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Getting in the Game

by Nisha K

During the early days of Nintendo and SEGA, the most exciting thing was when players pit against one another to determine a winner and a loser. Now it has evolved to a more sophisticated level that is E-sports that offers amazing business potential.

Ever since video games first made its way into our homes back in 1980’s, we’ve been mesmerised by its sheer entertainment. Competitive gaming has come a long way since the age of Sonic the Hedgehog and Mario Bros, who were the early pioneers in the game realm. They had a cult-like following which appealed to the masses and in turn laid the foundations of the multibillion-dollar industry. According to research by market analysts NewZoo, and shared by GamesIndustry.biz, the video game industry just chartered a new course for itself – reaching a peak of USD135 billion in 2018.

As expected, mobile accounts for the bulk of the industry’s revenue. In fact, 47 per cent of it, which is equivalent to USD63.2 billion – up 12.8 per cent year-on-year. Smartphones led the way with revenues of USD50 billion – up 14.2 per cent, while tablets accounted for USD11.4bn – up 7.8 per cent.

Interestingly, tablet games account for 10 per cent of the overall market, meaning USD1 out of every USD10 spent on games is on tablets. Of the three major sectors – mobile, PC and console – it was the latter that saw the biggest growth with revenues increasing by 15.2 per cent year-on-year to USD38.3 billion.

E-sports is big business. In fact, the growing industry has seen a massive boom in recent years with its core markets focused primarily in the United States and in Asia, where the bulk of its investments and revenue lie. NewZoo went on to state that global E-sports revenues will exceed USD1 billion for the first time in 2019, with most of that number derived from sponsorship, advertising and media rights. The global E-sports audience is estimated to reach 453.8 million this year, representing a year-over-year growth of 15 per cent.

As the industry balloons as a whole, emerging E-sports markets like Latin America are under-invested in relative to their share of E-sports players worldwide. They are ripe for opportunity, points out Twitch Partnership Program manager Pablo Montero. ‘Latin America generated about five per cent of global game revenues, but only one per cent of investment. We have a wide open field,’ he says.

Players Power
With that much of money being thrown in the industry, the relevance of E-sports has suddenly become necessary with its hype living up to its full potential. The players of the game are high commodity and can command a huge salary as the growing industry is continuously churning out new players each year. These players, who build their gaming credentials from tournaments, are specialists in their trade following years of practice honing their skills behind the keyboard.

Frank Fields, a sponsorship manager at Corsair, told an audience at Game Developers Conference that the hype around E-sports in recent years with a rush of investment mainly by venture capitalists and traditional sports organisations, has helped to generate a valuation bubble where costs like player salaries are outpacing revenue.

Apart from the players, game developers and promoters that make E-sport, it is captivated audience that churns the wheels of the industry. With the rapid rise of global audience growth since 2017, it’s no wonder TV revenues have skyrocketed propelling the business high into the stratosphere. A total of 335 million viewers tuned in to E-sports in 2017 and figures rose by 17.8 per cent in 2018 and the number clocked this year is approximately 454 million viewers.

What’s impressive is the projected figure for 2022 is approximately 654 million global viewers, a number which could give The English Premier League a run for its money.

The Future
The E-sports industry is on track for additional growth in the coming years as it continues to innovate and attract investment. Non-endemic brands in particular present a huge opportunity. While many brands have already entered or are currently planning their entrance, other brands have yet to make the first venture.

Both digital broadcasters and TV media companies have already started to compete for E-sports content and the extent to which these deals will generate a direct return on investment will impact the pace of media rights growth. Other ongoing developments that have high revenue potential include increased E-sports franchising, new content formats and premium passes, the success of mobile gaming, team profitability, and the success of new focus on professionals and streamers as brands.

In October, Cloud9 became the world’s most valuable E-sports team after raising USD50 million in Series B funding, leading Forbes to peg the team with a USD310 million valuation. The same report also estimated that a total of nine E-sports teams worldwide are worth at least USD100 million. Those numbers have attracted attention from a number of celebrities, including former NBA superstar and legend Michael Jordan, who joined the ownership group for Team Liquid in October 2018.

Challenging NFL and NBA in Size
It’s only a matter of time before E-sports bites a chunk off of the American sports industry pie. According to CNBC Cloud9 owner, Jack Etienne, sees the biggest E-sports leagues in the world only getting bigger, to be on par with the traditional sports industry. Riot Games said the League of Legends World Championships in November, for instance, attracted nearly 100 million unique viewers for the finals.

Last year’s Super Bowl saw viewership numbers clock in at just over 103 million. That has Jack predicting that other long-established competitive scenes like Counter Strike: Global Offensive and Valve’s Defense of the Ancients 2 (DotA 2) will continue to gain traction this year.

‘I think League of Legends, for example, is at the same level as the NFL and the NBA, and I think that realisation to the mainstream audience is going to be really exciting to watch,’ says Jack. He also believes that leagues and competitive scenes with more minor but growing followings will find footing as well.

Publisher Ubisoft, for example, has been building a competitive scene for its Rainbow Six Siege game since around 2016. This year, its annual Six Invitational world championship will boast a prize pool of over USD1 million for the first time.

Undoubtedly E-sports has created a social bubble, where investors and game developers converge to create an exciting and entertaining platform that not only benefits the players and others affiliated, but also the audience as well. This creation of social space which goes beyond conventional gaming has earmarked the industry to reach greater heights in the years to follow.

To say that E-sports has taken the world by storm is an understatement but the industry has well in fact lived up to its initial hype. Suddenly, all eyes are on the lucrative market that hasn’t only put the World Wrestling Federation in the shade, but will give Hollywood and the film industry, a run for its money.

 

Main photo of League of Legends is MireD in controversy by Jeremy Wacker

14 May 2019
Last modified: 14 May 2019
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