Does Glytch have the formula for esports LBE dominance?

Jan 12

No one doubts that esports is going to be massive, but we have yet to see this mainstream spectator sport take off in arenas.

Michael Williams, the founder of Glytch, thinks he has the key to esports LBE domination.

Glytch has just announced that it has broken ground on its first venue in Los Angeles, slated to open in 2022. The LA arena is the first of many planned across North America.

These will be 50,000-70,000 sq. ft. venues seating thousands of esports spectators with dynamic staging. The arenas will be within a fully themed, immersive environment featuring other attractions which can be updated.

Current plans include state of the art VR simulators, escape rooms, drone racing and classic arcade attractions as well as upscale food and beverage options.

Glytch CEO and Founder, Michael Williams, was recently the owner of GameWorks and is a life-long video game developer. His co-founding partners are Kathryn Raphael, a former Apple Genius program manager, and Blizzard senior executive/Major League Gaming CTO, Pavel Murnikov.

Quality investors and partners

The lead investor in Glytch is Liquid 2 Ventures. Liquid 2 Ventures were early investors in Cloud9, one of the most successful esports teams in history. Other backers include TwitchTV co-founder, Kevin Lin and The Lego Movie executive producer and TT Games founder, Jon Burton.

“As an early believer in esports, we think that Glytch has the right team and expertise to take the in-venue experience to the next level,” says Joe Montana, Founding Partner of Liquid2 Ventures.

Strand Venture Partners, the Buckeye Group, and other high net worth individuals have also recently come on board.

Jamie Shortill, the co-founder of Strand VP, says that “Glytch’s vision for esports stadiums is where we see this fast-growing market heading, but combining esports with location-based entertainment is incredible.”

Esports Evolution

Williams thinks he may have the formula for developing esports successfully by integrating the stadium with location-based entertainment.

“The idea of the esports lounge was fundamentally flawed,” says Williams. “You’re asking people to pay you five bucks an hour to play on your computer at your facility, which is not as nice as the one they’ve got at home; it’s not configured the way you want it configured; it doesn’t have the same kind of mouse or keyboard, and it’s been used by other people all day long. Do you really expect to charge people to do that?

“What you should do instead of charging people to use your computers, is offer them a reward for doing so. The longer they play, the more tickets they earn. You monetize your esports lounge with everything else. You surround it with food and beverage and entertainment and attractions and arcade and hundreds of other ways to have fun.”

Williams says a fundamental lesson is that the esports lounges on their own do not make money. The profit must come from having good quality F&B and other attractions.

An esports stadium is more than an esports lounge. It has seating for thousands of audience members to watch their pro team play. It can be filled with more competitions than a standard sports stadium. Sports stadiums spend a lot of time empty. By adding multiple uses, quality F&B and many other attractions, Williams thinks Glytch should be able to boost revenues:

“The esports stadium is our main attraction. It is basically a high-tech theatre. By programming it with not just esports events, but also TED talks, town halls, comedy, and concerts, we can keep it in use more often than a traditional sports stadium. We’re going to be always exploring what those opportunities might be.”

Glytch plans esports LBE venues across North America

Fast expansion is key to Glytch’s plans to dominate the market. Aside from the LA stadium under construction, four others are already in planning, in major cities across the continent.

Williams says, “our objective is to get to powers of two: such as four, eight, 16, or 32 locations, as quickly as we can, because each time you hit a power two, there’s like an increasing network effect that will help us become a league of our own, so to speak. There are a lot of synergies here. We’ve spoken with about thirty-three professional teams in North America and over half of them have indicated an interest in what we’re offering.”

“We’d like to roll this out as quickly as possible, and in fact, our financial capitalization partners are excited to have us do that. A lot of eyeballs on the first location. But we will like be opening additional locations before the dust even settles on the first one.”

Williams is aware that esports is still an unknown, but believes that his rapid expansion strategy is essential to Glytch’s success.

Glytch bets on esports

“I’m going to say something again against my own interests, which is that esports is still a bet. I personally believe it will happen, but the question is “what will it look like and how long will it take to grow. Everything we are doing is intended to mitigate our risk.”

“Getting to 8, 16 or 32 locations with a pro team ensconced in each location gets us to a scale – with its corresponding network effect – that will bring stability and success.”

Aside from that, there are questions around the structure of the teams and leagues and technology. Having a critical mass of teams and venues with attractions that can evolve should mean that Glytch is agile enough to attract and keep a local audience returning. Rotating the attractions is an important commitment.

“There are so many things to making esports actually work. We designed this to grow with esports in whatever direction esports takes us. But it is the location-based entertainment with its attractions and F&B that will be the real, stable component that will help us grow and bring people back time and again.”

