“Halo Infinite” hasn’t even officially released yet, but the Halo Championship Series has already hit the ground running. Over the past three weeks, “Infinite’s” esports circuit has hosted a series of open competitions for hundreds of teams vying for a spot to compete in the game’s first major tournament, which will be held at a sold-out convention center in Raleigh, N.C., Dec. 17-19.
Unlike other major esports leagues, like Activision Blizzard’s Call of Duty and Overwatch leagues, there are no multimillion-dollar franchise fees, city-based marketing strategies nor lucrative broadcasting rights deals for Halo’s revamped esports circuit. At least, not yet. Instead, Microsoft has partnered with established esports organizations like Cloud9, Envy Gaming and G2 Esports, which have licensed their brands to the publisher to sell in-game cosmetics for a cut of the revenue.
For the nine partnered teams, the licensing agreement is a departure from other esports revenue models that resemble traditional sports leagues. Instead of depending on broadcasting deals, ticket sales or sponsorships at live events, esports teams can earn revenue by focusing solely on the same goals as the publisher: getting players to download the game and spend money therein.
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Dan Fiden, president of Cloud9, says the future of esports is a world where established teams are seen as “distribution platforms” for the games they play, not just as organizations that serve a niche, competitive audience within a game’s larger fan base. Fiden said he wants esports organizations to help “drive the core business for the publishers,” i.e. selling in-game items and season passes.
“That is the future of how esports integrates with a game launch,” Fiden said. “We will move away from the notion that esports is a media business that operates on the side of the core video game business.”
When Microsoft released the free-to-play multiplayer beta for “Halo Infinite” a few weeks ahead of the full game’s scheduled release date, all nine of the partnered teams had custom armor kits ready to buy for $10 worth of virtual credits at the in-game store. “Halo Infinite” follows a microtransaction formula popularized by “Fortnite” and “Call of Duty: Warzone”: The multiplayer portion of the game is free, but certain in-game cosmetic items are not.
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“Halo Infinite” isn’t the first game to sell in-game items for esports organizations. “Rainbow 6 Siege,” “Rocket League” and “Valorant” have similar programs. In “Rocket League,” for example, teams earn 30 percent of the revenue from each item sold. A promotional in-game weapon skin for Champions, “Valorant’s” capstone esports event, will award the 16 participating teams 50 percent of the money raised from sales.
Tahir “Tashi” Hasandjekic, the head of Halo esports at Microsoft, declined to say how the company is splitting revenue with “Infinite’s” partnered teams.
Sponsorship deals and broadcasting rights are “real revenue streams” for esports leagues, Fiden said, but both are indirectly related to a game publisher’s bottom line — the number of users playing and spending money in a game. Cloud9 hosts teams in 11 different titles, including “League of Legends,” “Overwatch” and “Valorant.” Fiden said he wants esports organizations to be valued and rewarded by publishers for bringing players through the door.
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“We’re perfectly aligned with the publisher in these kinds of models,” Fiden added. “The teams that make great content and have a really dedicated fan base and can deliver users and sales to publishers are going to do really well.”
That level of alignment hasn’t always been the case in esports. “There are some occasions where we struggle a little bit to convince the publisher and the developer of the game that we are not just participating for the sake of competition, that we also want to share some of the positive outcomes of the success of the game,” said Alban Dechelotte, general manager at G2 Esports. “Seeing [Microsoft] already thinking this way before the launch [of 'Infinite’] gave me great hope for the future.”
It’s not clear how much revenue teams will bring in from the licensing agreement with Microsoft. A spokesperson for Envy Gaming said the partners don’t have access to “real-time data” on sales in “Infinite.” Hasandjekic declined to share details about sales from the in-game store.
As for Microsoft, these partnerships stand to curry favor with a new generation of players as Halo reenters an industry that’s changed dramatically over the series’s 20-year history. The Halo Championship Series has been around since 2014, but the league has been dormant for the past two years while developer 343 Industries focused on the release of “Halo Infinite.” Hasandjekic said the esport has always been a “grass-roots scene” with open events and tournaments. That’s partly why the Halo Championship Series is structured the way it is; Microsoft wants to have as many players and teams competing as possible, Hasandjekic said. And that’s also why Halo has stayed away from selling franchise slots, for now.
