Esports is a relatively new industry that is similar to other sports in many ways. The difference is that you watch professional players playvideo games like Fortnite, CSGO, Call of Duty, andLeague of Legends instead of traditional games like curling, hockey, soccer, baseball, etc.
Popularity of Esports
The popularity of Esports had gained traction lately. For example, the League of Legends World Championships events received the same number of viewers as the American Super Bowl. These viewers fall into the 18 to the 25-year age group that watches at least 34% more Esporting events than they do traditional sports. One of the prime reasons behind this number in the Games Market Growth is that most of the viewers are digital natives. These viewers can log online to watch an Esports event on Twitch, which is the leading platform. They can even replay past events on YouTube and discuss moments of the game or share event clips on Discord, Twitter, and Instagram.
The Esports industry was valued at $1 billion in 2019 and is now projected to grow at about 400% over the next 7 years to $4.28 billion by 2027. Other research says that with 2.7 billion gamers that value could easily change to $388.8 billion in 2020.
Growing investments in Esports
Statistics like these spells a very bright future for this industry and are beginning to attract huge investment in Esports. It is a global phenomenon that is attracting capital from noted individuals like Steph Curry, Mark Cuban, David Beckham as the pro athletes, teams and infrastructure continue to develop.
In fact, the capital inflow in the Esports Market for some of the biggest events is so much that the cash prizes that the grand winners take away are valued at $34.3 million for the DOTA 2 International and $30.4 million for the Fortnite World Cup. It was these large-scale events that occurred in the past and the maturation of global gaming giants that contributed to a huge surge in competitive gaming.
It is one of the industries that has benefited from the stay-at-home trend brought on by the pandemic. Today, the biggest Esports events are watched by 500 million viewers, which is half the audience of the gaming Video Content or GVC.
The GVC was valued at $6.5 billion in 2019 based on the data derived by Nielsen’s Superdata. It comprises all the online media streaming and consumption platforms on which Esports is played like YouTube, Twitch. These same platforms driver revenue through viewership ratings associated with audiences watching gamers play out video games. The GVC media is unique because it’s the users that create the content being viewed.
Challenges in the Esports Business
There is a very small gap between the players and the audience. For example, they all use the same equipment, lead similar lifestyles and even play the same games. The main differentiator between the two is the infrastructure, or rather the lack of it. The infrastructure that is seen now is only used by the professionals comprising of the big tournaments, top teams, key players, and the major events.
The misconception in the Esports Business
One incorrect thought that investors have about the Games Market Growth is that other than the professionals, everyone else playing Esports just forms the audience. This misconception can result in missed opportunities for investors. The gamer community is online 24×7, and watches competitive games or even participates in them. This equates to billions of hour GVC that is connected to many social platforms and is extremely valuable. Since investors often leave it out, these hours aren’t leveraged.
The professional Esports organizations already possess production studios. It is the casual fans and aspiring gamers that don’t have the means to develop, record and broadcast their gaming content. In fact, there are just a few platforms that they can use to share videos, like TikTok and how it enables crowd-sourced video entertainment potential.
This is an overlooked area in Investment in Esports: new gaming content creators who are potential competitive gamers, who play and even record their gameplay on the Esports games that they like to watch.
Esports Streaming revenues
It’s important to think of Esports as the mainstreaming of gaming that includes media, commerce, and pop culture as it gives us new avenues in the investment in Esports, where one could find opportunities outside of the main gaming events. There has been a lot of movement from venture capitalists and from private equity firms who place their investments in tournament operators, digital broadcasters, and Esports organizations
In the future, Esports consumption might even be enjoyed on our mobiles too, further reducing entry barriers. As of today, the industry enjoys new sources of revenue streams from Europe, North America, and Asia-Pacific, where Asia-Pacific accounted for 57% of Esports viewership. North America may reach $300 million while Europe reaches $138 million according to new estimates from PwC.
Most of the projections placed on the Esports ecosystem are expected to surpass $1 billion in revenue and are expected to reach $1.8 billion by 2022, as per the Newzoo statistics. Most of this revenue will be sourced through merchandise sales, media rights, in-game purchases, and live event ticket sales. Around 69% of this total revenue will come from advertising and sponsorships.
Another big investment area is the development and distribution of gaming software, where many of the top game development companies own and run some of the biggest competitive Esports leagues. Game publishers also own all of the intellectual property seen within the games and control the IP ecosystem through which games are broadcasted.
Previously, game publishers earned a huge chunk of their revenues through one-time title sales. With the onset of games-as-a-service, publishers can now monetize all existing IPs for a longer time period. Adding to these benefits, each game publisher has its own interest areas and focal points. Some game publishers are more focused on casual gameplay. Other game publishers are investing heavily in Esports growth, hoping that any form of growth in the industry will result in positive impacts for them. Publishers with this strategic goal in mind even develop a series of competitive game titles and promote them using the Esports events.