The global esports market is facing exponential growth as more and more trends contribute to the industry.
The global esports market is just one of the technology market segments influencing the entertainment space.
Like so many technological trends of the last couple of decades, millennials are once again disrupting traditional markets and institutions, this time in the sports industry. While there used to be some debate on whether esports, or professional competitive gaming, is really worthy of its name, the market has grown exponentially. It is now a serious global phenomenon.
In February 2018, Canadian Sasha “Scarlett” Hostyn won the South Korean IEM PyeongChang 2018 StarCraft II Tournament, which was put on as a precursor to the Olympic Games in South Korea to recognize the growing esports audience. This was just a taste of things to come, as esports will be considered as a medal event for the 2022 Asian Games and could even come to the Olympic Games as an exhibition event in the coming decade. While esports is already firmly established in many Asian countries like South Korea, it is now entering the mainstream in North America.
How did this come about? In the last two decades, gaming has entered many facets of our digital society, from social media platforms, smartphone apps, to even education and job site training. As video games are everywhere and widely available globally, it is no surprise that esports has become a big business.
Esports market numbers
While competitive multiplayer has been a key element of video games for decades, esports takes it to a whole new level, generating major new sources of revenue for marketers and advertisers. Worldwide gaming is expected to top US$300 billion by 2025, and Newzoo expects esports alone to reach US$1.1 billion in 2019. Though that is paltry compared to revenue generated by traditional sports leagues like the National Football League (NFL), National Basketball League (NBA) and Major League Baseball (MLB), esports seems to offer much greater revenue growth potential than traditional sports leagues.
The global audience for esports is estimated to be roughly 453.8 million people in 2019, and it is likely to increase rapidly in the coming years. In 2017, Newzoo estimated that there were 2.2 billion gamers across the globe. That allows for significant room for growth.
The prizes for esports tournaments are helping to increase the size of the market. The International 2018 DotA 2 Championship (TI 2018) had a prize pool of over US$25.5 million. TI 2019 is currently accumulating its prize pool from sales of the DotA Battle Pass; at 15 days in, the pool was surpassing TI 2018’s pool at 15 days by over 24 percent. Before the Battle Pass system was introduced, prize pool money came from Valve, meaning that in 2012, the same tournament paid out just US$1.6 million.
DotA 2 isn’t the only esport with an impressive prize pool. In February 2019, Epic Games announced a staggering $100 million for Fortnite tournaments over the course of the 2019 to 2020 season.
With increasing prize money comes increasing player paychecks. Over half of the top 100 players have earned over US$1 million from tournaments alone. On top of this is money from endorsement deals, event appearances and other forms of revenue and perks that are typically enjoyed by professional athletes. The highest-paid esports players tend to range from 17 to 26 years old.
Keep in mind that, even though the players are often young, esports is not just for young audiences, as older generations may hop on board as well. There was a time when social media was predominantly comprised of Generation Ys. Social media sites like Facebook were originally designed for young people in high school and university to connect and share experiences. Older audiences may catch on to esports in the same way they have embraced certain social media platforms.
Traditional sports institutions are embracing esports
Nike partnered with League of Legends star Jian “Uzi” Zihao, who appeared alongside Lebron James in the brand’s “Dribble &” marketing campaign. The significance of this cannot be understated. It highlights the growing influence of esports in traditional sports institutions. Many current and retired professional athletes are even entering the fray.
Toronto Maple Leafs forward Zach Hyman launched E11, an esports organization that competes in Fortnite, in October 2018. NBA legend Michael Jordan announced that he is an investor in aXiomatic, a major esports group that owns the Team Liquid franchise. In December 2018, the MLB even partnered with esports event organizer UMG to put on a Fortnite tournament for active and retired baseball players.
Similar announcements are likely to happen in the coming months. After all, the world of sport is a business like any other and it needs to evolve to maintain competitiveness and profitability. This new esports trend allows traditional sports institutions and players to stay relevant. It also connects them directly with younger audiences. It seems many star athletes, franchise owners, advertisers, league managers and broadcasters have vested interests to enter this new market.
Esports and blockchain
Spin-off industries typically form when a new market reaches a certain scale. Likewise, innovators are wasting no time coming up with solutions for the future esports market. The increasing size and complexity of gaming systems has resulted in blockchain technology being applied towards entertainment and gambling platforms. This technology allows users, in part, to earn rewards for engaging and competing in these platforms. Suffice it to say the following three companies are not the only companies striving to capture this market share.
FANDOM SPORTS Media (CSE:FDM,OTCQB:FDMSF,FWB:TQ42) launched its sports entertainment platform at the Consumer Electronics Show 2019 with the aim of aggregating, producing and curating unique fan-focused sports content regarding gameplay. The FANDOM SPORTS app allows users to connect and earn FANCOINS, which are used to buy access to exclusive content or real-life experiences.
Unikrn is a gambling platform that recently received wagering license approval on the Isle of Man in the United Kingdom. The company is now rolling out online products to esports enthusiasts in 20 countries predominantly in Europe, Asia and Latin America. The platform is not yet available in the US.
In September 2018, Bountie officially launched an initial coin offering, which allows the company to sell its underlying cryptocurrency in exchange for other cryptocurrencies (like bitcoin or ether).
It would not be surprising to see highlights from League of Legends, Dota 2 or Fortnite games on the TVs of local sports bars in the coming years as esport enters the mainstream. Growth in esports is centered on the mass market for electronic games that are seemingly everywhere and played by nearly everyone in our digital society. That growth appears to be global in nature and could see sustained interest not just from millennials, but older generations as well.
This article was originally published on the Investing News Network in December 2018.
This INNSpired article was written according to INN editorial standards to educate investors.