Electronic Sports (eSports) is a spectacle taking the broader gaming industry by storm. Data by Newzoo indicate that the nascent sector, will for the first time, surpass the billion-dollar mark when it comes to revenues generated. Revenues are expected at $1.1 billion by the end of the year, representing a 26% year over year growth.
For those still in the dark, eSports refers to organized gaming among professional players. In this case, players assemble and compete against each other while playing popular gaming titles such as League of Legends. Price money running into millions of dollars, for outright winners, is one of the catalysts fuelling the sector.
With eSports, the audience can visit an arena to watch professional players battle it out for bragging rights as well as the ultimate price. In addition to visiting gaming arenas, there are gaming broadcasters that provide live feeds for watching eSports tournaments.Â
Over a short period, eSports revenue jumped from $493 million as of 2016 to $655 million in 2017. Revenues are believed to have touched the $900 million mark in 2018. The tremendous growth in the sector, as well as acceptance of eSports among gaming fanatics, means revenues could clock the $1.1 billion mark for the first time in 2019.
ESports Evolution
Contrary to perception, eSports has been around for quite some time. The first eSports event took place in 1972 as Stamford University students competed on a video game dubbed spaceward. The outright winner walked away with a yearlong subscription to the Rolling Stones magazine. In 1980, the Space Invaders Championship tournament attracted an attendance of 10,000.
The 1990s are remembered with the proliferation of internet connectivity, which consequently elevated eSports to new heights. Internet connectivity triggered PC games popularity, which in return saw the likes of Nintendo and Blockbuster sponsor video game championships.
Red Annihilation tournament in 1997 is regarded as the world’s real eSports event as the winner walked away with John Cormack’s Ferrari as the grand prize. The millennium has seen several major international tournaments including the World Cyber games as well as Electronic Sports World Cup come into play.
ESports hit another level in 2017 as a total prize awarded clocked highs of $110.6 million from 3765 esports tournaments. The biggest prize pool from a single tournament clocked a whopping $24.6 million.
While eSports has come a long way, growth is not expected to slow anytime soon. The way people have been streaming into stadiums to watch athletes compete against each other is the same way people are expected to stream into venues to watch professional gamers compete against each other. Millions of people are also likely to spend time watching eSports tournaments from home or on mobile devices while on the go.
ESports Market Size
North America remains the dominant market in eSports as revenues are expected to clock highs of $409 million in 2019. Strong growth should result in revenues skyrocketing to $691 million by 2022. The largest share of the revenues generated should come from sponsorship deals at $196.1 million.
China’s eSports market comes in second as it is expected to generate up to $210 million in revenues in 2019. China has overtaken Western Europe thanks to the growing popularity of mobile eSports. However, regulatory pressures pose the biggest threat to the sector.
The Asia Pacific boasts of one of the fastest growing eSports markets. The region is projected to capture the largest market share by 2022 with $1.5 billion in revenues. Coming in close is Europe and the U.S with a market share worth $1.2 billion each.
ESports Revenue Streams
ESports revenues have been increasing at an impressive rate, thanks to an increase in the number of people embracing the spectacle and an influx of brands into the sector.
Sponsorships
A good chunk of revenues generated in Esports comes from sponsorship deals signed with some of the biggest companies transcending various sectors. Big brands want to get involved in eSports as part of an effort of monetizing the millions of people who play and watch video games.
In 2017 alone, companies spent over $500 million with over $250 million going to sponsorship deals in Esports, $140 million of the amount went to advertising as $90 million went to media rights. By 2020, advertising and sponsorship revenues on eSports could clock highs of $1.2 billion.
Companies are increasingly turning to eSports as a way of attracting the younger audiences playing and watching games, to their brands. The eSports audience clocked highs of $380 million in 2018 and is expected to hit highs of 550 million by 2021.
Some of the biggest brands spending millions of dollars on sponsorship deals on eSports include Nike, Adidas, and Puma as well as tech companies such as Intel.
