eSports overall revenues are set to hit about $693 million this year up from $493 million in 2016. Furthermore, eSports overall revenues are set to hit about $693 million this year up from $493 million in 2016. Furthermore, eSports revenues via sponsorship should grow to over $1.5 billion by 2020.
How and why is the eSports industry growing so fast?
First, let’s cover what eSports represents and involves on a global scale. eSports consist of a variety of video games that require world-class reflexes and dexterity in the fingers. Perhaps surprising to some individuals, hundreds of thousands of fans follow professional eSports teams and leagues no different than traditional professional sports. Diehard fans consistently watch matches and even attend large competitions just to cheer on their favorite eSports stars.
Many of the world’s most valuable companies are a product of the convergence of media and technology. These companies constantly battle for the same precious resource: viewers or consumers and time spent, just as with traditional sports. It is important to remember that this audience will be the future of purchasing power so at the center of that battle is access to exclusive and engaging content.
Three Forces that dominate growth:
- Reach – 2.6 billion casual gamers in the world today up from 100 million in 1995… the average gamer spends 24 minutes a day playing their favorite game
- Business model transformation of Digital gaming – from ‘one and done’ to a series of games
- Player engagement – eSports professional players coming together to compete…. Today there are over 400 million viewers around the world. Market research has shown that over half of these viewers don’t even play these games
As a result, we have seen ecosystems around eSports involving franchises, teams, and leagues that look very similar to traditional sports.
Where do brands spend their money in eSports?
Brands are expected to spend $517 million broken down into $155 million on advertising, $266 million on sponsorship, and a further $95 million on media rights. Brands investments will double by 2020 which pushes the total market to over $1.5 billion.
Audiences that would make the NFL blush
The global eSports audience will reach 385 million viewers in 2017, made up of 191 million eSports Enthusiasts and a further 194 million Occasional Viewers. The number of eSports Enthusiasts is expected to grow by another 50% toward 2020, totaling 286 million.
Peter Warman, CEO at Newzoo comments, “eSports is not only growing exponentially as a new independent business and industry, but it is also accelerating the convergence of various established industries. For brands, media, and entertainment companies, eSports provides a chance to capitalize on the favorite pastime of digital natives and Millennials: playing games and watching game content. With the arrival of live streams and events, gaming has entered the realm of broadcasters and media that can now apply their advertising business model to a market previously out of reach for them.”
Traditional sports are taking notice
Aside from big budget titles, the eSports scene can be credited for much of the traction driving the industry forward. The idea of creating professional leagues out of popular multiplayer titles is catching on. Just last month, the NBA’s Cleveland Cavaliers and Golden State Warriors announced their entry into eSports. They join the New York Yankees among the North American sports franchises that are buying into the growing eSports scene.
Established professional sports franchises, especially soccer franchises in Europe, have been involved and invested in eSports for a while now thanks to the popularity of EA Sports’ massive FIFA franchise. The emergence of other eSports leagues catering to multiplayer games such as Valve’s Dota 2, Riot’s League of Legends and Blizzards’s Overwatch are also encouraging more franchises to participate.
Football (soccer) clubs such as England’s Manchester City have started signing FIFA stars who are players of the virtual game, rather than the real thing. The most ambitious clubs, such as Paris Saint-Germain of France, have signed up a whole squad of players in a number of different eSports, including League of Legends. The thinking is simple: digital gaming is where the next generation of fans will come from (often, a young person’s first interaction with a professional football club is through the FIFA game), and so eSports are quickly growing among the potential revenue generating opportunities.
How do you value eSports?
In traditional sports, total revenue per fan is a key indicator of how well a sport is “monetized”. This encompasses media rights, sponsorships, and what a consumer spends. As the eSports industry matures and incorporates an increasing number of local events, leagues, and media rights deals, the average revenue per fan is anticipated to grow to $5.20 by 2020 up from a little over $3. This is still significantly less than popular sports such as basketball, soccer, football, hockey, and baseball.
North America leading the way in Brand Involvement
Currently, North America is the largest eSports market with revenues of $257 million in 2017. We should see this more than double to reach $607 million by 2020. Most of these revenues come from sponsorships which will total $113 million in 2017. This is partly due to North American teams that have welcomed many new non-endemic sponsorships as well as hosting several of the world’s largest leagues. The 25 million gamer enthusiasts in North America generate twice as much revenue per year than in any other region, specifically $10.36 per fan every year. The involvement of American and European sports teams and their marketing agencies will continue to grow this year, increasing brand investments even further.