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“That’s not to say that there won’t be some sort of franchising methods in the future. You know, we’ll never say never,” Hasandjekic said. “But, right now, we wanted to take an open-ecosystem approach.”
Mike Rufail, the founder and co-owner of Envy Gaming, said it’s been clear since the beginning that the team at 343 Industries is “making an effort to listen to our feedback.” In one conversation, Rufail suggested the studio invite fans to pitch money into tournament prize pools. Valve’s crowdfunding model for “Dota 2’s” international finals, Rufail noted, led to a record-breaking $40 million prize pool. Now, the Halo Championship Series will have its own version of crowdfunding as well.
“They are listening,” Rufail said. “They are trying to do things to support esports in a bigger way.”
Optic Gaming, a team that merged with Envy Gaming in November, won the first North American weekend series on Nov. 21. 343 Industries later said their broadcasts of the weekend tournament on both Twitch and YouTube peaked at 71,000 concurrent viewers. The viewership number doesn’t include co-streams, where individual streamers can rebroadcast matches to hundreds or thousands of their own followers. Many Halo esports professionals did just that.
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The first weekend of matches turned heads. Matthew “Nadeshot” Haag, chief executive of the gaming organization 100 Thieves, dished out praise for the relaunch of the Halo Championship Series — despite not being a partner with the league.
“What a statement from Halo,” Haag tweeted after the match. “Their re-entry into esports has been nothing short of incredible.” On Monday, 100 Thieves launched a Halo themed merchandise drop, despite not yet having announced a team for or partnership with “Infinite.”
That could change, though. Hasandjekic did note that new organizations have reached out to join the nine partners in “Halo Infinite,” and that more teams will be able to apply to come onboard through a public process next year. Right now, the championship series takes place across four major regions — Australia and New Zealand, Europe, Mexico, and North America — but Microsoft’s ambitions are to “expand more globally” in the coming years, especially since Halo is now available free-to-play on PC, not just on Xbox, which opens the pool of prospective players, Hasandjekic said.
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Microsoft and 343 Industries are looking to partner with esports teams that have “a strong track record” in terms of how they’ve managed and supported players in the past, Hasandjekic said. He added that they may go directly to players to get their feedback about specific organizations that have applied.
“It’s about building a sustainable ecosystem,” Hasandjekic said. “We really look to the track record and past performance. And the community perception.”
Over the next year, the Halo Championship Series will host eight in-person events, starting with the tournament in Raleigh and ending with a world championship in Seattle next October. Last weekend, 772 teams from around the world entered to compete in the tournament. Some publishers pay streamers, celebrities and esports pros to promote their games across social media or on stream, but with “Halo Infinite,” Microsoft said the engagement has been totally organic.
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“It’s 100 percent organic,” said Hasandjekic. “Philosophically we don’t pay to play or participate in our tournaments or things like that. So, I think that’s what’s especially humbling.”
Fiden said these matches aren’t just amazing story lines to follow; the competitions teach spectators pro strategies to try out on their own when they’re playing casually. Or, in other words, esports aren’t just entertainment — they’re a tool for developers to retain players.
“We are going to drive customers into Halo,” Fiden said. “If we can just get paid when we do that, it kind of acknowledges the reality of the situation.”
Microsoft and 343 Industries intend for “Infinite” to be the foundation for the next decade of the Halo franchise, meaning that there won’t be a sequel any time soon. Fiden says a lot of game publishers are still “wrapping their heads” around what it means to operate a franchise as a “live service,” rather than the kind of one-and-done release that has dominated the industry for decades. It’s still the early days, but Fiden wants publishers to move past the revenue models coined by traditional sports leagues, like the MLB and the NFL.
“We’re starting to see really cool experiments [in esports],” Fiden said. “Maybe actually adopting this kind of dying format is not the thing to do. What we should do is invent something that’s a lot better.”
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