How Big Can eSports Grow In 2018?

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The eSports industry has grown at a tremendous pace over the past few years. Per a report from Newzoo, total eSports revenue jumped from $493 million in 2016 to $655 million in 2017, and we estimate that total revenue could exceed $900 million in 2018. Our interactive dashboard for the eSports industry outlines the market’s performance over the past few years, and its outlook for the rest of 2018. You can modify the inputs to see how changes would impact the total market size in 2018.

What Are eSports? 

The term eSports refers to organized competitive gaming among professional players. Although there are many games that can be included in the space, the most popular games are generally team-based multi-player games from the first-person shooter (FPS) or multiplayer online battle arena (MOBA) genre. The audience can watch the event by either visiting the arena live or online through gaming broadcasters.

What Contributes To eSports Revenue?

Per Newzoo, eSports revenue is comprised of the below components.

  • Sponsorships are the largest contributor. Until now, sponsorships have been largely driven by tech companies such as Intel, or gaming peripherals companies such as SteelSeries.
  • Advertising is the second largest contributor. Major players in the advertising space for eSports include computer components manufacturers and energy drinks, especially Red Bull.
  • Media Rights revenues are the revenues paid by broadcasting partners who own the rights to broadcast live games. Twitch and YouTube Gaming are two major players in this space.
  • Game Publisher Fees are the revenues paid by publishers such as Valve to host tournaments.
  • Tickets & Merchandise revenues are generated from ticket sales to eSports events, as well as sales of merchandise from both eSports teams and game publishers.

Media Rights To Grow At A Tremendous Pace

The majority of eSports consumption occurs online. With the industry looking to attract young audiences – who are generally willing to watch matches on smart devices or PCs – several TV and internet companies have started to compete for the rights to broadcast events. Meanwhile, Over-The-Top (OTT) streaming continues to see impressive growth, and will also likely contribute to the growth in consumption. Furthermore, as franchising gains traction, especially in North America, broadcasters will have a reliable and steadily growing stream of income. While YouTube Gaming and Twitch saw tremendous growth in 2017, the entry of other big players such as Facebook also bodes well for the space’s near-term growth prospects.

Sponsorships and Franchising Will Have Important Roles

Revenue from sponsorships grew by over 55% in 2017 and exceeded $250 million. With more and more brands becoming interested in sponsorships given the growing popularity of the space, this growth trend appears sustainable. Moreover, many investors are looking at the big picture and investing for long-term benefits in eSports through franchising. Franchising started off in eSports with the recent launch of The Overwatch League, which had a $20 million price for each slot. This also led to Twitch paying $90 million in 2018 for exclusive distribution of the league, the biggest in eSports history. Several other game publishers plan to introduce franchising in 2018, which will be attractive for investors as it builds a stable ecosystem and should boost revenues.

Key Metrics 

Besides the immense growth in revenues of late, growth in the eSports industry can be gauged by looking at two key parameters.

  • Twitch Viewership Data: Twitch, an Amazon subsidiary, primarily focuses on broadcasting eSports competition along with providing a platform for video game streamers. In the last three years, it has seen a 21.3% compound annual growth rate (CAGR) in viewership. In 2017 alone, viewers watched almost 6 billion hours of content on Twitch.
  • Prize Money: In the early years of eSports, prize money was fairly low. However, with the overall growth in viewership and other revenues, prize money has grown by over 30% annually of late. Prize money comes from either game publishers (such as Valve) or eSports organizations (such as ESL).

Overall, we expect these factors to drive the total eSports market to exceed $900 million in 2018. If you disagree with any of our forecasts, you can modify them and see the impact on the market size.

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