2018 is gearing up to be another pivotal year for esports. The mania of the earliest wave has yet to fully subside, but year-on-year growth and the vast potential that comes with an emerging global entertainment sector means that esports continues to leave other established event verticals in the dust.
Newzoo is a leading market intelligence agency for the esports industry. The Amsterdam-based firm regularly publishes studies and infographics and reports on the health of the industry, and their annual Global Esports Market Report is one of the most anticipated and in-depth studies in the fledgling sector.
“As a business, esports is now entering a new and critical phase toward maturity,” notes Newzoo’s CEO Peter Warman in the report’s foreword. “Big investments have been made, new league structures have been launched, sponsorship budgets have moved from experimental to continuous, and international media rights trade is starting to heat up.”
“At the same time,” Warman continues, “player salaries have soared and the esports ecosystem and viewership hours still very much rely on a select number of globally operating teams and game franchises. Profitability and return on investment is, for many organizations at the heart of the esports economy, a challenge.”
The report—which was published in February—is packed full of insights into the meteoric rate of growth across the industry, and we’ve combed through it and highlighted some key takeaways that everyone in esports should heed and integrate into their strategies.
Esports Revenue is Set to Smash $1bn by 2019
Hitting this symbolic milestone will be huge for the esports sector, but lying in wait is a $1.65 billion predicted valuation by 2021, $1.38 billion of which will come from advertising, sponsorship and media rights.
“Global esports revenues will reach $906 million in 2018, a year-on-year growth of +38.2%. North America will account for $345 million of the total and China for $164 million.”
The Brands are Driving Esports Growth
via Jordan Fragen
Unlike traditional event verticals where ticket sales represent the lion’s share of the revenue, esports’ accelerated growth can be largely attributed to brand involvement.
“Brands will invest $694 million in the esports industry, 77% of the total market,” the report states. “This will grow to $1.4 billion by 2021, representing 84% of total esports revenues.”
But like other event verticals, brands are going to be looking for measurable ROI as they gauge the long-term viability of the fledgling industry. Given how much revenue is on the table, being able to deliver that kind of insight is key to establishing lasting partnerships.
Established esports platforms like Steam continue to play a key role in the bringing of audiences and brands together. At ELEAGUE Major in Boston, Intellitix’s RFID platform was integrated with fans’ Steam accounts, allowing partnering brands to get richer audience insights and measurable ROI.
Esports Teams Predicting Slower Trajectory to Maturation
One interesting takeaway was the difference in outlook between the esports teams and the brands and agencies. The teams are envisioning the industry hitting full maturation in five to 10 years, which is more conservative and cautious than the agencies and brands, who are banking on three to five.
Either way, the trajectory is steep and prolonged, and consistent growth is widely anticipated.
Ticketing Revenue Has Almost Doubled Since 2017
There were also very encouraging signs for esports’ development as a major form of live entertainment, with ticket sales almost doubling in the past year.
“In 2017, there were 588 major esports events that generated an estimated $59 million in ticket revenues, up from $32 million in 2016,” the report states.
While these numbers are considerably lower than the digital audience, the appetite is clearly there for live experiences around esports, and, as awareness grows, more localized events develop, and more experiential sponsorship opportunities arise, expect to see ticketing revenue soar.
Twitch’s Numbers Are Enormous, and Clearly Growing
It’s difficult to convey the kind of engagement that esports generates online to someone unfamiliar with the vertical. Amazon-owned streaming platform Twitch has played a central role in the emergence of esports as a live event vertical and now hosts around 15 million unique viewers every day and 2 million broadcasts monthly.
The League of Legends World Championship was the most watched event on Twitch in 2017, clocking up a total 49.5 million hours. This has also emerged as an exciting revenue stream for ticket revenue, with the LoL World Championship alone reportedly generating $5.5 million in online ticket revenues.
Despite having a significantly smaller gaming audience than YouTube, Twitch generates a reported 54% of the viewing revenue, achieving this through a successful subscription model and donations.
Media and Telecom Companies are Showing Interest in Esports
Huge audiences mean that more traditional media companies are starting to look seriously at the sector, keen to replicate some of the success that Twitch and YouTube enjoy by enabling their platform for esports.
“In 2018,” the report states, “we will see the battle for content increase, especially around top-tier leagues. We expect telecom companies to become even more involved in bidding for mobile streaming rights, as Verizon did with the NFL. The first deals of 2018 already point to an eventful year, including a deal between Twitch and the OWL worth $45 million per year.”
The report connects the dots between telecom giant AT&T and ELEAGUE (owned by Turner) and Machinima (owned by Warner Bros.) and suggests that Disney’s majority stake in BAMtech—which recently operated the digital stream of League of Legends—establishes the company as a key player in the next stages of audience growth.
“The industry is at that crucial point in the hype cycle. Its adoption has risen above the sub-culture level and has found solid footing in the mainstream,” explains Sean Coates, Intellitix’s esports Customer Success Manager. Coates has oversee the successful deployment of Access Control and Experiential RFID solutions at events like TI Dota-2 and ELEAGUE. “As various software companies and organizers alike, seek to grow their respective tournaments, fan engagement is paramount. Through the use of RFID and custom client integrations, Intellitix is enabling its customers to engage their fans in some of the most innovative ways.”
Watch our video case study from ELEAGUE above, and download the report here to learn more about how we’re helping some of the world’s leading esports events hone their logistics, gather more audience data and create more engaging experiences for their fans.