstarter, I think a better comparison would be band merchandise: premium prices on limited-edition merch, with the profits generally being dumped back into band infrastructure: gear, lighting, travel costs, etc. This becomes much clearer when you look at how Smash.gg splits up all of their revenue: 30% goes towards the merch costs, and 60% goes towards the cost of various rewards. The last 10% goes into a reserve fund for the tournament (things will always go wrong), or used on extra little touches, like this amazing backdrop at The Big House 5:

Photo by Michael Hathaway. Follow him on twitter: @TL_Peanuts

It Can’t Get Much Clearer

I’ve heard several times over that people just want more “transparency” as to where their money is going, or how these costs shake out specifically. But Smash.gg is giving us an astonishing amount of transparency: we know exactly what they’re spending the money on, even if we don’t know the amounts. We don’t demand to know the exact budget of anything else in our lives. Even Kickstarter projects don’t have to give an itemized budget. Nike doesn’t tell you what percentage of your shoe purchase goes towards materials, labor, advertising, legal fees, sponsorships, political lobbying, or cocaine for the CEOs. No one goes up to the Gaming Generations booth and says “yes, I’d like that $35 Bowser T-Shirt, but only if $15 goes towards flying my friend Brandon out for Passover, and another $5 goes towards an arm-wrestling competition between college mascots.”

Part of why companies (and governments) don’t provide this much transparency is because they’d open themselves up to criticism from consumers, all of whom have different and conflicting ideas of how, where, or why the money should be spent. Smash.gg is committed to improving the overall production quality of our events, and they work with TO staff over several months to figure out what they can and should offer as extra incentives. They take the necessary budget to accomplish all of these things, add it up, and split it evenly between all the possible incentives. Three nights of venue space for friendlies in a convention center in NorCal is likely somewhere close to $10,000, although they can probably negotiate it down a little bit. If the tiers reflected the cost of the item, that would be a $16,000 tier. Instead, they split the cost amongst all the tiers and gave us more reasonable, structured goals.

Moving forward, I think it’s best to think of a Smash.gg compendium as a merchandise shop that puts all of its profits towards improving our events and community, not a donation drive. If you spend money, get a sweet hoodie, and enjoy hours of quality smash content streaming directly to your home, you didn’t make a donation, you paid for a product. See you all next week!