Why E-Sports can no longer be ignored

A few weeks ago, in August 2019, a team of five European teenagers won $15 million playing a video game.

That game was Dota 2, the multiplayer battle arena (MOBA) game known more formally as Defense of the Ancients. As for the teens, they were members of team OG, which beat 17 other squads from around the world – including PSG.LGD, a Chinese outfit affiliated to the esports arm of Paris Saint-Germain Football Club – to win ‘The International’ in Shanghai.

The total prize fund for the event was $33 million (£26.7 million), eclipsing the $30 million on offer at the Fortnite World Cup held a month earlier.

The discipline of competitive video gaming, aka esports, hasn’t quite reached mainstream status yet, but it’s big business with a phenomenal growth rate. It’s already recognised as one of the fastest growing spectator sports in the world, providing huge opportunities for broadcasters, advertisers, sponsors and media rights holders. In fact, investors range from real estate companies building bespoke venues to celebrity sports people adding esports companies to their portfolios.

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The rise and rise of esports

The idea of professional video gaming isn’t new and events have been regularly held since the first coin-ops arrived in the 1970s. Tournaments grew in scale during the ’90s when Street Fighter II popularised the one-on-one combat genre, and then later with LAN-connected PC games like Quake. The first esports prize was given away at the ‘Red Annihilation’ in 1997, when Dennis ‘Thresh’ Fong won Quake developer John Carmac’s Ferrari 328 GTS.

However, things really began to take off in the Noughties, especially in Southeast Asia, which remains esports’ biggest market. The last decade has seen a huge increase in leagues, tournaments, viewers and prize money.

Viewing figures have been rising consistently too, growing from a worldwide audience of 181 million (including regular and occasional viewers) in 2016, to 380 million in 2018. With annual growth rates of around 14%, 2021 should see a global audience of around 557 million tuning in. Next year, esports in the US are expected to have the second highest sports viewership numbers after the NFL.

Big audiences, large revenues

As you’d expect, this huge rise in engagement is accompanied by a commensurate growth in revenue. In 2018 the worldwide audience for esports topped 440 million, generating media rights revenues of $180 million and total revenues of around $900 million. Global revenues are projected to hit $1.1 billion in 2019, and $1.8 billion by 2022.

Where is all this money coming from? The biggest revenue streams are currently split between sponsorship, advertising and media rights. But by 2021, this is expected to change, with media rights taking the lion’s share at 40%, generating some $400 million.

Catering to a global audience

As a niche event, esports have benefitted hugely from the rise in streaming services. Some tournaments have been televised in the US and Korea, but today they’re mainly watched in the West on Twitch and YouTube, while Asian gamers tune in via the popular Douyu and Huya platforms.

Twitch, which launched in 2011 and is now owned by Amazon, was quick to see the potential of esports. In 2018 it signed a two-year deal with the Overwatch League, worth a reported $90 million, for the exclusive digital broadcasting rights in English, French and Korea, making it the biggest deal in esports history.

The Overwatch League also struck a deal with Twitter, to show highlight clips during games, and sold the linear TV rights to Disney, with live broadcasts appearing on the ESPN and DisneyNOW apps.

On demand clips and replays

There are parallels here to the way some sports are moving away from linear TV broadcasting to embrace digital-first and on-demand content. We increasingly live in an age of clips and replays, where shorter attention spans require tightly packaged content that can be accessed anytime, anywhere and on any device.

By employing a cloud-based media management platform such as Imagen, media rights holders in any sport (including esports) can store, clip, distribute and monetize their content easily. Instead of striking expensive and inflexible broadcast deals, they can become an OTT provider, controlling the experience and delivering content directly to eager viewers.

Esports, with its multichannel structure, points the way towards this future, where viewers can choose when, where and how they watch their favourite content. You might not believe it yet, but this is what next-generation TV looks like. 

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