Ways to capitalize on the burgeoning cybersports industry

The eSports Industry Is Growing Rapidly, Creating a Wealth of New Business Opportunities

The popularity of eSports is growing at a rapid pace, creating a wealth of new business opportunities. The industry is estimated to have reached $696 million in 2017 and is predicted to top $1.5 billion by 2020, according to Newzoo, a gaming industry research company.

For those who may still be unfamiliar with the term, “eSports” refers to competitive game playing, often by players organized into teams. eSport games broadly include traditional console games (xBox, PlayStation, Nintendo systems), personal computer (PC) games (i.e., Overwatch, Starcraft, Defense of the Ancients), mobile games on smart phones (i.e., Eternal, Hearthstone), and even tabletop games (i.e., Magic: the Gathering, and Yu-Gi-Oh) that people can produce digital content for via YouTube, Twitch or other channels. Basically, fans are flocking to watch other people play games. Just like a traditional sporting event, fans support the teams and players they love by seeking memorabilia, collectibles, and wearables that show their support.

Growth of eSports Industry

While many Americans may still not consider gaming a “sport,” millions of fans disagree. NewZoo estimates that the worldwide audience for eSports will reach 580 million by 2020.

For digital natives and millennials, competitive game events are akin to those of any other professional sport. Nielsen, which has established a research business dedicated to eSports, found that 53 percent of eSports fans in the U.S., U.K., France and Germany considered competitive gaming a sport. In addition, more than two-thirds predict it will become mainstream in the near future.

As eSports continues to grow, businesses outside the gaming and computer industry are starting to take notice. “Esports is not only growing exponentially as a new independent business and industry, it is also accelerating the convergence of various established industries. For brands, media, and entertainment companies, esports provides a chance to capitalize on the favorite pastime of digital natives and Millennials: playing games and watching game content,” Peter Warman, CEO at Newzoo, stated. “With the arrival of live streams and events, gaming has entered the realm of broadcasters and media that can now apply their advertising business model to a market previously out of reach for them.”

The eSports is also attracting investors. Since 2012, eSports companies have raised more than $5 billion in venture capital funds via 350 deals. “In the last year, investment to private eSports companies grew by over 30 percent while overall industry revenue mirrored this figure,” said CB Insights intelligence analyst Jud Waite. “This rate topped that of the broader gaming industry, as well as a majority of professional sports organizations worldwide. We expect to see continued growth as the eSports industry continues to engage audiences and monetize in new ways.”

eSports Revenue Streams and Business Opportunities 

The eSports industry generates revenue from a number of different sources, including media rights, advertising, sponsorship and ticket sales. It also attracts a highly desirable market — millennials. Regular viewers also tend to hold high-paying jobs and have relatively high disposable incomes.

Sponsorship is the eSport’s industry’s largest revenue stream. According to Nielsen, more than 600 eSports sponsorship deals have been inked since the beginning of 2016. Earlier this year, Major League Soccer announced it is creating its own FIFA eSports league. Red Bull and Coca-Cola are among the big-name companies that have sponsored gaming events. With major brands looking to get into the industry by sponsoring players, teams, and events, sponsorship is predicted to reach $655 million by 2020.

Attracting interest from companies like ESPN and Facebook, eSports earnings from media rights are predicted to reach $340 million by 2020, an increase from $95 million in 2017. Industry insiders predict that exclusive content deals, much like those used in traditional sports like football, will significantly contribute to growth in this sector.

In addition, watching eSports is not limited to a digital experience. Last fall, tickets to watch the best gamers in the world compete live at Beijing National Stadium sold out in minutes. They also weren’t cheap. Tickets for the League of Legends world finals ranged from $41 to $185, which is akin to a Major League Baseball game. There are also community social events around digital games, like Hearthstone Fireside Gatherings.

Tech startups are also increasingly turning their attention to the eSports industry, particularly with regard to data analytics. Team and players seeking to get a competitive edge are relying on high-tech software to track performance statistics. For instance, a company called Mobalytics offers a service that analyzes gaming data to categorize players based on a Gamer Performance Index (GPI), a set of statistics which break down individual players’ strengths and weaknesses based on millions of data points from their career. As Venture Beat reports, players are evaluated based on different categories or skill sets, such as fighting, farming, vision, aggression, toughness, team play, consistency, and versatility. 

The bottom-line is that all aspects of the eSports industry are expected to grow exponentially as competitive gaming gains legitimacy as a true sport. For companies looking to get in on the action, time is of the essence.

As with any potential business opportunity, it is very important to conduct due diligence. While no longer considered the “wild west,” the industry is not yet highly regulated. We encourage businesses to work with an experienced attorney who can protect your best interests.

If you have any questions, contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Jeffrey Cassin, or the Scarinci Hollenbeck attorney with whom you work at 201-806-3364.