The last 12 months have been challenging for the sports industry. Canceled seasons, empty stadiums and ever-changing schedules for many leagues in 2020.

It has become the perfect growth opportunity for eSports, aka video game competitions.

Even before the pandemic, eSports was a growing industry which saw $4.5 billion in investment in 2918, according to Deloitte. That’s a notable increase from $490 million in total investment in 2017. And it’s still just beginning. According to a Newzoo figure on Statista, eSports industry revenue is expected to reach $1.6 billion by 2023.

More traditional “sports” genre varieties of eSports that are growing in popularity include eNascar sim racers (which set a new record in March 2020 to become the highest-rated televised eSports event ever), the FIFAe World Cup, and the NBA 2K League, whose broadcasts on Twitch increased nearly 70% year over year. That’s not to mention the Madden 21 Club Championship which is scheduled to return in 2021 with a prize pool of $750,000.

According to the eSports Industry Report by Pillsbury, year-over-year eSports industry growth is expected to reach 26.7% this year and traditional leagues are taking notice. But e-versions of traditional sports aren’t the only kinds of eSports, which also offer more traditional gaming competitions.

What are eSports?

As a category, eSports is basically “competitive gaming at a professional level.” To be sure, however, they look a lot different than traditional sports.

The many genres of eSports include Real-Time Strategy, Multi-player Online Battle Arena (MOBA), First-Person Shooter (FPS), and Sports. Across genres, eSports don’t involve physical activity like sports in the traditional sense (although some eSports teams have personal trainers that help players to stay fit). It’s video gaming.

Even so, pro-gaming is serious business, with gamers practicing for 10 hours or more each day. Like more traditional sporting “practice,” activities might include studying previously completed games to determine ways to improve, informal competitions against other teams, and even analyzing opponents’ play styles and strategies. Pro teams even have coaches and managers. 

Typically, professional gamers are paid a base salary by their team or company before bonuses or prize winnings. eSports teams make money through sponsorships, advertising, merchandise, tournament winnings, league revenue sharing, ticket sales, and broadcasting rights. Top tournaments and leagues beyond ones that resemble traditional sports include the Overwatch League, League of Legends Championship Series, Fortnite World Cup, and Dota 2: The International.

A major difference between traditional sports and the eSports industry is that the games played in eSports are owned by their game/developers and publishers. Publishers are considered “the most powerful group in the eSports ecosystem,” according to Pillsbury. Even if a publisher isn’t handling a tournament, it can still generate licensing revenue.

Tournament organizers can also make large sums of money, even if they license from game publishers. The Electronic Sports League (ESL), for example, is one of the world’s largest eSports companies. 

So, who is watching? It’s a young and well-off demographic.

According to Deloitte, “the eSports industry had a global fan base of 380 million in 2018 with 37% representing males ages 21 to 35, and 16% representing females ages 21 to 35.” In the United States, 61% of eSports viewers earn more than $50,000 per year.

Viewers aren’t limited geographically to the U.S. Nearly half a billion people worldwide consume eSports content, and most of those audience members are under the age of 35—one of the most important and profitable demographics for brand awareness. In China, South Korea, and Europe as well as in the U.S. competitive gaming has established mass popularity. Its popularity is also growing in Eastern Europe and South America. That’s much different than the markets for traditional sports (think NFL football) that are predominately tied to domestic audiences.

Why invest in eSports?

If there’s any indication about the future of eSports, it’s the acknowledgement from the broader sports world that this segment of the industry is here to stay. ESPN, for example, broadcast League of Legends, NBA 2K, and Formula 1 in 2020. Not only did that catch the eyes of its followers, but it also introduced new viewers to the eSports category.

According to Deloitte, “the eSports ecosystem offers a variety of different investment opportunities across a range of subsectors.” These include team organizations, developers, event coordinators, media, eSports viewership platforms and advertising, and consumer products.

Viewership platform Twitch, for example, is owned by Amazon and streams a massive portion of eSports events. In November 2020, Twitch reported a record 1.7 billion hours watched. And Twitch isn’t alone. According to Riot Games, League of Legends Worlds 2020 also set a new record, achieving an average minute audience of 23 million. Other streaming platforms include Huya and Douyu, two of the largest streaming platforms in China.

With more than 2.5 billion gamers around the world, the eSports industry has an “unparalleled potential for growth” especially in a pandemic and post-pandemic world. And, with the diversity of stakeholders involved, there is ample opportunity for investment.

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