eSports: A Guide to Competitive Video Gaming
Despite COVID19 wrecking havoc with world economies, eSports is booming globally. Forbes magazine recently published the list of most valuable esports companies in 2021. According to the list, the average value of the world’s top teams jumped 9.9% as compared to the previous year. That’s a considerable margin considering the world economies and their major industries are posting negative economic growth in the same period.
According to Statistic.com, approximately 397.8 million people watch esports both online and in-person all over the world. This figure is only expected to grow. Statista estimates the figure to be around 577.2 million in 2024.
Apart from this, around 234 million people watch esports regularly, and this number will grow to 285.7 million by 2024. Apart from people who watch esports regularly, 291.6 million viewers just join every once in a while. You can get more info about the growth of esports by doing research on esports industry, visiting professional esports websites, or having a look at esports stats. This growth only leads to immense opportunities for players, investors, and sponsors, as it has grown from just being a hobby for many.
With such a large consumer base, fragmented landscape, and the ease of digital viewership, the esports industry holds immense opportunities for monetization. If you want to invest in the esports sector, then read on. Because we will be sharing an introduction to the industry as well as some key insights to help you make the most of your investment.
What Is eSports?
Esports is the short form for “Electronic Sports.” It refers to the competitive video gaming industry in which skilled video gamers compete for prizes and glory. It’s just like traditional games of football, basketball, and rugby. The only difference is, esports competitions hold tournaments across several video games such as DOTA, WOW, LOL, Overwatch and others. Contrary to public perception, esports events don’t happen just in the grandma’s basements of unemployed twentysomethings. Instead, the industry is as real as traditional games. Its events are held in as big arenas as you find in football. In fact, more people are now watching esports than traditional sports.
As the esports ecosystem grows, tech platforms, analytic firms, and investor capital are slowly starting to pour in. Video gamers prefer to join larger organizations for better rewards rather than just playing and streaming alone. What makes esports unique is that it is – for the most part – independent of the physical appearance or attributes of a player. A player can be short, weak, slim, and still be a champion. A player can have any sexual orientation, ethnicity, culture, gender, location and still be a champion. The industry levels the playing field for anyone and everyone. And this is its biggest draw.
Which Esports Games Are Most Popular?
The actual ranking of popular esports titles varies on a monthly basis. If a game has a tournament coming up, it blows up in popularity. It’s also pertinent to mention that popular esports are not traditional sports-related games. For instance, FIFA, F1, Tennis, etc., rank very low in popularity when it comes to esports. Instead, popular esports titles involve multiplayer battle games (in which a player joins a team to destroy an opposing team), real-time strategy (a player has to develop an army to exert dominance over a region), or first-person shooter (in which players fight to kill opponent’s team.
With that said, the 10 most popular games on the top video games streaming site Twitch has remained unchanged for quite a while. As of writing this article, League of Legends leads the pack as the most-watched eSports game in the world. It has over 40.67 Billion views, according to Statista.com, and continues to grow. Fortnite and Counter-Strike: Global Offensive are on the second and third spot with 24.24 Billion and 18.34 Billion views, respectively. The rest of the top 10 most popular games are:
- DOTA 2
- World of Warcraft
- Tom Clancy’s Rainbow Six: Siege
Esports Landscape: Involved Parties
The esports landscape is complex. There are several parties involved in the business. At times, this complexity makes it tough to navigate. Especially if you a new investor, you can have trouble understanding the complex landscape. Below are some of the major parties you should be aware of.
You must have heard about all the big shiny esports tournaments and leagues. Video gaming leagues are just like regular sports leagues. They have playoffs, regional championships, world championships, and regular seasons as well. Like football teams are part of the Premier League and compete against each other, esports teams play against each other in gaming leagues.
Generally, esports teams are managed by an organization, and companies like ESL or MLG run these tournaments. For example, MLG organizes the Call of Duty World League every year. Similarly, ESL organizes the Counter-Strike: GO’s Pro League. Initially, when the trend for esports leagues started taking hold, tournaments drew very few fans to the arenas.
The trend has changed considerably today. In November 2019, It took less than 50 minutes for all 12 thousand tickets to sell out for the League of Legends World Championship finals. Likewise, the prize money for these events has also grown considerably. The prize pool for DOTA 2 championship The International in 2019 touched a massive $34.33 million. That’s nearly quadruple the payouts of Golf’s The Masters’ tournament.
