Since eclipsing the Film & Music industries in 2008, Gaming has continued to dominate, reaching more than double the revenue of those industries 10 years later. The current Gaming industry revenue is more than $150B. Competitive gaming, also known as “Esports”, has been developing in step with the rise of the Gaming industry and is now positioned as the future of the video game continuum, its next logical step. Esports are played on all types of platforms, including PCs, consoles and mobile devices. As new technologies like mobile Augmented Reality (AR) and Virtual Reality (VR) develop, we’re likely to see these platforms become more popular as a venue for competition as well. Players compete across all types of gaming genres, from First-Person Shooters (FPSs), Multiplayer Online Battle Arenas (MOBAs), Strategy games, Fighting games, and more. If enough people enjoy a multiplayer game, there’s little stopping it from becoming a popular esports title.
In Asia, esports is a way of life, where entire sports arenas that hold 30,000 to 40,000 people will be filled, hosting live video game competitions. NetEase is currently planning a $710M Esports Park in Shanghai. And now, esports is quickly moving West towards Europe, Canada, and the US with arenas being built in Las Vegas and Southern California.
You may have heard in the news recently about the Fortnight World Cup, where 16-year-old Kyle “Bugha” Giersdorf won $3M dollars. That’s $1M more than Shane Lowry won at the famous golf British Open in June! In fact, if you look at prize pools for competitive sports in 2019, the esports competition called “The International” had a prize pool bigger than any other sporting event except the US Open for tennis. You may also notice that the Fortnite World Cup wasn’t even at the top of the list! But it does occupy spots 3 and 4, above the Indy 500!
Viewership for esports is growing rapidly along with this, with an average compound annual growth rate of about 15%. By 2022, the total esports audience will be over half a billion. Let that sink in a moment. In the US, only the NFL will be bigger at that point.
There is an incredible ecosystem and economy around esports involving individual players, teams of players, video game developers, video game broadcasting platforms like ESPN and Twitch, event organizers, sponsors like Intel and Redbull and, of course, these huge, professional esports competitions like The International. We’re already starting to see the rise of large esports companies that own multiple teams, scout worldwide for the best talent, and are building major training facilities, complete with physical therapists, sports psychologists…you name it.
With that, there are loads of opportunity to generate revenue: sponsorships, media rights, advertising, merchandise, tickets, game publisher fees. And we are just getting started in the US…we’re not even on first base in the West.
The really interesting number is the total esports revenue of $1.1B in 2019. It’s definitely on the radar with other major sports, but seemingly still small compared to the likes of the NFL. But don’t be fooled — this is a drastic underestimate. Those of us who are deep in the industry believe that esports revenue is wildly under-reported, largely because we’re still developing the appropriate analytics to pinpoint the right metrics to make stronger estimates. Esports is likely already bigger than the NHL.
When you look at total esports’ revenue growth over the past few years, you’ll see why. Esports is growing even faster in revenue than in audience. Esports is projected to reach a total revenue of $1.79B by 2022, with North America generating $409M of the pie, but again we expect revenue will be much higher than this due to the under-reporting mentioned earlier. The compound annual growth rate has stayed very strong since 2017. Compared to the other sports leagues, esports’ growth is seriously outpacing all the others.
There is a significant amount of M&A potential in this space, certainly with the consolidation of teams and platforms, building of arenas, etc. But more specifically for technology, I think there is an open door for analytics companies to come in and help monetize this opportunity by building intelligence on financials, audience attendance, user engagement and retention, and so on. With all the other players in this ecosystem, there are many more opportunities for further consolidation.
Keep an eye on this space and take it very seriously. Gaming is a huge industry, and esports is where the growth is.