Advertising
Advertising around eSports tournaments and games is another critical stream of revenues in the burgeoning sector. The fact that eSports games bring millions of people together continues to fuel increased advertising activities.
As brands advertise side by side so are eSports event’s organizers generating a significant amount of income in the form of ad revenues. Some of the brands spending big on advertising on eSports include computer components manufacturer as well as big brands such as Coca Cola, Red Bull, and McDonald.
According to PWC advertising accounted for $163 million in eSports revenues generated in 2018.
Media Rights
Media Rights are also increasingly becoming acrucial source of income in eSports. To be able to broadcast some of the live eSports tournaments, broadcasting partners have to part with millions of dollars to acquire content. Twitch and YouTube are some of the biggest spenders when it comes to media rights n eSports.
The sale of media rights for eSports is believed to have brought in $181 million according to data by PWC.
Tickets & Merchandise
ESports tournaments are known to draw in considerable audiences to sporting venues. To enter such venues, one must pay entry fees. Given that thousands of people entersome of the events affirms the number of revenues that organizers are drawing in. The sale of merchandise in the venues also continues to account for a substantial amount of revenues generated on eSports.
Esports Impact on gaming
It is impossible to ignore the mammoth impact that eSports is having in the broader gaming industry. The audience size that eSports tournaments draw is a testament that eSports is here to stay and set to revolutionize the gaming industry for many years to come.
The League of Legends eSports tournaments drew a large audience of 36 million daily active views last year, resulting in the distribution of $6.3 million in prize money. The huge audience presents a unique target audience for big brands, which explains why eSports is on its way to becoming a multi-billion segment in gaming.
The vast sums of money streaming into the sector should result in more eSports games and tournaments as publishers seek to make good use of the vast audience.  Â
Game developers can no longer ignore the fact that millions of people are willing to compete against each other around the world. The vast player bases should see the likes of Overarch and League of Legends developers increasing their efforts in a bid to lure in more eSports and completive gaming.
The future of eSports
Diversity of Games
While eSports has taken off, the majority of games are mostly PC games that fall into a few genres. However, with game developers moving with speed to take advantage of the vast opportunities for growth in the sector, more accessible, eSports gaming genres should crop up.
Geographical Expansion
For eSports to tap into bigger advertising budgets, then there needs to be a more robust structure when it comes to eSports events. It is for this reason that eSports looks set to replicate the format deployed by traditional sporting events. In the future, there should be more local, regional, and global eSports leagues.
League of Legends has done a decent job, as its structure comprises of regional league structures in North America, Europe Oceania, and Latin America, etc.
Regulation of Competition
ESports has grown from the realms of small grass root venues. As the spectacle goes global and, more eSports venues crop up, increased regulations for big competitions should kick in. With millions of dollars, streaming in to finance eSports tournaments, rules and regulations will have to come into play to avert incidences of cheating and match-fixing.
Ownership of Media Rights
Currently, rights of eSports games played during tournaments belong to publishers or event organizers while videos made by fans and streams that contain video content belong to fans and streamers. As revenues in the sector balloon, there is likely to be a change in the people who own eSports content.
Bottom Line
ESports is on course to surpass traditional sporting events when it comes to viewership and revenue generated. The fact that there will be billions of dollars at stake in the form of sponsorship and advertising deals should translate to increased regulations and rules as a way of combating cheating issues. Strong punishment for cheaters as well as people, who violate media rights, will also come into play.
Resources:
- https://medium.com/@BountieGaming/the-history-and-evolution-of-esports-8ab6c1cf3257
- https://www.emarketer.com/content/esports-disrupts-digital-sports-streaming
- https://venturebeat.com/2017/02/17/how-the-rise-of-esports-will-affect-the-game-industry/
- https://www.cnbc.com/2019/01/20/heres-why-esports-can-become-a-billion-dollar-industry-in-2019.html
- https://newzoo.com/insights/articles/newzoo-global-esports-economy-will-top-1-billion-for-the-first-time-in-2019/
- https://digiday.com/marketing/state-esports-advertisers-five-charts/
