Who is investing in esports and why?James Dodd 16th May 2019
Global esports revenues are expected to hit $1.1bn this year. Over $155 million in prize money was awarded in nearly 3,500 esports tournaments last year, playing games like Dota 2, League of Legends and Counter-Strike: Global Offense. $11.47m of this prize money went to just one team: OG, a European professional team which is famed for playing Valve’s Dota 2. With teams like Team Liquid racking up overall earnings of over $26m, and global esports viewers projected to total 453.8m this year (representing a year on year growth of +15%), competitive gaming is becoming a money-making phenomenon for both players and investors. So where is the money coming from, who is investing and what’s in it for them?
Esports is still in its infancy, comparatively, so the medium represents a new, current and exciting opportunity for traditional investors, looking for growing areas, to maximise return on their investment. These typically fall into the following groups:
Games developers and publishers: Revenues for the U.S. gaming software market rose to $35.8bn in 2018 – a rise of 15% from the previous year. For publishers, there is a virtuous circle where gameplay enhances your brand for viewers, and an engaged community actively playing and sharing their experiences of your game can significantly prolong its life and the revenue you make from it. Dota 2 originally launched in 2013, but currently sits at number three in the most played games of 2019, with a peak of 844,713 concurrent players earlier this year, some six years after it was released.
Non-gaming brands use esports as an audience communications channel: the medium allows them to reach engaged and often younger audiences than more traditional channels. Activision Blizzard’s Overwatch League is sponsored by Coke. While effectiveness is yet to be proven, it’s a smart tie-in for the soft drinks giant.
Hardware and peripheral-specific brands: In February 2019, brand leader HyperX was announced as the official peripheral, memory and SSD partner of the ESL Katowice Royale. Esports fans spend 100 minutes per spectating session, on average, on platforms like Twitch and YouTube Gaming — which led to 260 million hours of esports watched on these platforms in Q1 2018 alone. This type of exposure entices gamers to the sponsor’s products, helping to increase their share of a market which was valued at $7.5bn in the U.S. and £1.57bn in the UK in 2018.
Celebrities love to promote their brands through association with cool stuff, and esports is no exception. Sports star Shaquille O’Neal, pop stars Drake and Jennifer Lopez, and actor Ashton Kutcher are just a few celebrities who have invested in esports. The attraction of the combination of celebrity and game is clear: the record for most people watching an individual’s Twitch stream was broken in mid-2018 when more than 600,000 viewers watched Drake and Ninja play Fortnite.
Start-ups: There are also a multitude of technology platforms and start-ups getting in on the action, but not always as a platform or developer. Every business requires a supply chain: one company I spoke with recently have developed a blockchain platform to secure payments for players, sponsors and beyond.
Esports is still in its infancy, yet represents a huge opportunity for so many people, businesses and industries beyond the games industry. How it grows, where it goes next and who takes it there is all to play for. Game on.
Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work across the media, information, technology, communications and entertainment sectors, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.
Image courtesy of www.dezeen.com.