Organizations hire the best esports teams. One organization can have multiple teams that specialize in their respective video game. All operate under the same title, though. It’s just like traditional sports teams. A university or college can have different teams competing in football, rugby, baseball, etc. – all operating under the same umbrella.
An organization is a combination of different teams playing different games. Some of them can be 1 on 1 player, while others are squads competing against others. Organizations try to find high-profile players in an effort to leverage their already huge fan following and get sponsorships from brands.
Sponsorships are one of the major income streams for these organizations outside of the prize money for a particular event. Like traditional sports, a high success rate means teams and players will get more sponsorships and bring in more financial benefits for the organization.
Like a traditional top athlete, rising through the ranks of millions of gamers is no ordinary feat. Players train hard. Some play even for 15 hours straight, honing their skills with extensive gameplay. A video gamer has two main options to pursue. First, is lifestreaming their gameplay? This is done casually with often lighthearted commentary. To give you an example, the world’s biggest Youtube Channel belongs to a casual gamer PewDiePie with over 60 million subscribers.
The second option to pursue is playing professionally. Players who rise to this level compete in international tournaments all over the world. They build a fan following for themselves as well as their teams and organizations during the process. Successful gamers earn millions. According to the estimates of Statista.com (as of March 2021), Johan Sundstein, a video game player from Denmark also known as N0tail, has accumulated 6.97 million U.S. dollars throughout his recorded eSports career. That’s quite a figure!
A publisher is the intellectual property rights owner of a particular game. Activision, Valve, Epic Games, Electronic Arts, etc., are all examples of video game publishers. They develop their games and own all rights surrounding a particular game, such as where the game is to be played and who can host the event. They also control all the pro gamer and fan resources, gaming infrastructure and platforms, live streaming resources, and marketplaces. This way, publishers of a game are all mighty and powerful.
Back in 2016, several esports teams approached Riot Games to discuss new terms and conditions for revenue sharing. At that time, Riot games refused to negotiate. They turned down all the demands of participating teams, flaunting the publisher’s authorization. A year later, they announced different revenue-sharing schemes. This allowed select players and their teams to participate in the upside and make a profit from the revenues. So, a publisher is all in all. They can decide a policy and then reverse it any time they want.
A pro player can either play 1 on 1 or join a team. The parent organization usually manages these teams, buying new players and ending contracts as and when they deem appropriate for a particular gaming title. Every team specializes in only one specific video game. It can be League of Legends, DOTA 2, Counter-Strike, World of Warcraft, or any other video game. Prizes are distributed among all the team members equally. These teams have millions of followers on their social media, following their every news like traditional sports teams. Fans watch their favorite team’s games online and in person. Some of the most popular video gaming teams are Cloud9, Team Liquid, OG, Fnatic, and Evil Geniuses.
Below are some key stats related to the esports audience.
Esports to reach 577.2 million viewers in 2024: Newzoo, the world’s leading market research firm, recently released its 2021 Global Esports and Live Streaming Market Report. According to their report, the esports audience is projected to grow at a rate of 7.7% annually. It will pass the half-billion mark in 2022 and reach approximately 577.2 million in 2024.
Esports fans in North America and Europe are growing in numbers: In the past, people thought only Asians are crazy about competitive gaming. However, today North America and Europe are slowly starting to outpace the rest of the world in esports popularity. This is apparent from the fact that 9 of the world’s most valuable esports teams belong from these regions, as per Forbes’s recent report.
Esports keep the audiences engaged: Esports is engaging. As per some reports, fans are spending as much time as 100 minutes on a single session. What’s really interesting about this figure is that only half of the spectators actually play the game they are watching. Also, more than half of the esports fans are more than willing to travel to another city/region to watch their favorite players and games.
Esports Audience is Young: In a survey conducted in 2019, it was found that 32% of the internet users all over the world between the ages of 16 and 24 watched esports at some time in their life. In comparison, only 6% of people between the age bracket of 55 and 64 affirmed watching esports.
Esports fans are working professionals: As per Mindshare, a global marketing firm, 43 percent of the esports enthusiasts have an annual household income of 75K USD or higher. It also found that nearly one-third of them earn 90K USD or even higher. Such a huge purchasing power is incredibly lucrative for brands who want to leverage it for acquiring new consumers.
