The Good, The Bad, The Covid
November 20, 2020
Unless you have been living under a rock, you will know that the Esports industry, a constant source of interest to many, if not all, within the entertainment realm over the last 5 years, has been growing at an unparalleled rate, with the industry as a whole expected to be worth $1.1 billion this year (Newzoo).
Today, I’ll take a quick look at what I believe have been the optimal conditions that have allowed the industry to flourish, COVID’s acceleration on this growth, and the next logical growth areas for the industry (of which, many are already in action).
By building the product around their audience’s consumption patterns from the get-go, it has enabled the rights holders of the industry to build a highly engaged global audience.
I always think when trying to understand the growth of Esports, a good place to start is by looking at 2 key areas that have contributed to its current position, these being; the audience, and the freedom/autonomy.
Generally speaking, the Esports audience is made up of that elusive 16-35 demographic. This means that they are (mostly) digital natives, and that’s why Esports is such a complimentary fit to their lifestyle. The whole Esports product is based around the premise of the games being played digitally, watched digitally (in most cases, which I’ll touch on later) via medium’s like Twitch, and discussed digitally via socials. By building the product around their audience’s consumption patterns from the get-go, it has enabled the rights holders of the industry like publishers, leagues and teams to build a highly engaged global audience that they are now monetising on effectively to facilitate the level of growth we are seeing.
Secondly, the autonomy; Esports has the opportunity to build from the ground upwards; although undoubtedly this has been a challenge, this freedom can be seen as a pro, but also a con. It’s such a junior industry e.g. being an Arsenal fan is generational, so you can pretty much guarantee a set amount of revenue from the fans, whereas the Esports industry is not at this level yet. This means there is no guaranteed revenue from their audience and means those within the industry must be continually creative in their approach to ensure their audience is engaged.
It would be untrue to say the industry was not growing at an exponential rate prior to COVID, with a number of non-endemic brands entering the space.
This lack of heritage can however be a positive; due to the new position of Esports, they have the luxury of learning from the mistakes of traditional sports; this means picking and choosing business models that have been tried and tested, and enables organisations to compress 50 years of innovation into 5 years. This insight is invaluable and is definitely one of the key drivers behind the growth of many organisations within the ecosystem.
Moving onto the dreaded ‘C’ word; COVID, and it’s influence on Esports growth.
It would be untrue to say the industry was not growing at an exponential rate prior to COVID, with a number of non-endemic brands entering the space, major events being hosted (like ESL Katowice) and prize money continuing to rise. However, unlike many traditional sports entities, Esports was positioned well to pivot extremely quickly back to its digital roots, which meant that the impact of COVID was minimal, and if I can say, probably the springboard to several positive changes.
Whilst traditional sports were scrambling to create more digital assets now that physical activation was impossible, Esports had been doing this extremely well for many years, with seamless integrations of sponsors into broadcasts/gameplay through overlays etc. Although not true in every case, the postponement of traditional sports leagues meant that brands that were looking to expand their sponsorship portfolio’s into Esports now had no reason not to.
The next positive of COVID for Esports is intrinsically linked to brand sponsorship; it is of course viewership. To give you an example of the scale of growth through just a 4 month period from February of this year to May, the number of hours streamed on Twitch nearly doubled, with 1.7 billion hours being watched. This substantial increase in viewership of course improves an Esports organisations proposition when talking with potential sponsors, whilst also undoubtedly converting a number of ‘part-time’ fans into fully fledged fans.
I think it’s fair to anticipate that media rights values will eventually grow to be the largest revenue stream for Esports organisations.
To conclude, where do I feel the biggest growth points will be over the coming years?
Well, to link back to my previous points, I think it will be in 2 main areas:
- Non-Endemic Brands entering the space
- Media Rights Deals
There have been notable entries into the market over the past year (e.g. BMW’s 5 Esports team sponsorships), and due to the creativity of many publishers, leagues and clubs in integrating their sponsors authentically into the space, I see no reason why this won’t be one of the fastest growing revenue generators for rights holders.
Finally, media rights; linking back to my point earlier about Esports having the opportunity to follow successful models from traditional sports, I think it’s fair to anticipate that media rights values will eventually grow to be the largest revenue stream for Esports organisations; Newzoo is already estimating media rights will be worth a combined $396m by next year (2021). I would suggest a key contributor to this rise will be the increased number of linear broadcasters that will be looking to diversify their content offering by adding Esports to their packages to continue engaging with the subscribers, but that’s a discussion for another day!
Love to hear your thoughts…