With lockdowns occurring around the world due to the world health crisis, individuals have had to turn to activities that socially distance them from others. With eSports platforms not being impacted by these regulations, they were able to carry on as normal, increasing investors interest (VC, Family Offices, PE, strategic investors).
Even prior to the world health crisis, predictions were saying that eSports would become even more mainstream and lead the gaming industry. While eSports may have once stood for a subset of sports culture, it has definitely grown into a full industry in its own right.
Esports : Pop culture
ESports and gaming have burst into the mainstream in recent years, transforming from a vibrant niche to a central form of entertainment around the world, and ticket sales are transitioning from the arena, to the internet. That shift has been powered by championing from mainstream celebrities and an increasing amount of coverage from traditional outlets like ESPN, and, at least in part, the breakneck rise of Fortnite.
A recent report from Business Insider’s Insider Intelligence stated that :
“as competitive video games continue to integrate into popular culture, global investors, brands, media outlets, and consumers are all paying attention. Total esports viewership is expected to grow at a 9% compound annual growth rate (CAGR) between 2019 and 2023, up from 454 million in 2019 to 646 million in 2023, per Insider Intelligence estimates. That puts the esports audience on pace to nearly double over a six-year period, as the 2017 audience stood at 335 million.”
The pop-culturization of eSports has helped power the explosions in eSports investment and revenue. eSports has hit this stratosphere in large part because of the social component of live streaming and gaming. Video gaming-specific streaming platforms like Twitch and YouTube Gaming give fans a direct connection to the players and teams, while more mainstream socials have allowed those connections to flourish. Certain eSports organizations, like FaZe Clan, are also moving aggressively into areas like merchandise, lending their brands more notoriety than if they’d stuck to esports alone.
eSports attracts VC & PE
It’s essential to think of the esports opportunity in one inclusive of gaming, media, pop culture, and commerce, as it shines a light on opportunities beyond gaming events alone.
According to Deloitte report – 2019, the industry has seen a huge uptick in investment from venture capitalists, and more recently from private equity firms. The number of investments in eSports doubled in 2018, going from 34 in 2017 to 68 in 2018. That’s reflected in the total dollars invested, too. Investments are up to $4.5 billion in 2018 from just $490 million the year before, a staggering YoY growth rate of 837%. These investments are distributed to players across the ecosystem — from esports organizations, to tournament operators, to digital broadcasters — allowing it to function and grow.
Most projections put the eSports ecosystem on track to surpass $1 billion in revenue for the first time this year. And revenue is expected to grow from here — Newzoo projects is to hit $1.8 billion by 2022. Money flows into esports through media rights, live event ticket sales, merchandise sales, and in-game purchases, but most of the revenue (69%) comes from sponsorships and advertising, per Newzoo figures cited by Statista.
Still investors underestimate eSports
PwC considers that despite the growing demand from consumers, investors underestimate eSports; they are still concerned about further investments due to lack of knowledge about the ecosystem of eSports.
“Financial investors tend to focus too much on P&L statements rather than on the strategic aspects of eSports. It is crucial to understand that investors should act now if they want to invest in the eSports market.”
Family offices have increase their eSports portfolio allocation both via VC funds and direct investments certainly lead by the Millenials interests who beter see the value proposition that eSports represents.
“It is important to understand that eSports is fundamentally intertwined with games. While nobody owns football or basketball, the games on which eSports depends are owned by their publishers. Investors must understand that eSports should be viewed in the wider context of the ecosystem and that strength lies particularly in its convergence with adjacent industries. It is part of a larger culture—the different areas of life of the players and fans.”PwC – Investors: High demand in esports attracts big brands from various industries
In term of audience and revenue, Asia-Pacific (APAC), North America, and Europe are the top three esports markets, respectively, accounting for over half (57%) of global eSports viewership in 2019, up from 51% in 2017, per Newzoo. Meanwhile, North America is set to hit $300 million in esports revenue this year, while Europe is expected to reach $138 million, as per PwC estimation.
The rest of the world only accounts for about 15% of total esports revenue, but it contains several regions to watch, of which Latin America, is expected to hit $18 million in esports revenue in 2019 before skyrocketing to $42 million by 2023, per PwC estimates.
In Monaco various initiatives are popularizing eSports including the Monaco Esports Club & Federation, and the Esport Alliance of Monaco whose members are actively working on a standard solution for managing global eSports players through a Global Gamer Passport.
Article: Joana Foglia – Sources: PwC; Deloitte; News Media