Many advocates of esports are convinced that the sector will overtake established sports in terms of popularity and value in the coming years.
For the likes of Rahul Sood and Jens Hilgers, for example, it is a question of ‘when’ rather than ‘if’. According to Hilgers, the chairman of the Electronic Sports League (ESL), esports is “more meaningful than traditional sports and is the sport of the young generations.”
Sood, the chief executive of esports betting company Unikrn, said in February: “Formula One is a sport that I like, but I think it’s a dying sport. I don’t think it will be here in five or 10 years’ time. I think esports will overtake other traditional sports.”
However, such is the disparity in the figures that have been thrust into the spotlight in relation to esports, quantifying and predicting the future trajectory of the undoubtedly growing market sector is a largely speculative exercise.
For example, Newzoo and SuperData, two gaming market research companies, have contrasting expectations. Newzoo estimates that global esports revenues will more than double from $194m (€172m) in 2014 to $465m in 2017. According to SuperData, though, that total has already been surpassed, with the global sector set to generate upwards of $1.13bn this year before reaching more than $1.5bn in 2017.
Deloitte, in its aptly titled January 2016 report, ‘eSports: bigger and smaller than you think’, noted that sceptics of the sector “often underestimate the global annual market size as being in the millions of dollars only.” The report added: “Conversely, esports advocates overestimate the current market size, believing annual revenues are already in the billions and comparable to major league sports.”
With Deloitte predicting that esports will generate total global revenues of $500m in 2016, it could be argued that expectations of overtaking established sports in the pecking order are delusional. Business magazine Forbes estimated in January that even the NBA North American basketball league’s smallest franchise, the New Orleans Pelicans, is worth $650m.
However, Deloitte’s $500m projection would represent a whopping 25-per-cent increase year-on-year, while the report also estimated that esports will attract a global audience of regular and occasional viewers of nearly 150 million people – figures that would send many established sports green with envy.
Deloitte’s director of research in the technology, media and telecommunications sector, Duncan Stewart, told SportBusiness International that esports’ total revenue is growing more than three times faster than the European football market, “which is enjoying superb growth from ever higher ticket prices, TV rights deals and sponsorships and, we predict, is growing at seven per cent compounded between the 2011-12 and 2016-17 seasons.”
It also has to be remembered that esports has not even really begun to scratch the surface of the revenue streams mentioned above. “The opportunity lies in the current lack of monetisation as there is an exponentially large audience,” Sood added. “This is still a very nascent industry and there will be exuberance and blowouts. Players can make $12,000 to $16,000 per month now and are asking for a split in league revenue.”
Part of the reason for the lack of coherent, all-encompassing monetisation strategies is the somewhat chaotic landscape that has emerged. Despite having been a fringe movement in the late 1990s and early 2000s, largely practised by amateurs, the sector has transformed in the second decade of the new century.
The lack of a single large league is a barrier to sizing the market
As telecommunications and internet technology matured and became more widely available worldwide to catch up with the demands and aspirations of a digitally-connected generation, the popularity of esports exploded. According to EsportsEarnings.com, prize money at tournaments increased six-fold between 2010 and 2014.
In 2011 Twitch, a video-streaming platform and community for gamers, was launched. It now attracts more than 45 million gamers every month.
— Twitch (@Twitch) March 6, 2016
In 2016 the esports industry resembles the Wild West, with multiple operators competing for market share in an industry that remains largely unregulated in its core markets of North America, Asia and Europe, and therefore free to expand aggressively.
“Measurement of esports is tough,” Stewart said. “When we look at traditional sports, or traditional TV, there are many large firms that measure audiences, engagement and revenues. There are imperfections in those measurements, but they are relatively accurate.
“I can drive a bus between the various estimates of esports revenues. The lack of a single large league is a barrier to sizing the market. Adding up 50 to 100 different esports revenue totals is almost impossible.”
In the long term Stewart expects the value of the esports market to continue to increase by between 15 and 25 per cent until 2020 or even 2025 – a rate that will not be matched by traditional sports.
To continue reading the Esports Focus, please click the links below:
The Game Changer (2/4) – Comparisons and Expertise
The Game Changer (3/4) – Growing pains and Challenges
The Game Changer (4/4) – Market size and Business model