As if ambitious plans for North America weren’t enough for now, Glytch is also looking further afield. Venues in London and Berlin are now in planning with a major professional esports team interested in each location.

The COVID-19 effect

Williams says that Glytch nearly bought its first location just prior to the pandemic. When the deal fell through, he says he was “tragically disappointed” and thought the venture was sunk before it was launched.

But the delay actually turned out to be a huge benefit: “because we happen to be on the buy-side when everyone else was in distress, getting approvals and negotiating terms became substantially easier. We were no longer looked at as a greenfield start-up, but a light of hope instead.”

By the time of the launch in May 2022, he believes “things will get back to normal. I feel like a contrarian saying that but stadiums go back to the coliseum. It has always been a part of the human condition and even a pandemic won’t stop people from gathering in large numbers to enjoy themselves.”

Nevertheless, COVID-19 has influenced some of the design and operational elements of the arenas.

“When we designed this originally, the seats were all latched one to the other and we’ve gone back and made it where the seats are detachable so that we could remove enough seats to do a checkerboard pattern. That was an accommodation that we wouldn’t have thought of if it hadn’t been for the pandemic.”

The potential for temperature checking scanners at the entrance has also been accommodated. Williams always wanted a compelling entry experience including a giant digital flume and a scanner inspired by the movie, Total Recall.

“We wanted to create a scanner experience showing your skeleton as you’re entering the facility. Over time, we decided that this ‘fake’ scanner should, in fact, be a real scanner, screening discretely for weapons. Now, we’ve decided to add a temperature check to screen for COVID-19 or other ailments. Our little fake total recall experience has become more and more real.”

The huge potential of esports

With impressive statistics flying around about the participation in gaming, the potential for esports to translate into a spectator sport is huge.

Williams says, “We think the numbers are undeniable. More people watch other people play esports than just about any other sport. The booming esports market is projected to reach $2.4 billion by 2024. We are seeing a massive spike in esports viewership.”

“However, it just hasn’t been done right yet. Going to a tournament can be a labour of love. Excruciating and boring. What’s missing at this point is watchability and ancillary entertainment.

Williams thinks there are two elements to this.

Firstly, there needs to be more entertainment in the staging and programming of the esports events including the same kinds of programming fan service offered by established sports like hockey and football.

Secondly, that video game developers need to think about spectators when creating games. The viewing audience, not just the hardcore players, need to understand what’s happening in the game at all times during an event.

“When people develop these video games, they try to make a compelling video game from the point of view of the players. What they haven’t yet fully taken into account is what is the audience seeing? I figure until my mom can watch it and understand what’s going on, then it hasn’t arrived yet. Every game developer is thinking about this and the next wave of esports games is no doubt on its way.”

Publishers stifling the evolution of esports

Williams believes the current structure of video gaming leagues is problematic. In order to reach its full potential, fundamental changes need to happen in the control of esports leagues.

“Originally, esports leagues were formed by third-party companies such as ESL and Major League Gaming. Now, the largest leagues are run by the publishers of the game, such as Riot Games and Activision/Blizzard. But I believe there’s another revolution coming, one where the teams themselves have greater control.”

“As a lifelong video game developer, I know that games come and go. The shelf life of a game is about seven years if you’re lucky. That means that games come and go, but the teams – and the stadiums – are theoretically forever.”

Esports Teams

“What I would advocate for is team owners being more directly involved in the management and running of the league. And teams should not be limited to just a single game, but should be able to field squads for multiple games.”

“The Dodgers play baseball and that’s all they play and that makes sense in traditional sports. It would be very strange if the Dodgers started playing basketball. But baseball has lasted over 100 years. Esports are different. They have a shelf-life. Certain franchises can last for decades, but games themselves can go out of style in a handful of years.”

“To me, esports is more like track and field, where a single team might field different squads for events, such as long jump, javelin, and discus.”

“The large publishers, such as Activision/Blizzard, mandate that teams can only play the game they signed up for, such as Overwatch.

“Overwatch teams spend a ton of money marketing their brand and supporting that one game title, but what happens when Overwatch sales naturally begin to decline? Does that team brand and all of the associated marketing need to decline with it? What if, instead, that team brand could outlast the game by announcing that they are now fielding a squad for another game?”

“Glytch will be the official home stadium of your favourite professional esports team. As such, we want the team to be around and successful for as long as possible in as many leagues as possible.”

Regionality is a key ingredient Williams believes in. When he briefly lived in Seattle, he found himself suddenly supporting the Seattle Seahawks. (In Seattle, this was all but mandatory.) Once he moved back to Southern California, he found himself once again supporting the Los Angeles Rams.

“We believe the regionality component is real. People want to root for their local team.”

