The Esports Industry, A Diamond in the Rough
Esports, short for electronic sports, refers to an organized competitive video gaming among professional players. Typically conducted in a league tournament format, esports serves as a natural extension of video gaming. It gained tremendous attention globally since 2011; the launch of an esports streaming platform such as Twitch skyrocketed the viewership. It allures a globally engaged fan base without the limitation of location, culture, gender, and is more fast-paced and scalable because of its reliance on digital platforms. Over the past few years, the viewership continues to rise at a healthy growth rate of 8% even after the pandemic hype and it’s set to reach an annual viewership of 640M by 2025.
What makes esports more attractive is the demographics of the audience. Esports audiences are passionate about competitive video gaming. They are young, tech-centric, and more connected with digital platforms for on-demand and streaming content, some of whom are hard-to-reach through traditional marketing engagement. In addition, esports fans have a higher buying power than people perceive. According to interpret survey results, esports fans are relatively affluent - 30% of the esports fans are having annual income of $100,000.
Where attention is focused, financial opportunities lie. According to Newzoo, the global esports market was valued at ~$1 billion in 2020. However, this figure is regarded as significantly undervalued since it only accounts for 'esports event revenue'. A study conducted by [1] proposed an alternative revenue model, considering the esports industry as a whole within its ecosystem, estimating the industry's revenue to be $25 billion in 2019.
Despite these encouraging figures, there are concerns centered around economic sustainability of the esports industry. During the recent economic downturn, many esports teams are struggling financially to fund their business operations, opting to shut down or withdraw from some of the esports titles. In addition, on the industry level, the average annual revenue from esports enthusiasts is merely $5.30 [2], indicating a challenge in fully capitalizing on the massive audience.
In the next few blogs, we are going to examine the structure of the esports ecosystem, power dynamics among stakeholders, and suggests potential solutions to unlock its full potential for a sustainable future.
Reference
Ahn, J., Collis, W., & Jenny, S. (2020). The one billion dollar myth: Methods for sizing the massively undervalued esports revenue landscape. International journal of Esports.
LA times, the hype around esports is fading as investors and sponsors dry up. https://www.latimes.com/business/story/2022-12-08/esports-hype-fading-investors-sponsors-dry-up
