eSports: Bigger than you think
Picture this: you’re in a stadium, enthusiastic fans surrounding you on all sides. You wait with bated breath as the time left on the clock slowly creeps to zero with the score tied. With the brilliant flick of a thumb, the team you support scores and wins the Championship. Instead of watching football players, you’re watching video gamers compete against each other. Welcome to the world of eSports.
eSports has come a long way from players congregating in someone’s basement on a Friday night to a mainstream spectator event. Universities such as the University of Toronto in Canada has started to offer eSports scholarships with the University of California Irvine going further by opening an eSports area on campus. Government agencies are also taking note of this shift, by issuing visas under the same criteria set for professional athletes.
When did this shift take place?
The first ever competition involving a video game was organized by Stanford University in the Fall of 1972 where the winner of the inaugural “Intergalactic Spacewar Olympics” would win a year subscription to the Rolling Stone magazine. In the 1990s and early 2000s, eSports was a community of gamers who would gather at low-budget conference rooms in out of town hotels. Today, entire convention centers are filled during an entire week, turning eSports into a mainstream spectator event.
The catalyst of the shift in eSports was the east of access to the internet. Gamers went from playing with people in one’s local region, to playing across the nation and then the world. Game developers took early notice of this and supported this ecosystem by building tools and infrastructure to support players.
eSports as a career
The pioneer generation of gamers who participated in eSports tournaments used to make money from prizes, usually awarded to the top few teams. The advent of live streaming changed this by giving players a steady stream of income. In 2014, Amazon acquired Twitch, the market leader in online gaming live streaming, effectively monetizing live streaming. Now, many live streamers don’t even screen commercials and earn money mainly from donations. The ability to create content, post it online and monetize viewership has made eSports a viable career path for many millennials.
Global earnings of top 30 eSports personalities
Image Source: ESportsearnings.com
With greater support and acceptance of eSports by the general public, TV studios have started to broadcast 45 minute episodes of eSports tournaments into living rooms around the world, the final push of eSports being brought into mainstream popular culture.
No different from conventional sports leagues with professional and amateur teams competing at regional, national and international levels, eSports presents an attractive commercial opportunity. Companies involved in this area are able to realize many revenue streams from ticketing, merchandise sales, advertising, licensing, media rights and so on.
We’ve also seen traditional sports buying into this industry as well. Vfl Wolfsberg, a German Association Football Team, hired a gamer to represent the club in tournaments and events. West Ham United and Manchester City Football Club, both English Premier League sides also signed eSports players.
Mainstream institutions are starting to take note of this opportunity. In a 2016 report, Goldman Sachs valued the eSports industry at a staggering $500m and forecast a CAGR of 22%, to reach $1.1B by 2019.
Image Source: Newzoo Data
Commercial Opportunities in eSports
About 300m people worldwide watch eSports today, a number that’s forecast to rise to 500m by 2020. What does the future of eSports hold? How much further can this industry grow? Will it ever reach the popularity of ‘traditional sports’ the World Cup Finals or a Formula One Grandprix? The short answers to the above questions are: unlimited potential, much more, yes.
The greatest challenge is to successfully introduce eSports to the masses and traditional media companies and big video game publishers are all clamoring a slice of the pie.
Image Source: Newzoo Data
YouTube, one of the largest video streaming websites in the world, recently signed a multi-year deal to stream a competitive gaming league, the eSports Championship Series (ECS), due to start streaming exclusively on YouTube on March 25. While financial terms of the deal was not disclosed, YouTube’s head of Global Content and Partnerships said in an interview that this investment was the company’s “biggest investment in this space”.
Swedish media company Modern Times acquired a majority stake in the oldest eSports company, ESL, for $87m in 2015.
Activision Blizzard, the company famed for video games such as the Diablo franchise and World of Warcraft, is launching an eSports league for its popular shooter game Overwatch (the share price of Activision Blizzard rose ~26% since the launch of Overwatch in May 2016), which aims to create greater prominence for eSports.
Even Facebook waded into the eSports arena with Amazon owned Twitch and Google owned YouTube by letting players use personal Facebook accounts to login to Blizzard Entertainment video games such as World of Warcraft. This collaboration has thrust Facebook as a platform for sharing, viewing and brought the potential for future streaming play of games such as Overwatch on Facebook’s “Live” feature.
Conclusion
Although eSports is unlikely to match or surpass traditional sports any time soon, the potential economic opportunity is too significant to ignore. The demographic group of eSports audience - young, passionate and digital first - presents sound commercial opportunities which companies will be keen to engage. As user engagement via live streaming platforms continue to grow, eSports has massive growth potential -- especially in conjunction with the evolution of virtual reality. Tech companies such as Amazon and Activision Blizzard will continue to precipitate the shift of competitive gaming as a core part of their media initiatives. The idea of online communities and internet-born activities is the paradigm that will define the millennial generation.
WRITTEN BY FELIX LIM FOR BESA
PLEASE DIRECT ANY INQUIRY TO AS.BESA@UNIBOCCONI.IT
