More Than Just “Games”. Video Games and Esports Leveling Up Your Portfolio

More Than Just “Games”. Video Games and Esports Leveling Up Your Portfolio

The creators of the film “The Wizard” predicted something accurately: in their 1989 film, three kids competed in the Super Mario 3 super final for a prize of $ 50,000 in a large hall crowded with fans.

Since then, the stakes in eSports segment of the gaming industry (which includes computer gaming competitions) has grown. The age of the audience has increased and eSports has become a niche in which millions of dollars are a very good choice to invest in, why not?

Competitive gaming gradually and imperceptibly for the uninitiated left the framework of the subculture and filled the stadiums.

Today, the best venues are given for eSports tournaments: Madison Square Garden in New York, Wembley Stadium in London, VTB Ice Palace in Moscow and more exotic options, such as the restored St. Romanesque Church in Italian Lucca. Esports are now being discussed at TEDxNevaRiver and SPIEF, tournaments are gathering an increasing audience – the threshold for entering the audience is very low: you only need a smartphone and internet access; tournaments become spectacular and commercially successful.

According to the eSports Earnings portal, the prize pool of all the tournaments held in 2018 amounted to about $ 133 million. For comparison, in 2008 this number was about $ 7 million, and in 1998 – $ 132 thousand. Thus, over 20 years growth made up fantastic 1,000 times. This is not the limit.

Now the main organizers of eSports tournaments are studios that develop games. On July 29, 2019, Epic Games studio held the first eSports championship for its Fortnite game. The total prize pool for the championship finals exceeded $ 30 million, which was an absolute record for eSports.

The main prize for the victory in the solo championship was taken by 16-year-old cyber sportsman Kyle Giersdorf, known under the nickname Bugha. He played for the Sentinels team from Los Angeles. The title was awarded to him by the totality of points scored for his performance throughout the tournament. Kyle Giersdorf was paid about $ 3 million for the victory – a record fee for such competitions. The final of the championship was watched on YouTube by 9 million people, and two weeks later it increased to 12 million people.

Epic Games also announced the allocation of $ 100 million in prize pools in competitions for the Fortnite game. According to the Newzoo agency, the revenue from eSports in the world will reach $ 1.7 billion by 2021, compared to $ 906 million at the end of 2018. Experts predict that the entire gaming industry, including eSports, is already on track to exceed the traditional financial performance of the professional sport. According to their words, the gaming industry will earn $ 180 billion, and eSports will be a key driver in achieving this goal by 2021. And the esportsman will be able to become a dollar millionaire by winning just one tournament.

By the way, all forecasts regarding revenue indicators in the eSports segment and market coverage made by Newzoo three years ago, in 2015, came true. With new energy generators, unmanned vehicles and anti-aging, eSports and Citigroup Citi Global Perspectives & Solutions have been added to its list of “disruptive innovations”. They believe that one of the growth factors will be interest from television and media companies, which will increase competition for content rights.

Athletes from traditional sports have already rushed to take their places in this niche. Ronaldo, two-time world football champion, has invested in two eSports teams, and Formula 1 racer Fernando Alonso created his own team. The young audience is not even millennials, but Generation Z – those who were born in the late 90s – early 2000s. A tidbit, a consumer, to which it is no longer possible to reach through the usual channels.

Game Viewers

According to Newzoo, in 2017, 192 million people around the world watched eSports more than once a month, another 143 million from time to time. In 2018, these figures amounted to 215 million and 165 million. In 2019, the total eSports audience worldwide exceeded 1 billion people. This is more than the performance of some traditional sports: no more than 500 million people are watching broadcasts of Formula 1 competitions, and about 100 million people are watching baseball.

New participants are constantly involved in the industry, sponsors and advertisers, those for whom the business, competencies, and opportunities of eSports are complementary.

According to the analytical agency SuperData, the eSports industry is very actively developing. We see that clear rules for interaction between industry participants are being formed, while competition continues to grow, which in turn has a positive effect on the dynamics of the industry as a whole, contributes to the unification of large players and the emergence of new companies with innovative solutions in eSports. In addition, it is important to note that such positive dynamics is also due to the constantly growing interest from auditory to the very phenomenon of computer sports.

Today, according to Twitch, there are about 20-30 spectators for each player. Such a lively demand also affects the formation of the offer: eSports content is not just available, it is becoming more diverse. The market itself is transforming, becoming more structured, transparent and understandable, including for non-core brands that come to eSports as investors or sponsors. I am sure that in the near future the eSports industry will not only maintain its high growth rate but will also become more accessible to an even wider number of users. 

Innovations

Firstly, today, game developers are increasingly turning both existing and new projects towards eSports. Multiplayer modes, elements of confrontation and competition are becoming increasingly important aspects of not only a client but also mobile games. And competitive elements are already available not only for PVP-games but also for single-player.

Secondly, a variety of modern technological solutions allows users to watch tournaments from any device and from any part of the world. The content becomes more accessible, which significantly affects the number of active viewers. Competitions themselves become more spectacular not only online (the level of interactivity is increasing), but also offline (there are more and more entertainment elements involving the audience).