Esports Industry Overview and Revenue Breakdown
All industry insiders project the esports ecosystem to surpass $1 billion revenue this year. And it will only climb more heights from here. Newzoo estimates the revenue to hit $1.8 in 2022. That’s a massive increase from this year’s projections. However, considering all the money that’s pouring in through media rights, in-game purchases, merchandising and ticket sales, ads, and sponsorships, this figure isn’t too far-fetched.
Current Monetization Strategies
Almost 15 years ago, home console-based video game software sales were a major source of income for the global video gaming market. However, it has fallen considerably today. With the inclusion of esports in the 2022 Asian games, video gaming companies now have multiple income streams. Like the media companies, gaming companies today earn from ads, ticket sales, TV broadcasting rights, merchandising, and other similar venues.
Sponsorships are growing, despite all the negative impacts of COVID. All the famous tech sponsors have some sort of involvement in the industry, and it’s only increasing. Non-endemic and lifestyle brands (i.e., brands not directly involved in the gaming industry) are slowly moving from the experimental phase to more commitment-based strategies for sponsorships. They are also allocating dedicated marketing budgets for esports. Moreover, local leagues and teams are now tapping into new marketing budgets to reach the eSports audience.
Unsurprisingly, the biggest revenue stream for esports is sponsorship. As per Newzoo figures, it amounts to approximately 69%. The figure they have quoted is $584.1 million for this year. It is up 7.5% from the previous year. New brands are constantly entering the ecosystem. To quote Whalen Rozelle, the Director of esports at Riot Games, “In the beginning, we used to explain what esports was. Now, all the brands are coming directly to us [for sponsorships]. Companies have become more selective. They are now trying to align themselves with professional teams. In case they have a smaller budget, we just point them to pro teams that suit their requirements.”
Merchandise and Tickets
The money generated by the sale of merchandise and tickets of live events falls under this category of revenue. This revenue stream has suffered considerably during the pandemic. As there were very few live esports events worldwide, the revenue from ticket sales has seen a drastic drop globally. As per Newzoo’s latest figures, the industry saw a meager 52.5 million USD revenue this year. This figure is down almost 50.3 percent from the previous year’s figures.
However, the COVID vaccines are slowly rolling out all over the world. The vaccination program is in full swing in the United States and Europe. China has already started announcing dates for new esports events. The biggest being, the League of Legends 2021 World Championship, will be held on November 6th in Shenzhen. Hopefully, in a matter of a few months, the esports industry will get back to normalcy. But, for the time being, it doesn’t look like merchandise, and ticket sales will rebound any time soon.
Media giants pay money to secure online streaming rights. This comes under the category of media rights revenue. It includes the money various online platforms pay to the industry stakeholders for broadcasting their media. It also includes the money foreign broadcasters pay to secure the media rights for a particular show in their country.
Newzoo’s 2021 esports figure shows media rights revenue increased despite a lackluster year in terms of events. The figure stands at $163.3 million. It is up 3.3% from the previous year, which is considered a decent increase. Industry insiders are already calling Media Rights the fastest-growing revenue stream going forward because of the massive potential it holds.
As more and more exclusive content deals are announced and the world economy recovers fully from the pandemic, this sector will show steady growth. To quote Newzoo (again), media rights deals will come close to $400M this year. In this way, media rights revenues of esports are expected to mirror the revenues of the traditional sport.
Game Publisher Fees
The game publisher fees are a big chunk of the portion. And why it shouldn’t? Game publishers spend a handsome amount on human resources making the awesome games that we all enjoy. Most of this amount (game publishing fee) is the marketing investment by game developers and creators to increase the shelf life of their titles.
However, esports hasn’t really been a profitable business model for them. And we are not expecting a change any time soon. Today, publishers want to grow their franchises into spectator sports to further engage their fans. Oftentimes, turning towards white-label organizers to set up events, which also eats up their revenues.
According to Newzoo’s 2021 estimate of esports revenue streams, game publisher fees saw a marked decline. So far, the numbers have been 108.9 million USD. This figure is down 11.6 percent from the previous year’s figures. The effects of COVIDare all the more obvious when you look at these figures. Therefore, Newzoo estimates this sector to experience slow growth in the coming years.
