The State Of eSports: Why Investors Should Pay Attention

Forget marijuana stocks and cryptocurrencies, one of the latest disruptive trends investors are looking to capitalize on in 2019 is professional video gaming. Electronic sports, commonly called “esports,” brings millions of spectators around the world together both online and on-location to watch competitive video gaming. Now, 2019 is slated to be the first year the industry surpasses $1 billion in revenue, solidifying esports’ position as a serious contender on the world stage.

Newzoo Global Esports Economy 2019

Market research firm Newzoo released its 2019 report on the global esports economy last month and projects revenue for the industry to reach $1.1 billion marking an impressive +26.7 percent growth year-on-year. Newzoo indicates the fastest growing revenue stream for the industry is the selling of media rights for viewing esports with an expected growth of 41.8 percent in 2019. 

Media Rights and Increased Viewership

When it comes to esports entertainment, popular streaming platform Twitch.tv, which was acquired by Amazon.com, Inc. AMZN for $970 million in 2014, has been at the forefront. Earlier this year, Twitch and Activision Blizzard, Inc. ATVI agreed on a two year, $90 million-minimum deal to grant the streaming platform broadcasting rights for one of Activision Blizzard’s most successful games and competition, the Overwatch League (OWL).

The expansion of media rights as a revenue stream fits with the explosive growth in viewership for esports as a whole. Compared to just years ago, viewership for esports has grown significantly, particularly for League of Legends, the most popular competitive game. During the 2018 Mid-Season Invitational, League of Legends attracted more than 60 million unique viewers. To put things into perspective, the most-watched NBA game since 1998 attracted roughly half that number in 2016 with a record 30.8 million viewers during game 7.

Number of Unique Viewers for Select Esports Competitions, Statista 

The Early Esports Advantage 

Perhaps the most attractive aspect of esports for investors isn’t just the size of the audiences but the state of the market. While esports has grown substantially since its inception, the industry is still mainly a nascent one. Consider Activision Blizzard’s Overwatch as an example again since the title was one of the first games launched with esports already in mind.

Since its launch in 2016, the company has franchised out geo-located teams for Season 1 of the OWL that began last year. Now, as Season 2 is underway, the league is beginning to look more like a traditional professional sport with teams like the “London Spitfire,” “LA Gladiators,” and many others spreading from New York all the way to China and South Korea. And yet, because the OWL is still so young, no teams have their own home arenas to play in as one would expect for a professional sports team — yet.

In Philadelphia, home to the OWL’s “Philadelphia Fusion,” Comcast Corporation CMCSA is investing to build a $50 million esports-specific arena; the first in the league. Set to be placed directly in the center of the Philadelphia Sports Complex alongside the homes of the Eagles, Flyers, 76ers, and Phillies, the 60,000 square foot arena is expected to seat 3,500 spectators and include training and broadcasting facilities as well. 

Compared to the well-established world of professional sports, esports offers a unique opportunity for investors to still gain access during the industry's infancy. 

Growing Pains 

Though esports has experienced impressive growth, that’s not to say it hasn’t come with some growing pains along the way. A major pain point is due to the decentralized nature of competitive play as the term “esports” encompasses a vast array of different game titles, playerbases, and various leagues. Because of the fractured nature of esports, it’s not uncommon for a title to have several unaffiliated leagues for professional players like Counter Strike:Global Offensive’s open circuit system.

However, there are efforts to reduce that confusion and forward the maturity of esports. After the success of the OWL, Activision Blizzard has hinted at the creation of a similar league for Call of Duty with geo-located franchised teams. Likewise, other actors are looking to meet the needs of standardization and legitimacy for esports as well. One of the largest platforms to-date with over a million users, DreamTeam, is creating standardization for professional players across many titles like League of Legends, CS:GO and Electronic Art’s EA latest success, Apex Legends. The platform is aiming to bring players together with event organizers, team owners and sponsors to offer an all-in-one solution for professional gaming as a whole.

Amateur players can use the platform to create teams of their own to compete and work their way to the professional levels of play, drastically reducing the barrier to entry for many games. For some titles, that barrier to entry can be steep too. In the case of League of Legends, North American teams seeking a franchise spot had to pay a hefty $10 million fee — in Overwatch, that fee was $20 million per team and potentially doubling for expansion teams in the future. With a lower barrier to entry for players around the world and an easy-to-understand ecosystem, DreamTeam is working to bridge the gap for players forming a professional team.    

The Bottom Line 

With the advent of franchised teams, massive media rights deals and the attraction of big name sponsors like The Coca-Cola Co KO and Red Bull, it’s clear that video games are no longer just a way for kids to kill time. Now, competitive gaming is one of the fastest growing industries and investors are quickly looking to get in. Whether buying a team of one’s own or investing in the endemic brands propelling esports forward, investors all over are recognizing the promising future of the industry. 

Image sourced from Pixabay