Innovative gaming platforms are bringing esports fans together through competitive tournaments held both online and offline.
Esports companies are driving fan engagement by offering new platforms and events to bring gamers together.
Generating a global revenue of US$1.06 billion in 2020, the esports industry has grown considerably since its humble beginnings. The esports industry refers to organized video gaming competitions that take place in the form of regional and international tournaments in which both professional and amateur players often compete for cash and prizes.
The esports industry generates revenue through a variety of channels, creating opportunities for professional players, video game producers, brands, event organizers, and digital platforms capable of monetizing the trend such as Twitch (NASDAQ:AMZN) and YouTube (NASDAQ:GOOGL). These channels include sponsorships and other advertising agreements, media rights, publisher fees, merchandise sales, and streaming-related income.
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Competitive esports tournaments held across the globe are commonly broadcasted on live-streaming platforms where fans can gather, comment, and discuss in real-time. So far this year, esports tournaments and other events have generated more than 495 million worldwide viewers. Online audiences are expected to grow, with analysts such as Statista predicting 646 million global viewers by 2023, an increase of over 200 million from 2018.
Popular brands such as Coca-Cola (NYSE:KO), Samsung (KRX:005930), PUMA (ETR:PUM) and Nike (NYSE:NKE) have embraced the world of esports through a number of sponsorship opportunities, both online and offline. Mainstream media channels have become increasingly involved, with ESPN and Disney XD securing a multi-year contract to broadcast the Overwatch League back in 2017.
The esports industry has also gained attention from those in the major sports leagues such as Patriots owner Robert Kraft, who acquired Boston Uprising, an Overwatch League team, for US$25 million.
Due to the increasing popularity of esports tournaments, major tournaments are now offering tens of millions of dollars in prize pools. For example, in 2016 prize pools for the International Dota 2 Championships generated US$18.4 million. Three years later, the same tournament provided US$34.3 million to its winners. In total, Dota 2 has hosted 1,415 tournaments and awarded more than US$226 million in prize money.
One sizable source of revenue—and an indicator of the industry’s explosive popularity—has come in the form of ticket sales to gaming tournaments. For example, the League of Legends World Championships in 2017 generated US$5.5 million in international ticket sales. Tickets to the same event in 2018 reportedly sold out within eight seconds.
Major players in the esports industry
Each game has its own renowned figures. For example, Lee Sang-hyeok, otherwise known as Faker, made his professional debut in early 2013 and has since earned a total of US$1.25 million in prize money. He specializes in the team-based game, League of Legends, and has won the League of Legends World Championship three times. Similarly, Johan “N0tail” Sundstein, a Denmark-based professional Dota 2 player, has earned US$6.94 million in prize money. He is the player with the highest tournament earnings across Dota 2 as well as all esports. In 2017, Dota 2 alone generated US$406 million.
The title for the highest-earning video game continues to be held by Fortnite, a Battle Royale game that earned US$1.8 billion in revenue in 2019 and has over 350 million users worldwide. The top Fortnite player in the world is Kyle “Bugha” Giersdorf, who has championed four tournaments. Giersdorf’s earnings total more than US$3 million.
Major brands and partnerships in esports
The explosive growth of the esports industry has been partially driven by an increase in brand endorsements. For example, Nike struck a four-year deal with the League of Legends Pro League (LPL), the premier League of Legends tournament in China, and the most-watched esports competition in the world. According to the deal, Nike is responsible for supplying every squad with sneakers, casual clothing, and professional jerseys. Nike’s deal with the LPL is similar to league-wide deals that the multinational corporation typically strikes with the National Football League (NFL) and the National Basketball Association (NBA).
Coca-Cola similarly embraced the eSports trend through a multi-year partnership with Activision Blizzard (NASDAQ:ATVI), naming Coca-Cola as the official non-alcoholic beverage sponsor of the Overwatch League (OWL). While the soft drink manufacturing company has had partnerships with League of Legends and the FIFA eWorld Cup since 2016, this 2019 deal with the OWL gives the corporation exclusivity with all twenty OWL teams, the Overwatch Contenders league, BlizzCon, and similar events.
The major esports platforms driving engagement
The rise in online viewership of popular esports tournaments can be largely attributed to increased accessibility. Unlike traditional television programs, streaming platforms such as Twitch make it possible for viewers to tune in for free, from any location in the world. Moreover, live-streaming platforms typically include interactive functionality, allowing viewers to donate sums of money, gift awards, and send messages in real-time.
Critically, streaming services allow both professional and casual gamers to form loyal followings. Popular gamers typically rely on platforms such as Twitch to cultivate their fandoms, which can lead to seven-figure earnings through brand endorsements and other forms of advertising. There are 7.46 million active streamers on Twitch as of Q4 2020, the most popular of which being Michael “Shroud” Grzesiek, a Toronto-born former Counter-Strike: Global Offensive professional with 8.2 million followers and a net worth estimated to range between US$8 and $12 million.
Another well-known Twitch streamer, Tyler “Ninja” Blevins, is widely regarded as the world’s most famous gamer. Blevins has 15 million followers on the platform and an estimated net worth of US$25 million. In August 2019, Blevins reportedly signed a deal with one of Twitch’s competitors, Microsoft’s Mixer, which was estimated to be worth US$30 million. Microsoft announced the sudden closure of Mixer this past June, allowing Blevins to sign a multi-year contract with Twitch.
Esports platforms improving the live experience
In an effort to transfer the digital gaming experience to the live stage, a number of gaming companies are delivering the live gaming experience through competitions, live tournaments, and community-centric events. For example, live gaming innovator The Gaming Stadium (TSXV:TGS) is working to provide fans with this enriched experience through its unique gaming arena located in Richmond, BC. According to The Gaming Stadium CEO Spiro Khouri, the company’s aim is to reflect the positive user experience gamers have grown accustomed to. “It is all about the user experience. The more advanced platforms get, the hope is that they are easier to use. If we can remove any potential barrier for someone to play a game it is going to lead to more playtime and less frustration. We are in a great spot today with the platforms available but there is so much further we can go,” said Khouri.
The Gaming Stadium hosts weekly tournaments, competitions, and viewing parties designed to allow gamers to come together to enjoy the most of their favorite esports titles. The facility comprises 5,500 square feet of gaming space including 60 custom gaming PCs, a full live competition stage with broadcasting capabilities and a direct 10-gigabyte fiber internet line.
The Gaming Stadium has secured partnerships with companies including HyperX, Ubisoft (EPA:UBI), Red Bull, Vertagear and Pepsi (NASDAQ:PEP). In September 2020, The Gaming Stadium announced an LOI to acquire Pepper, an online platform that aims to improve the user experience for online gamers and esports enthusiasts. Through the acquisition, The Gaming Stadium intends to provide a consolidated end-to-end esports experience to players and tournament organizers.
The esports industry has grown significantly over the last decade, generating partnerships and sponsorships with major players across the entertainment industry. The success of streaming platforms and gaming companies has demonstrated the success of innovation in esports, with new companies emerging to fill popular niches within the space. As the gaming industry continues to grow, there are numerous opportunities for companies to connect with players through engaging content, branding opportunities, and extravagant in-person events.
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