What is esports? Before you start investing in this growing industry, learn these facts about the market and what the future could hold.
But esports is still a new market, and if you're new it’s good to start with the basics. Let’s take a look at four facts on how esports began, the industry’s rise in popularity and, of course, where this exciting scene is headed.
1. The esports market has major growth prospects
Let’s start by clearing up any confusion the term “esports” may create. Although it has the word "sports" in it, esports is actually very different from traditional sports.
Instead, esports — or electronic sports — involves competitive gaming with computers or consoles, and encompasses a wide variety of games. Individual players or teams compete until a winner is determined.
While gamers can play competitive multiplayer games at home, or go to local stadiums, esports on the big stage have the potential for major rewards. Professional gamer and Dota 2 competitor Johan “N0tail” Sundstein holds the record for the highest earnings of all time, coming in at US$7.2 million as of 2022.
While that might sound like a lot, we’re talking about an industry that’s forecast to grow by 21.9 percent between 2022 and 2030 to reach nearly US$12.5 billion. Clearly this rise didn’t come out of nowhere, so how did esports develop into a rapidly growing spectator event? Let’s take a look.
2. Esports has a surprisingly long history
While esports may only recently have attracted mainstream attention, the sector has been around longer than you might expect. Slowly but surely, the industry has been quietly building over the last 30 to 40 years.
Marching at pace with technology, gaming became more accessible and popular as computers grew increasingly affordable and commonplace in homes around the world.
Interestingly, the first esports event took place all the way back in 1972, with the first tournament happening in 1980. Other esports tournaments took place in the 1980s and 1990s, but it was the rise of the internet that truly led these competitions to take off. Internet integration into gaming consoles enabled players to form teams, communicate with one another and play against other people online.
Broadband internet became widely available in 2000, and with the creation of YouTube in 2005, people could watch their favorite creators play competitive multiplayer games. Amazon’s (NASDAQ:AMZN) Twitch started in 2011 and grew quickly. Unlike YouTube, it's a platform dedicated to streaming video games, and is used to broadcast esports tournaments, as well as gaming channels run by individuals.
Some of the top esports games are first-person shooters such as Overwatch and Counter Strike: Global Offensive, and multiplayer online battle arena games like Dota 2 and League of Legends. Also popular are fighting games like Street Fighter V and Super Smash Bros, and real-time strategy games such as StarCraft II; battle royale games such as Fortnite and PlayerUnknown’s Battlegrounds also have a broad following.
Enthusiasts can also watch esports players and teams compete for titles in major league gaming events. In 2019, Dota 2 team OG made history when it won the Dota 2 tournament The International — Dota 2’s Super Bowl — for the second year in a row. The professional esports players beat Team Liquid to take home US$15.6 million from the prize pool, which reached a record US$34 million. Over US$211 million in prize money was awarded in 2019.
In 2020, COVID-19 lockdown measures were a key driver behind explosive growth in revenue for the gaming industry, and in the esports market by extension. That growth continued into 2021, with Grand View Research estimating that global esports market revenues soared passed US$2 billion for the year.
3. Big league gaming may be the future of esports
While no one has a crystal ball, esports industry speculation shows potentially big possibilities.
"Millennials consider esports a professional career option, owing to the increasing popularity of gaming tournaments, one-to-one sponsorships, streaming revenues, and impressive international prize pools. Additionally, colleges and universities have started providing dedicated esports programs to develop skilled professionals," notes Grand View Research in its report.
Another place where esports may make moves is the Olympics. Though it might seem farfetched to include esports in the Olympics, an event that has long stood for world excellence in physical skill, stamina and exertion among professional athletes, esports is nonetheless being evaluated for inclusion.
The Paris 2024 Olympic organizers have decided to include esports versions of Olympic sports as a side event. Although postponed due to the ongoing pandemic, esports is already being included as a demonstration title at the 2022 Asian Games in Hangzhou in China. It was previously considered a medal event.
While such exposure could help boost esports, some have pointed out that esports doesn’t necessarily need the Olympic spotlight, and that it’s been growing rapidly without it. With or without the Olympics, we’ll likely see ever-increasing sponsorships, magazine covers with top gamers and more.
Beyond popular games, another core component of the esports industry is built on interactions between players and fans on platforms such as Twitch. There's money there for businesses that support those interactions.
From hardware like headsets that allow gamers to talk to one another, to esports betting services or venues that profit off of live gaming events, there are many ways to gain exposure to this industry.
4. Esports could present opportunities for investors
Whether you’re an investor or a speculator, there could be much to gain in the long and short term as the popularity of esports increases. These electronic sports already have a huge reach across verticals and countries around the globe, and it’s not only pro players participating — anyone can compete at local esports events, and there are even college and high school esports teams and clubs sprouting up.
It’s clear that esports and the gaming industry are growing by the year, bolstered by social media and interest in competitive gaming as a spectator sport in both professional tournaments and Twitch streams.
Of course, that doesn’t mean that anything remotely related to esports is going to be a good buy for investors — those interested in this growing space will have to make choices depending on their risk level and the research they do. For more insight into esports opportunities, check out these articles: Ways to Invest in Gaming, Top 3 NASDAQ Gaming Stocks, and Mobile Gaming Stocks: 10 Biggest Companies.
This is an updated version of an article originally published by the Investing News Network in 2019.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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