Also, it is necessary to note the importance of the influence of modern advertising tools – the possibility of targeting and activities at stadiums, clubs, metro and other points where the eSports audience is concentrated, have a positive impact on the growth indicators of the gaming audience.

As a result, technology will make computer sports more economically viable for a wide variety of industry participants. And finally – the economic development of countries and society will grow. The high average standard of living in the country largely determines the solvency of the audience and the willingness of the business to invest in eSports. It is important to remember that eSports are at the intersection of two major industries – entertainment and sports, so for further development, it is necessary to improve the existing infrastructure. This will not only scale the existing of new eSports projects but also increase the positive level of social perception of cybersport in general.

German Kaplun, Co-Founder and Strategy Director of TMT Investments commented on the situation around eSports nowadays: 

— “So far, eSports is a relatively small business with huge potential. The market size in the world is about a billion dollars. But, in my opinion, after time, revenues from eSports will overtake revenues from traditional sports. People at all times most of all want spectacles, and spectacles that they can easily understand. Why does football have the most fans? Because it is played all over the world.”

Every boy and even many girls played football in their childhood. A huge number of people are now playing computer games. Twitch, whose specialization is video streaming games, has a billionth audience. The number of new fans of computer games is growing every year. And consequently, the potential number of viewers, fans, players and sponsors.

On the other hand, a comparison with sports is not in favor for computer games because of their number. Potentially popular computer games are significantly more than sports. Plus, their number is constantly growing. As in sports, there are the most popular games due to national characteristics, different types of games are popular in different countries. 

It seems that many adults consider eSports is not a sport at all. But what is the difference between eSport and chess? Modern strategy games are much more complicated. Also, new technologies are constantly emerging and new opportunities appear. It is time for virtual reality, this is where it will be possible to combine sports talents with technology, and this is where the real entertainment is.

How eSports Are Divided

Esports can be divided into five main categories:

• Shooters where the player needs to shoot with other participants. The most popular are Counter-Strike or Warface.

• Strategies – battles between the armies of players. For example, StarCraft and WarCraft.

• Team role-playing games in which players control their character, constantly improving it, and in a team with other participants must defeat a group of opponents. The most famous are League of Legends and Dota 2. 

• Sports simulators of football, hockey, basketball. For example, FIFA and NHL.

• Technical simulations in which people play as the driver of a tank, plane or car. The most striking example is World of Tanks.

Also, there is a new category of games – Battle Royale. Most popular are Fortnite and PUBG.

Esports-friendly People

In South Korea, where competitive games have become part of the national culture and players have the status of professional athletes, all the big companies, from telecoms to air carriers, have come to eSports. For example, SK Telecom plays against Samsung. Thus, there are those who need a young audience who want to play. Moreover, “young” does not mean 14-year-olds. The average age of an eSports audience is 21–25 years.

These are young professionals and the people who develop the digital economy. This is arguably the most developed community that will grow rich and access will become more expensive. In the eSports industry, new ways of monetization will appear. A transfer market has already emerged, the sale of players as in traditional sports. This is a direction that will develop even more as the market is structured, money is injected into the industry as players’ capitalization grows.

The Most Striking Example of a Young Player Making Money on Games

The popular streamer Tyler Blevins earns five hundred thousand dollars per month on broadcasts on the game Fortnite. In an interview with the American channel, Tyler said that the game itself provided him with popularity, and he only funny commented on what was happening on the screen.

For 2019, Tyler Blevins, better known under the nickname Ninja, is the most popular streamer on Twitch (and recently on Mixer) with more than 4 million subscribers and an average of one hundred thousand viewers per broadcast session. Thanks to the quality of his streams, Tyler became a recognizable player and began to earn up to five hundred thousand dollars a month on Fortnite broadcasts.

The streams of Blevins drew attention to the popular Canadian rapper Drake. On March 15, the musician tweeted, informing his 36 million subscribers that he was going to play Fortnite with Tyler.

After the announcement of Drake, 628 thousand users watched the live broadcast at the same time, and this was Twitch’s absolute record.

As a result, the player became a star. Various shows, interviews began to invite him. He became an honored guest at any eSports and sports events. And this is just a streamer. There are too many examples in professional eSports to list them. Players of top teams in one or two tournaments can become millionaires, they are invited to different events of the presidents and they are recognized everywhere on the streets.

The gaming industry is one of the fastest-growing markets

A recent study by Newzoo shows that active users spent more than $ 130 billion on new games in 2019. This is almost 12% higher than the previous one. The largest growth is noted in the segment of games for mobile devices, which in terms of revenue almost equaled the rest of the platforms.

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Now it is prestigious to be associated with eSports. Entire corporations strongly support young players and talents. In some countries, eSports schools are opening and DotA is taught at universities.

However, do not expect a miracle. Nothing will change instantly. Sports infrastructure has been developing for 50-100 years. So eSports has just begun to grow.