Ad revenue comprises the targeted advertisements that play during live streams on various online streaming platforms, VOD contents of an esports event, or on esports broadcast channel. All the big-name brands such as Pepsi, Samsung, Apple, Arby’s, and Coca Cola, etc., are already targeting esports enthusiasts with their ads. As we already discussed, esports fans offer enormous potential for revenue to these brands because of their excellent purchasing power.
So far, ads across various esports platforms have been relatively cheaper. But if the esports industry continues to grow at the same pace, reaching out to this fan base will definitely get more expensive – just like traditional sports. According to Statista.com, esports digital ads generated total revenue of $175 Million in the US back in 2019. It is expected to grow at touch $226 million figures by the time this year ends. On the other hand, some industry insiders estimate that the global ad spent will hit $1 Billion in 2021.
Investing in Esports
With all that considered, now is an excellent time to invest in esports. The market is recovering from the impacts of COVID19, and there is enormous growth potential. But, quite understandably, investors find it rather challenging to navigate this labyrinth. Still, it’s this complexity that gives rise to the multitude of investment opportunities.
It’s worth remembering that esports didn’t become mainstream just because of what a game offers. Instead, it’s expanding because of the pro gaming opportunities driven by tournaments and esports events made possible due to sponsors. Future improvements in video games will benefit not just the developers but also the investors in terms of overall profitability.
Ways to Invest in eSports
Not everyone has the time or talent to develop gaming skills. But, what everyone can do is invest to benefit from the esports boom. Of course, you need the right budget as well to invest in any field. People often wonder how to invest in esports. Well, there are several ways to invest in eSports. From direct investment to purchasing a stock, whatever option you go for, make sure you invest wisely. Otherwise, you will always endanger your investment. Let’s take a look below at the two most popular ways to invest in esports.
Gaming Company Stocks
Esports stocks are obviously the most popular choice. Most of the profits from esports go directly to the companies involved. These comprise video game creators, developers, as well as publishers. Besides, PC & console companies and other manufacturers who produce different video gaming accessories also reap some of the dividends.
Various companies sell stocks with the help of brokers. You can go for any broker you like. The very first step is to sign up. Open a brokerage account. Afterward, you have to pick the company that you will be investing in. Activision Blizzard lets you invest in mega franchises like COD and Overwatch. Likewise, Tencent Holdings has Fortnite and League of Legends. You can also go for companies like Logitech, AMD, or Intel manufacturing different PC components and gaming peripherals.
Below are some gaming companies to invest in.
- Capcom ·
- Take-Two Interactive
- Activision Blizzard
- Electronic Arts.
We’d suggest making small investments in different companies to build a portfolio instead of making one significant investment in a single company. After that, it’s all a game of patience. You have to hold your asset and wait for their value to appreciate so that you can sell in profit.
Backing Esports Teams
Another excellent way to invest in eSports is by backing esports teams. This is because video gaming teams receive a big chunk of the revenue by winning prizes and sponsorship deals. Just like traditional sports, big investors are looking to invest in esports teams. Then you have big celebrities like Drake and Michael Jordan showing their interest in different teams and investing millions. This skyrockets their share prices.
Regrettably, not everyone can make such huge investments. But, if your favorite team comes under the aegis of a public limited company, you can still invest in it. Many teams are directly linked to companies in the stock market. You have Chengdu Hunters tied to HYUA Incorporation, Luminosity Gaming tied to Enthusiast Gaming Holdings, and Team Dignitas linked to Pepsi Co International.
The investment prospects in the esports ecosystem are endless. The Esports boom in recent years is reminiscent of the rise of social media in many ways. SM companies like Facebook, Twitter, Insta saw a massive increase in popularity in a very short time. However, it took some time for them to develop effective monetization strategies. Today, the same companies are worth billions.
The same thing is happening in the esports industry. It has an audience of 474 million (according to statista.com), yet it generates only a billion USD in revenue. There’s a massive opportunity for growth, which makes esports one of the lucrative investment opportunities today. Esports isn’t just competitive gaming. It has an entire ecosystem of digital media and entertainment venues.
Esports is driven by technology. More so than any other sport. With advancements in tech raining like magic, it’s only a matter of time esports industry overshadows the popularity and revenues of traditional sports. And when that time rolls around, we hope you are one of the many who will have benefited from this opportunity.