Esports sponsorship

Williams thinks that the other structural issue with esports is around sponsorship.

“Esports is only just beginning to become well enough defined for the big sponsors to know where to put their dollars. And is only just now starting to command comparable money to traditional sports.”

Most of the money currently gets swept up by the publishers. “I think there needs to be a new dynamic. The sponsorship dollars are ever-increasing. And I think that’s something which will keep getting better and better.”

What’s the stadium like?

There is still the question of the optimal design for an esports arena.

“A very big thing that hasn’t been figured out yet is what does an esports stadium look like? Traditional sports owners would love to fit esports into their existing stadiums. But it doesn’t belong on a football field or a baseball field. Basketball stadiums can work as esports stadiums, that’s not too bad, but like everything else in this world, it will never beat a specialized esports stadium design.”

“We want to define what an esports stadium is. A team of industry pros have consulted with us and we think we have come up with what may be a definitive design. Actually, not one design, but three. That’s the thing about esports: it’s not one sport, but many. From 1v1 to 6v6 to Battle Royale, there are as many different formats for esports as there are game genres.”

“Accommodating all the formats in a single stadium requires some very creative design and planning. Plus, we know that when we finally reveal our plans, there will be feedback. The design isn’t right until everyone agrees it’s right.”

Interactivity in esports

Esports are very different from traditional sports. Spectators need screens to view them effectively, interactive elements and even motion seating.

Williams agrees. “The stadium itself is a high-tech theatre. There will be computing devices in the seats of the first one hundred positions. There’s a reason for that which will become clear to the audience. The audience has an interactive element, meaning that they can influence things during a match.

“The idea of expecting your average gamer to not use their cell phone or not be online for a marathon esports event is absurd. Instead, we plan to make being online part of the experience. “

Micro amusement park

It would be wrong to think of Glytch as simply esports venues.

“We want to be a micro amusement park. I think there’s a market for an amusement park where you can park your car, go inside, drop a hundred dollars and go home and have a great time with the whole family and come back the next day. Low commitment, easy access.”

“Our business model is less about throughput and more like a casino model. We want people to come to hang out and have a great time for as long as they like. Eventually, you’ll eat and eventually you’ll try the other attractions. That’s the whole idea.”

“We think we’ve got that secret formula, which more than just the sport. You’ve got to surround it with good food and attractions and fifty thousand other things to do because that’s what makes it fun. It’s more of a festival than just a tournament because right now the standard is sitting on your butt for eight hours watching match after match after match… with only candy, chips, and sodas to eat and drink.”

Tech and future-proofing

A high-tech venue is going to need to be future-proofed for new advances. Williams says that “we are going to be challenged to keep it fresh and new. This is where most location-based entertainment places go wrong: they don’t rotate their games often enough. If you don’t keep changing and evolving, you’re going out of business. We intend to be continuously innovating, with really great partners helping us.”

Glytch is using its Glytch App as a “massive CRM” to help it track the interests of its visitors. This app allows visitors to book attractions and keeps track of their redemption points, called “GameBux”.

Robots

Robots play a big part in the mix. For a start, they fit with the sci-fi theme. Williams says that robots should be used for mundane jobs, like burger-flipping. This allows the human staff to focus on interactions with customers.

https://youtu.be/ylO-OgRpobo

Even if current robots are not quite up to Westworld standards, Williams thinks there is entertainment value in bots which has marketing value.

Innovative partners

Surrounding the esports arena will attractions is important to Glytch. Current partners include Escapology, ParaDrop VR, and City Lights. Williams is keen to invest in experiences that can be replayed and arcade equipment that can be rotated.

“Scenario is our general contractor and they are helping on the theme design side and we love them … phenomenal. We have so much confidence and respect for the team.”

Dan Moalli, Vice President of Scenario USA, says, “Scenario has recently expanded into turnkey project delivery. We believe in the vision of Glytch, its management team and its tremendous growth potential. We are really excited to be part of this project.”

Future domination

“Right now, the plan is for Glytch to own all of the locations. There are lots of people who are asking us would we expand into other countries, would we do franchises? And the answer to both is yes. But we want to establish our brand first and then grow. At least the first eight will be company-owned in order to set their standard. “

Williams says Glytch is currently in discussion with half of the esports teams in North America, but the potential is much greater than that.

“I honestly think there’s a demand for more of our locations than there are teams right now. In at least two of the locations we’re looking at right now, there isn’t a local team. Our theory is to build it and they will come.

“We don’t ever want to own a team – we think that’s a conflict of interest. But we believe in every location we can inspire the formation of a local team. We have little doubt that there will always be a third party interested in starting a team. Don’t you want to own a team right here in this lovely little stadium that we’ve created for you?”